Famous Buell well (Buell 8H) about to be shut down!!! Chesapeake doesn't own horizontal drilling rights!

Looks like Chesapeake's "best shale well ever" is actually owned by Kenneth Buell.

You can find all the relevant court documents (very hard to get your hands on - rural public records...) and analysis here:

And the Buell well will soon look like this.

p.s. the well is in Harrison County, Ohio.

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Permalink Reply by joe pierson on July 12, 2012 at 9:13am

The topic is Buell, your comment was about Buell, (about transferring over mineral rights), so why are you bringing up the Jewett Sportsmen Club. Keep on one topic please if you can.

What I am in favor of is whoever owns the surface rights and whoever owns the property rights as defined by deeds recorded in the county court house are the owners. Period. It is extremely clear you are not.

Think of it this way, if roles were reversed, if your 80 year old grandma sold her surface estate to Walmart 30 years ago, keeping the minerals, and Walmart decided to sue your 80 year grandma for screwing up their property with a well pad, you would probably be screaming at the evil Walmart empire for trying to take the poor old ladies minerals.

The problem is your deciding first, then fitting the data to support your decision.

Permalink Reply by Buell Well on July 12, 2012 at 9:26am

The Jewett and Buell controversies are one in the same, Joe. It's literally the same lawsuit. I suggest you read the Motion to Intervene linked to in the original post in this discussion thread. You see, Jewett and Buell can point to the identical relevant deed language (i.e., word-for-word).

Make sense now?

Permalink Reply by Buell Well on July 12, 2012 at 9:32am

The data?? You mean the law, including the Court's January decision? The January decision which defined what a deed in the court house means? What other data is there, beside the LAW?? I

If the January decision went the other way we wouldn't be having this thread, Joe.

Speaking of law, under Ohio law - "the law of case" doctrine for applied to on-going litigation - Buell is entitled to the same relief as the Sportsmen Club because he is a similarly situated party.

Permalink Reply by Buell Well on July 12, 2012 at 8:10am

Sure, but that's when CHK had the leverage. (Though, it must be remembered, CHK didn't even do Buell the favor of signing an agreement - when he countered their form offer they invaded his property!!) The power relationship is reversed now, so the question is why should CHK get to keep more than the 12.5%-15% they customarily offer landowners who they have the hammer over? CHK does landowners no special favors, why should Buell do them one now? Thus, your logic supports Buell holding out for FAR more than 50% of the profits as CHK would never offer a 50% royalty when they have the upper hand.

Also, you are forgetting about punitive damages, which are triggered when CHK forfeited it's status as a good faith contracting party by ripping up the counteroffer. Any settlement - assuming that's possible with CHK's arrogance and Buell's undoubted anger - has to be judged, among other considerations, against what a Harrison County jury would give Buell. There's a reason CHK has never been a defendant in a jury trial for a reason...the punitive damages in this case are likely to dwarf the actual damages for the reasons I've already stated - deterrent effect that protects future landowners from the kind of property rights violations, abuse, and disrespect experienced by Mr. Buell.

Permalink Reply by Buell Well on July 11, 2012 at 8:57am

Try going to ODNR and telling them "CHK tore up my counteroffer, never leased me, and is now drilling under my land". What they will say, Marcus? I'll tell you. "Go find an attorney, and file a lawsuit in ________ County Common Pleas Court".

As an aside, the whole point of punitive damages is the unfortunate fact that not all property rights violations will be caught. If only 50% of them are caught - because landowners are not aware as maybe they should be, or bow to threats of CHK bankrupting them, or don't have money for an attorney, or the attorney they hired wasn't worth diddly - then damages must be *at least* doubled in the cases where they are. So whatever a fair settlement for Buell is, double that and then you take away the incentive to violate property rights. TRIPLE it if you want the deterrent effect that protects ALL property owners, surface owners and mineral owners alike.

Permalink Reply by Dan on July 12, 2012 at 2:02am

"If only 50% of them are caught..."  BW, that assumption seems like a very high number.  And your assumption that Chesapeake knew full well that it was doing something wrong in the cases of Buell and the Jewett Sportsman's Club is not proven.  At the time Chesapeake entered into leases with North American Coal, it believed they were the rightful mineral holder, and Wiseman v Potts hadn't even been litigated yet.  In the cases of both Buell and JSC, CHk made offers for surface damage that were higher than the surface damage amounts that people typically agree to when they sign leases.  These offers were rejected, and counteroffers were made.  At some point CHK said, "we tried" and they proceeded onto the property, which they felt that had the right to do after repeated attempts to deal with the surface owners.

Now there are legal issues that have come to light, and both sides (or perhaps 3 sides) have arguments to make in court.  I don't think gloating over Chesapeake's percieved hard times or Buell's perceived slam-dunk windfall is necessary.  This does need to be worked out, and is a very interesting development in mineral rights law, and I understand how emotional it becomes because there is so much money at stake, but I don't think the outcome is as clear-cut as you make it out to be, or that the villains and heroes are as black-and-white.  Perhaps there are no villians; just property owners, mineral owners, and energy companies trying to figure out what the rights really are here and each looking out for his own best interest, as seems reasonable.

Meanwhile, 5 square miles really is just a tiny fraction of Chesapeake's leased acreage in this play.  Delaying their activities within that area doesn't slow down their overall operations at all.  They can and are drilling outside of that area right now.

Why do you say ODNR doesn't care if there are leases in place for all the properties in a drilling unit?  I can't speak for PA, but I have had many conversations with the Ohio Mineral Division office, and I believe them to be very pro-landowner/mineral owner.  They look down upon force-pooling in general and are very restrictive of the practice.  They do need to see a lease in place for every parcel in a unit before they will grant a permit.  Of course they have no way of knowing if that lease is valid.  If it comes to light later that a mistake was made in who owned the minerals, then that would have to be corrected in the legal system, but the gas company shouldn't necessarily be blamed in that case.  They are spending tremendous amounts of time and money thoroughly researching mineral titles to make sure they are leasing with the right party, and I know of many people who have received rejection letters from Chesapeake because they researched and found out that they didn't have clear title to their minerals so they wouldn't lease with them.

Like I said, we don't need to villainize anyone here.  As information comes to light that may change the rights of mineral and surface owners, then we need to carefully look at that information and figure out what is fair.

Permalink Reply by Knows-a-little on July 12, 2012 at 6:10am
It seems to me,that if there is ever a "question" of mineral rights ownership that the "right" should default to the PROPERTY OWNER...
Permalink Reply by Buell Well on July 12, 2012 at 8:42am

Dan:

I too think 50% of violations being caught is a high number - in reality closer to 25%, and maybe less. What do you think? Whatever the precise number, in reality the punitive damages multiplier is likely significantly LARGER than 2 to 3. If 25% are caught, it would be more like 4 to 6. So even if you think actual damages are only $2 million, for example, Buell would be crazy to settle for anything less than $8 to 12 million.

But like I've pointed out, it's more complicated than that in a way that likely drives the number higher. Given the collateral damages to (1) CHK reputation as a honest and reliable JV partner, (2) to Aubrey McClendon for bragging on earnings calls about wells that are, in fact, about to be shut down by court order, (3) to CHK's drilling commitments under the JV agreement in 5 square miles around the Buell well with the same relevant deed language, (4) the real embarrassment this causes Total's as the JV partner...lets just say there are a lot of reasons very far reaching reasons CHK and Total don't want to the Buell 8H's current operations subject to a permanent injunction like the Sportsmen Club received.

Permalink Reply by AT on July 12, 2012 at 9:59am

Buell Well,

There is one big difference between the JSS case and Mr. Buell's case that you fail to recognize, that I'm sure CHK's legal team will raise on defense, and Judge Nunner will ultimately have to rule on. That is the affirmative defense of laches.

  

Unlike in the JSS case where JSS took swift legal action, Mr. Buell sat on his hands, did nothing for a year and a half and watched CHK, et al, sink millions? into the development of the site, well and pipeline before he brought his claim against the the defendants. Therefore, unlike in the JSS case where they acted swiftly in bring their claim, I believe Mr. Buell's claim for injunctive relief against CHK, et all,  to cease operations at the site, will fail. The well will not be shut down or shut-in as you have been crowing for the past week.

  

I do believe, however, that Mr. Buell will prevail on the property damage portion of his case and he may prevail on the mineral rights ownership portion of his case which would entitle him to royalties from the well's past present and future production. I don't see any conspiracy or RICO allegations, therefore, I don't believe punative damages would apply in this case.

Permalink Reply by Paul Martinelli on July 12, 2012 at 10:05am

This is gonna get interesting, to say the least!

Permalink Reply by Buell Well on July 12, 2012 at 4:58pm

AT,

Interesting argument and one I'm happy to recognize (and more than happy to speculate on). Perspective is critical this deep in the weeds, however. Are you aware that a successful latches argument could preempt a Buell 8H injunction, but it's unlikely to prevent a permanent injunction against a second well on Buell's property?

(FYI - CHK has filed an application for a second well on the drill pad)

Thus, latches would not solve the problem, just make the PR damage control easier. Mr. Buell would still have all the leverage.

Permalink Reply by Buell Well on July 12, 2012 at 6:44pm

AT,

Even though it merely offers a measure of PR damage control, treating one symptom rather than the underlying title problem, lets consider the quality of the latches argument. The burden of proof rests with CHK to establish the affirmative defense. (How do you know Buell "sat on his hands"? It likely took a long time to find an attorney with the time and inclination to take up such a complicated case against a formidable defendant, especially when attorneys had their hands full negotiating oil and gas leases). The burden of proof alone significantly hurts CHK chances, especially since their equitable argument is self-defeating. Afterall, the distinction you draw between Buell and the previous case cuts both ways. CHK can plead change circumstances and good faith under then existing law, and so can Buell. Or if Buell acted in bad faith, then surely so did CHK, being the ones in the business of studying mineral law.

If Sportsmen Club changed the law, Buell has every right to respond to it. Alternatively, if the law was clear then CHK has been acting in bad faith for the past 18 months and they assumed the risk by assuming they were above that law. In the end, CHK is not the party aggrieved because the coercive tactics against Buell had their intended effect.

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