Ohio Supreme Court Hands Down Slip Decision In Favor of 700 Landowners

SLIP OPINION NO. 2016-OHIO-178

THE STATE EX REL. CLAUGUS FAMILY FARM, L.P. v. SEVENTH DISTRICT

COURT OF APPEALS ET AL.

HUSTACK ET AL., APPELLANTS, v. BECK ENERGY CORPORATION, APPELLEE.

[Until this opinion appears in the Ohio Official Reports advance sheets, it

may be cited as State ex rel. Claugus Family Farm, L.P. v. Seventh Dist. Court

of Appeals, Slip Opinion No. 2016-Ohio-178.]

Oil and gas leases—Class certification—Validity of leases—Covenant to reasonably develop the land—Delay rentals do not extend beyond the fixed term of a lease.

(Nos. 2014-0423 and 2014-1933—Submitted December 15, 2015—Decided

January 21, 2016.)

IN MANDAMUS and PROHIBITION.

APPEAL from the Court of Appeals for Monroe County, Nos. 12 MO 6, 13 MO 2,

13 MO 3, and 13 MO 11, 2014-Ohio-4255.

_____________________

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Permalink Reply by Joseph-Ohio on January 23, 2016 at 10:22pm
How can the 'sad situation' be representative / interpretted as any kind of 'win' by anyone but the lessees ?

I think the decision encourages lessees to litigate and any lessor to avoid it as ithere appears to me to be really nothing to be gained by the lessors pursuing remedy.

Still, looks to me to be nothing more than spinning of the wheels / 'legal fodder' as far as offended (lease specific) lessors / leased landowners / leased mineral owners are concerned.

JMHOs / interpretations.
Permalink Reply by Joseph-Ohio on January 24, 2016 at 2:27am

Best I can fathom in way of benefit to landowners / lessors here is that EXXON / XTO may cause certain leaseholds to be developed / drilled.

How those lessors / landowners view the development of Natural Gas and Oil wells on their lands under the terms and conditions of their leaseholds is  unknown to me.

Waiting for more answers on that one (and / or any new unknown factors that we may have not thought of / have come up here in this post).

Good luck to  all.

Permalink Reply by LERRET on January 24, 2016 at 2:38pm

How can the 'sad situation' be representative / interpretted as any kind of 'win' by anyone but the lessees ?

Perhaps the worst of it is that others who did not even realize they were in the "class action" are bound by the terms of the order without having any say so in the results or were even aware that they were in the class action. They were thrown under the bus in order for someone who actually dropped out of the suit to benefit.

Permalink Reply by Olive Sue on January 25, 2016 at 3:50am

It would appear you are saying the Hupps benefitted by this case?  I fail to see your thinking.  They are left in the same position as every one of the 700 leased by Beck.  They have nothing also.

I think the biggest mistake was signing a lease in ignorance as we all did.  We learned a very costly lesson and are left with nothing but that lesson. 

Permalink Reply by Barry D on January 24, 2016 at 3:33pm

How did the Seventh Court of Appeals and the Supreme Court err in deciding that the leases were valid?

I ask because many landowners in Ohio have similar leases. I think it would be helpful if they understood where they stand.

Permalink Reply by bo boboski on January 24, 2016 at 10:37pm

I agree. Ohio landowners need to hear what it could mean for their leases. In words they can understand, not with the legal mumbo-jumbo that only attorneys can makes sense out of.

Permalink Reply by Joseph-Ohio on January 27, 2016 at 1:11am
All of the Landowner / Lessor negative news causes me to wonder if even there exists an honored Landowner / Lessor acceptable leasehold agreement to use out there ?

Is there such an instrument / vehicle ?

What good does it do to enter into a lease if all it does is tie your land / resources up indefininately / in court ?

Also now wondering how Member Ron Hale is doing in his struggles ?

Looking alot to me like the Industry, the Laws and our Politicians / Government doing everything they can to strip Landowners / Mineral owners / Lessors of fair return on their resources.

What's everyone else thinking about it all ?

Care to share your thoughts / impressions on that here ?

I'll consider a null response to those inquiries as at least in agreement with what I'm seeing.

Good luck to all of us in all of this - I think we need it.
Permalink Reply by Barry D on January 27, 2016 at 2:13am

Joseph,

I have been pondering the same question; how can a landowner be sure they are entering into a lease which benefits them and protects their interests.

At this point the landowner may have an edge, we have seen the companies "play their hand" on a couple of issues. This information should be critical for un-leased landowners when they negotiate a lease.

I wouldn't enter into a lease without clear concise royalty language. I think the newer leases negotiated by land groups tried to get to legalistic and as we have seen with some companies that language has been twisted or ignored. Landowners may want to wait for the decisions that result from the case in which Ron Hale is involved. 

So, in some measure I think landowners may have more power right now.

Of course there is the other problem of whether or not a company wants to lease. Land owners have no control over that and should not be swayed by threatening talk from land agents. If you don't get the deal you want, then walk. Otherwise we will be reading about you here on GMS.

As usual, just looking for that sliver of a silver lining.

Permalink Reply by Joseph-Ohio on January 27, 2016 at 2:32am
Thanks Barry D.

Your reply in affirmation is welcome.

Think about forced pooling now as well and how it may be used to entrap landowners / lessors into a sub-standard leasehold.

How can our laws permit such to even have a chance to occur (whether by accident or malevolent design) ?

Catch my drift friend?
Permalink Reply by Barry D on January 27, 2016 at 3:03am

Joseph,

Made the catch.

There is a reason when a landowner(s) end up with a bad deal from "forced pooling" (at least in Ohio). The reason is that they didn't participate in the process or completely ignored it.

Lack of involvement is typical of many landowners when dealing with o&g companies. Land owners must remain proactive. Ron Hale is a perfect example, he has remained proactive and has refused to be "steam rolled" by the o&g Goliath.

I will say this - I know from experience that being anti o&g or not wanting to be involved in an o&g lease are not winning arguments in a mandatory pooling action. Also, the recommended lease from the state of Ohio is very landowner friendly so landowners have a better than even chance that they will not end up in a sub-standard lease.

There is a silver lining for landowners in this situation, but they must be involved.

Permalink Reply by Joseph-Ohio on January 27, 2016 at 3:26am

Didn't even know there was a recommended lease from the State of Ohio to be used in instances of forced pooling.

Thought the application for a forced pooling order always used only the prevailing lease (the lease that the majority of the lessors were bound by - which may be of the sub-standard / outdated variety such as the old tailgate class agreements).

Do applicants have to use the State's recommended agreement ?

BTW, we remain pro domestic oil and gas development / pro fracturing long / deep horizontal laterals etc.; but becoming more and more apprehensive (by the minute) of landowner / mineral owner / lessor abuse.

Permalink Reply by Barry D on January 27, 2016 at 4:19am

Joseph,

It's listed on the ODNR site

It's a process and the State does not have preconceived conclusions, so the lease is more of an option. My point is, that landowners MUST be involved! Or they will lose for sure.

The Mandatory Pooling process is not a slam dunk for the company. I would suggest that all landowners read about the process on the ODNR site.

You can only be abused if you allow the abuse.

Most of the time when I read a story of a landowner complaint I usually find that the landowner was not pro-active. One mistake most people make is not having good legal representation. Yes I know this costs money, but look at the results when people aren't represented.

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