Court Decisions in Ohio in re: leases with wells 'in production' - looking for information

I will apologize ahead of time if I am not as on top of this particluar issue as I should be, and if this forum has already covered it at length. My simple searching was limitedly helpful.

Does anyone know if Ohio courts have made any rulings fore or against a landowner who has brought suit challenging an Oil & Gas Co. lease in either or both of these areas?.....

    Area 1 - What does "a well in production" really mean?  Does the well have to be commercially profitable, or will token amounts of product produced validate the lease and keep it active.  Who decides what is commercially profitable?

    Area 2 - My lease was executed by my grandfather in 1981.  At that time NO ONE (as far as I know) gave any thought to deep wells and horizontal drilling.  Has any court ruled on excluding deep well (mineral) rights from existing leases where there is NO mention of specific formations permitted to be explored/tapped/drilled or excluded from exploration/tapping/drilling, NOR, language as to depth limitations/exclusions?

Thanks in advance for any help you can provide in this area.  D.B.

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Permalink Reply by David Brooke on May 31, 2013 at 1:57pm

The language is pretty vague but as I recall it does state basically as long as product is pulled  from the wells.  My situation is 4 wells on 160 acres, so that's 40 acres per well, so no outs there for failure to develop, as I understand it.

Permalink Reply by william r rinehart on May 30, 2013 at 10:08pm

Also keep in mind the numbers are provided by the shallow well driller, and ODNR does not check them, so lets see, what number do I need this month to hold onto the lease until I can sell the lease to someone? Fox gaurding the hen house?

Permalink Reply by John OBrien, landowner advocate on May 31, 2013 at 12:43am

David,

Ask the operator to show you his insurance policy on the well.  If he cannot, or will not, it is probably because it is not insured.  If this is the case, tell him you are concerned about the safety of his operations and that you want the well made safe with fence, dike, signage, and a copy of a new insurance plan for the well.  At $1500/month for insurance, he will not be able to be profitable, which should mean it is not "producing at substantial quantities", therefore not HBP status.  I am not an attorney, but, this would make perfect sense, no?

Permalink Reply by David Brooke on May 31, 2013 at 1:58pm

Great point and idea.  While I certainly hope that the wells are covered by insurance, it is definitely something I will follow up on.  Thanks!

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on May 31, 2013 at 5:46am

The implied covenant to reasonably develop angle is a good one, though many leases have a provision that waives said covenant.  I agree that putting one well taking up 40 acres on a 160 acre farm and then doing nothing for 30 years is a violation of the intent to reasonably develop.  But if the Lessor waived that right what recourse do they have?  

Permalink Reply by Paul Martinelli on May 31, 2013 at 6:41am

What about 1 shallow well on 40 acres of an 83 acre plot.....and the shallow well company is not the lease holder of the deep rights....should that well also be expected to hold the deep rights by production? If they subleased the shallow rights....and did not explore the deep rights........

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on May 31, 2013 at 9:32am

I'd like a little more information if you have it, Paul.

Permalink Reply by Paul Martinelli on May 31, 2013 at 9:33am

such as?....we can take this offline.

Permalink Reply by TM on May 31, 2013 at 9:37am

I am in the same situation as you paul. The shallow well holder is not the holder of the deep rights. I dont get how these shallow well owners can just sell the deep rights to another company and we as landowners get nothing in return. Funny how they can profit by selling but we cant. There is no way they had any intentions to drill the deep rights back then.

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on May 31, 2013 at 6:48am

I've seen pretty unambiguous waivers.  That said one well over 32 years is not what I would call a good faith effort to develop.  All of this stuff is going to have to end up in court over the next half decade.  Add to that the ODMA cases that are pending and it's a tough environment for people to plan out their futures.  

Permalink Reply by John OBrien, landowner advocate on May 31, 2013 at 8:17am

What ever happened to honesty in business relationships and contracts.  Some operators have done "their best" to develop lessors lands with the shallow wells they drilled (in Ohio only 20 acres needed) in the last ten years.  But now, they resort to extortion to force landowners to sign bad addendums, ensuring that the operator will get all the profit from the deeper formations and the landowner gets none.  I have personal knowledge of just that happening.  The operator calls up the farmer, tells him he has new paperwork for him to sign, and that it could mean the farmer will get rich quick.  He doesn't divulge the fact that there is a signing bonus, or that there is a increase in the royalty percentage that he (the operator) intends to keep for himself.  Furthermore the operator tells the farmer when he arrives with the paperwork that it doesn't matter whether the farmer signs or not, that he can force pool his land.  He also tells him if he does not sign that he will shut in his wells, and turn off his free gas.  (Keep in mind it is January, and dang cold outside).  

Now Marcus, this farmer has done everything he could have done to remain friendly with the operator.  He has allowed the operator to leave his plastic lines on top of the ground, only burying the ones crossing his hay fields.  He has not complained of the fact that there is no brine tanks anywhere, the brine runs over the hill into the streams.  He has called the operator to tell him of malfunctioning equipment that needs repaired because revenue is being lost.  But the operator still treats him like dirt when the big money rolls in from the Marcellus and Utica.

This is why I say the law needs changed.  Not changing the law is about the same as letting family court decide corporate america law.  How many corporations would like that, simple divorce decree type laws controlling how they do international business.  Not fair now, never will be.

Permalink Reply by Markus on May 31, 2013 at 8:44am
All three issues you mention such as brine overflow, exposed piping and wells not operational are all ODNR violations and they should be called.

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