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 Paul Martinelli on May 31, 2013 at 8:53am

John....

 

So lets say everyone is honest and interested in a good relationship.....

 

The farmer, the shallow well lease holder and a big O/G gas company sit down to discuss deep drilling and lease ammendments.

And for sake of argument...the old lease is standard 12.5% royalty and the going new lease rate for non HBP land is $5000/acre signing bonus and a 20% royalty.

To keep it simple....we'll not consider all the other issues....pad fees, pipelines, water....etc.

 

What would a fair deal be  to split up the $5000/acre bonus and the 7.5% bump in royalty between the shallow well lease holder and the landowner?

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on May 31, 2013 at 9:36am

Anyone who paints with such a broad brush is not to be trusted to be capable of having an honest debate.  

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on May 31, 2013 at 1:18pm

You're not getting the model for a very simple reason: Excel is registered to my personal name and I'd rather not give it some random stranger calling himself "Bob".  And as far as your middle school Black Swan Theory it's not too difficult to name a number of drillers who have generated massive income for landowners all across the state.  Up in my neck of the woods Everflow Eastern has drilled hundreds of wells, some during economic downturn and despite low gas prices.  Eric Petroleum is much the same.  Here in Mahoning County alone there are half a dozen producers who do what they say they'll do and provide the enrgy that powers this country.  Since you seem to have this sick obsession with me why don't you tell us a little about what you do Bob?  C'mon, feel the warm embrace of using your totally identifiable and legitimate name and tell us all about how swell Bob is.  

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on June 1, 2013 at 3:43am

"Marcus: Your response provided no proof, let alone a statement, that any of those shallow well drillers actually treated the farmers fairly regarding the deep rights under their land. If any of them did, post the documents to prove it."

What documents are you talking about? Did you go to the law school that told you that people record affidavits of happiness with their contractors? I've never heard of that one. The fact is that you only have documentation when something has gone wrong. Landowners usually don't take any action when they're being treated fairly. But I suspect that even you knew that, which is why you asked for something that you knew didn't exist.

"I won't be holding my breath waiting for you to do so. If my memory is correct, didn’t at least one of those entities try to sell/assign the deep mineral rights without any legal right to do so?"

Don't know anything about that. Several companies up here sold deep rights and I'm sure that each transaction had any number of variables that are not public.

"Let me get this straight - your excuse for not posting your infamous well model is because it is a spreadsheet and you can’t post it because the excel software is in your real name. rllghkrl kgk---__dlmvv - Sorry about that, almost passed out from laughing so hard. I do thank you for proving what was already known - Marcus is all hat no cattle."

I'm sorry that you're too old to understand how software works. That's a you problem.

"By the way, are you still telling landowners they should take $2000/acre for ½ of their interest before this thing implodes?"

When exactly did I do that? A little context with your statement would be lovely.

"Everyone at the firm even found that one a gut buster."

Ah, your firm full of "experts" who likely just started learning about oil and gas a few years ago, I presume? Well, the snakes in the landman business are always happy to deal with the snakes in the lawyerin' business. Professional courtesy and all.

"Feel free now to commence with your childless attempts at insults like you always do when anyone calls you on your never ending unsupported and laughable assertions."

Never heard anyone say an attempt at an insult was "childless". Must have learned that at your very elite law school.

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on June 1, 2013 at 11:31am

Since I do not work at a law firm and never said what kind of firm it was or whose it was, are you positive I wasn’t referring to the folks at the firm you work with? By the way, it is you that has no clue how a printer or software works, let alone what real software looks like. Ever read a local newspaper, court docket or court file genius? You know what adults say about always telling the truth instead of lies, you always remember the truth but after you told so many lies you can't remember which lie you told to whom. Appears you need to get out of somebody's basement and go to work for a real E&P company. Or should I say firm English teach? Now it is official: All hat and no cattle Marcus!! PS: New our resident English teacher could not resist that one. lol

Permalink Reply by John OBrien, landowner advocate on May 31, 2013 at 9:21am

First of all let me apologize for poor analogies.  (family vs corporate law, small claims vs corp would be better)

In my neck of the woods it seems the new standard for % is more like 18.75% (after all we can't let Exxon go broke can we) which seems fair as it is 3/16 which would be a 50% increase.  IF it is at the wellhead.  (big if)

 In my mind the signing bonus should all go to the landowner.  But for arguments sake lets turn the tables and offer the operator 12.5% of the signing bonus.  Since he has (if he is a real operator) probably (and in the case I am speaking of) thousands of acres of leases, he will become a millionaire with only 12.5% from each lessor.  

As far as splitting the royalty rider, again, he should get no more than 12.5% of the new 6.25%, which would be less than 1% total increase to him, so for arguments sake lets give him 1% of the rider.  Total all his leased acres this will give him another couple of million a year income.  Now, you say it wouldn't be fair to him, (I can hear the naysayers already) but remember he has no additional output of cost, none, zero, and it (the new deep well) has no adverse affect to his property, only to the landowners.  

So, let me hear the downside from all who want to pipe up.

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on May 31, 2013 at 9:34am

Some people are scumbags.  Some of those scumbags work in oil and gas.  Your guy needs to call the state inspector and nail this operator's balls to the ground.  Seems pretty straightforward to me.  

Permalink Reply by David Brooke on May 31, 2013 at 2:01pm

Thanks for the court decisions!  There is, unfortunately, language which nullifies any implied covenants.  As a result, according to the attorney I've engaged, I cannot force the O & G Co. to turn over their production numbers.  Any thoughts or case law on that one, that you know of...?

Permalink Reply by searcherone on May 31, 2013 at 3:27pm

Definitely, no thoughts on case law from me.  However, TAXES.  Producers are suppose to pay taxes on the wells they are producing to the counties where wells are located  Just today someone stated to me , funny how when taxes were do many of these producers claimed they didn't own the wells, but now suddenly they do own them.   Check to see if the taxes are being paid as they actually can become delinquent and are they paying on one or four?

Permalink Reply by Fowler, Ohio Landowner on June 3, 2013 at 7:47am

Our lease was signed in the 70's by the original 60 acre farm owner.  The property has since been sold and split into three parcels, of which our is 18.5 Acres.  The lease wording is in the original owner's name and never was transferred into our name when we purchase the property.  We're in Northern Trumbull County (Fowler) and wanted to know if any one has the same type of lease and who in Trumbull County you could use to evaluate your existing lease?

Permalink Reply by John OBrien, landowner advocate on June 3, 2013 at 2:34pm

Do you have production from a well and receive a royalty check?  If you do not, then with only 18.5 acres you cannot now be drilled unless you  are included in a unit.  So, nobody can hold you by production.  Why not try asking James Brinks here on GMS.  He may have a simple answer for you.

Permalink Reply by Fowler, Ohio Landowner on June 3, 2013 at 11:36pm

Yes we do currently receive a minimum royalty check ($12/QTR).  How can we find out if they are attempting to sell our lease to a unit?  Do they have to notify us?

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