Replies to This Discussion

Permalink Reply by hunter4440 on February 14, 2012 at 8:47am

David... I ,too, have a lease in the Brinker Storage Field and did a little research on my own last year. I learned that the deep rights were further assigned in 2011. Can you please explain what you mean by " defect issues". Thanks...

Permalink Reply by dr j on February 14, 2012 at 12:08pm

The Brinker Storage Field is the the proverbial "box of chocolates" - you never know what you are going to get.   I have done a lot of diligence following the leasing of Brinker landowners and can probably give you some feel for what happens.   Keep in mind those who leased very early via DPS Penn, Trinity etc were leased without awareness of the field.   Also keep in mind some in the field have strata leases that limit the Columbia leases to just specific formations such as the Berea sandstone etc.    I have a dinner date..... so will come back to this later.  Lots of info to share. 

 

Permalink Reply by bob logan on February 14, 2012 at 12:58pm

If they would of done proper research for each person they would of known that they fell in this storage field (if it was early signing or not) ?

Permalink Reply by David F. on February 14, 2012 at 2:50pm

There appears to multiple issues related to the Brinker field. As Dr J posted it seems that DPS/CHES. and other majors did not identify the Brinker Field as being a defect for leasing parcels early on. Perhaps in performing due diligence based on standard practice at the time they did not go back far enough. It is my understanding that shallow storage, although not necessarily appealing for leasing, is not a valid defect for leasing the deep rights. If my understanding is not accurate please advise.

Hunter how were the deep rights assigned in 2011 if the original lease did not convey those rights?

Permalink Reply by dr j on February 14, 2012 at 3:59pm

Bob - exactly- my understanding is that CHK didn't even know about the existence of the field until sometime last spring.   We have land that was involved and my interest was piqued when we eventually were rejected - and had no idea our land was even on the storage field.   Because the land directly across the road is NOT on the field I decided I needed to figure out just "where" this thing was.   I was able to obtain a map of the field, a copy of the old lease that applied to the property.   The field is large... about 30,000 acres.   It's northern boundary is in sections 23 and 24 of Salem Township and Sections 19 and 20 and a bit of 21 in Fairfield township.   It's eastern boundary is the western parts of Sec 26 and 35 in Fairfield extending into Elkrun township, to Center with the Southern border being in Lisbon /Elkrun township.   The Western border is Salem township sections 27 and 34 to Center twnshp through the center of Lisbon, following SR 45 somewhat.     Elkrun Township probably has the most land involved.  I did my own due diligence on our properties and found several subsequent documents after the original lease.   This finding made me realize that the title had not been searched properly if at all.     This then lead to investigating as much as I could about the field and "who" actually had control of these deep rights.     Here are some of the things I have figured out along the way. 

-  The original leases, which still hold many properties, are horrific.   While each one may be slightly different, most of them were signed with Manufacturers Heat and Light in the late 50's and early 60's.   Many of these leases were signed in an eminent domain type of situation.   Many of these leases have not paid any type of compensation for years.  

-  At some point along the way some landowners were able to renegotiate leases limiting the strata as mentioned above.  This seemed to happen in the '80s and '90s.   Those landowners essentially regained control of their deep rights.  

- Many of these properties HAVE been leased despite the storage leases over the years.   In many cases I think it's because the leases were so cheap, it was cheaper to pay the landowner than do the title work up front.   Even though another lease was signed and paid, it probably could not have been developed.   A really common scenario are companies such as Black Gold, Wevco, Great Lakes Energy and/or Ohio Buckeye Energy - the latter two being entities that are now controlled by CHK ( and that may be where Hunter's reassignment came in).   Enervest is another company that leased many of these properties- some with strata leases I believe- and of course Envervest and CHK are a joint venture.  

- The most problematic leases appear to be the old Manufacturer's Heat and Light leases.   While early on some of those properties were leased,  CHK changed courses and would not take them.   I know they have been in negotiations with Columbia but I am not sure anything has come out of it... at least nothing that is public knowledge .  Columbia has indicated they wanted to parlay their storage field holdings into a commitment for midstream consideration ( transporting the gas etc) but once again- that info is way above my pay grade!  LOL.

- Even still, some people with those old MH and light leases HAVE been able to lease, despite the storage field but there is not a lot of rhyme or reason to it- at least not to me.    I have even seen property owners who own parcels of the same property controlled by the same exact document ( parceled off over the years)  in which one was able to lease and the other was not.  

- There are a handful of parcels, once again - no rhyme or reason obvious to me, where Columbia has even gone to large extents to protect their deep rights- filing affidavits of protection on the deep minerals.  

As a landowner with land on the field, I recommend you go to the courthouse and find every document that pertains to your property.    It's something we all should have had in hand when purchased our land years ago but who knew?    One of the largest issues is the "implied covenant" the original leases had to develop the minerals.   There is a lot of interest in that clause..... obviously Columbia gas has dropped the ball in that regard and many feel they should get it done or move out of the way.     I know a few have contacted attys about a possible class action suit.  Unfortunately so much of the storage field has been leased- I would say CHK has leased over 60% of it if not more,  that there may not be as many landowners involved.    They are going to drill in this field - in fact they have started on the Grubbs well off Miller Rd- smack dab in the middle of the field- so a better strategy, and maybe the only one for some, is going to be to renegotiate the old leases when/if you are placed in a unit.

Based on recent activity the area appears to be of great interest so this story is a long way from over.   If any one wants more specific info... contact me by "friending" me.   I have a pretty detailed map of the field with details on who is leased etc and can give you info on your general locale.

I have questioned CHK folk directly about the field and their answer has basically been "it depends" .   They have changed their approach to the field several times,  perhaps based on their dealings with Columbia or other info they have .  Who knows? 

Permalink Reply by Inchworm antenna on February 14, 2012 at 5:57pm

There's a lot of concern with Brinker.  If CHK is assigned deep rights from people with the Manufactureres light and heating leases is there a guarantee that the leases will need renegotiating?  Those old leases say 1/8 royalty for oil, and the royalty for gas is $200 a year for each well on premises, and 150,000 CCF's of free natural gas if well is on premises.  What if someone gets fraced under, do they get only royalties for oil, and none for natural gas and associated liquids?  The assigned could potentially take millions of dollars worth of natural gas and pay the landowner virtually nothing.  Ohio is one of the few states with no minimum royalty laws.  New York, Pennsylvania, and West Virginia have realized since the shale boom these old leases in storage fileds are robbery, and have passed laws requiring minimum12.5% royalty for the landowner or the lease is null and void.  There's gas storage fields all over the Eastern Half of the state so something has to be done.

There really needs to be a two tiered strategy:

1.  The old leases were designed to protect the storage fields at a time when such was necessary.  Since storage fields are a public utility, one better have signed the lease or be it imposed by emminent domain.  But now the well can be cased so no protection issue holds merit, so the deep rights should be released by the lesee back to lessor.  I bet a really great attorney could make a great case using this point.  

2.  Not having too much faith in the courts, people in Brinker Storage field with the old leases might want to have a meeting with State Representative Newbold to get the ball rolling on legislation for minimum gas AND oil royalties that mirrors Pannsylvania's.  AND DO IT FAST before it's too late!!!!!!

State Representative Craig Newbold (lives in Columbiana) (614) 466-8022

77 South High Street, 13th floor, Columbus, 43215-6111.

State Senator, Lou Gentile (lives in Steubenville) (614) 466-6508

Senate Building, 1 Capitol Square, Ground Floor, Columbus,43215.

 

Permalink Reply by dr j on February 15, 2012 at 8:00am

Inchworm has some great points.  Many of the leases appear to be slightly different- but quite a number do have 200/year number in them.  Some allow complete use of all water resources on the property without compensation etc.   They offer very little protection.  

On the plus side, many do prohibit unitization, do they would have to be modified before they could place you in a production unit but once again, that may not be the case with all of them.  

Talking to the state reps is an excellent idea.         

Permalink Reply by Blue Sky on February 15, 2012 at 7:10am

We live about 1/2 mile north of the Grubbs property and we leased with Trinity in January 2011 without any problem.  They were definitely aware of the storage field at that time.  I believe our lease was actually with Columbia Gas.  Subsequently, Chesapeake has acquired our lease along with many of our neighbors.  We have also heard rumors that Chesapeake is negotiating with Columbia Gas.  Originally the landman from Trinity told us that the high transmission pipeline that runs down our road would be of no use to Chesapeake or any other driller.  Now we are wondering if this was really true.  Maybe someone else out there has more information or a better understanding of this particular issue?

Permalink Reply by dr j on February 15, 2012 at 7:49am

Blue Sky- yes the storage field is owned /leased by Columbia Gas Transmission.   All of the storage leases are now held by them.   Manufacturers Heat and Light is the old company they purchased in the late 60's or early 70's.    Since Columbia Gas DOES NOT explore for oil or gas, they have "sat on" our mineral rights/development rights for decades, despite the implied covenant of the leases they purchased years ago.   No one was too concerned about this - because we were not aware/unable to develop those resources up until recently.     We should have been.   Even though most of those old leases do state you can be "held by storage" - the implied covenant is still valid I believe.   They should have release the deep rights years ago- being a company that does not explore.  That is probably the reason they easily signed the strata leases in the 80's and 90's - legally they have not fulfilled their implied covenants.   

I am not sure they can use the same exact pipeline but I do know they often will utilize the same easements/rightaways.   Columbia has a large transmission network though and eventually they want to be moving some of the gas.  

Permalink Reply by Inchworm antenna on February 16, 2012 at 6:12pm

I called State Rep Craig Newbold and State Senator Lou Gentile yesterday, and left messages with their offices.  We'll see if they call me back.  If we can get a group of people or a list of people with the Manufacturers Light and Heat Leases that would be great.  The more people they see they can help the better.  I'm looking to getting them to adopt some sort of minimum royalty law that mirrors PA.  I've spoken with one of the leaders of the Mohican Valley Landowners and he's going to look into contacting his State politicians in their area.  They have similar leases around Wayne & Knox counties(that only pay a gas Royalty of $25/year ) and in their case Columbia has already subleased them.  We need to move faster though as drilling is getting hot here and not yet in the Mohican area of the state.  I don't believe this is something that should be sat on or we'll have a lot of property owners loosing tons of potential royalty.   

Permalink Reply by dr j on February 15, 2012 at 7:53am

PS - Trinity was probably well aware of the storage field as some of their "principles" own land on the field.   They were gambling a bit as to if CHK would take those leases from them - and I believe while they have taken most, there are a few which Trinity still holds.   

Permalink Reply by Blue Sky on February 15, 2012 at 8:30am

dr j - very interesting information.  This has definitely been a learning experience for us.  I enjoy reading your posts and have gained a lot of insight from them.  When you say "principles" are you referring to owners of the company?

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