Ohio Leased Landowners must read.

This could get rid of the unit size stated in your lease.  Read it please,

Hidden in a massive budget bill introduced in the Ohio General Assembly last month are proposed changes in state law that could rip away an important provision of many mineral rights leases.

Unless concerned mineral rights lessors and their advocates can stop the bill from becoming law, they may lose a popular tool to maximize the value of their rights.

House Bill 64, introduced Feb. 11 by State Rep. Ryan Smith of Gallipolis and known as the “Main Operating Budget,” is a monster bill of some 2,783 pages that amends some 934 existing statutes and touches myriad legislators’ pet issues, like e-cigarettes. (You can download a copy here, but it is a massive file.)

The bill also includes huge proposed changes to Ohio's unitization law (pp. 437-446). 

Background on unitization law

At the moment, that law, Ohio Revised Code Section 1509.28, allows for a unitization by owners of drilling rights on land overlying a defined pool of oil and gas.

The law was barely used from 1965 until 2011, when horizontal well drillers started hatching creative means of applying it to their benefit. Since then, the ODNR has been flooded with unitization applications.

The statute gives the Chief of the Division of Oil and Gas Resources Management the authority to "force" participation in a unit by unleased owners and owners of working interest rights who do not want to play ball with the majority working interest owners.

The statute does not address what is to happen if an energy company lessee claims its drilling rights under a lease that restricts a drilling unit size in conflict with the unitization applied for.

This has given lessors leverage to demand consideration from unitization applicants in return for amending existing leases to allow larger unit sizes.

Of course, the lessees (usually big oil and gas company assignees of original lessees) do not appreciate this inconvenience, and have been espousing novel legal theories to avoid it. Courts have not yet reviewed the issue.

Devil in the details of new bill

However, the new "operating budget" bill does raise the issue and proposes to shift the law against the rights of landowners.

The bill’s drafters (likely oil and gas company lobbyists) do not suggest clear language like, "The Chief can tear up existing leases and ignore negotiated unit limits." 

Rather, buried in proposed RC 1509.28 (E) (page 440), in language just ambiguous enough to hide its intent, a new provision says that if an applicant for unitization has not reached a voluntary agreement with a mineral rights owner as to the proposed unit, the rights owner (apparently whether under a lease or not) "shall be considered an unleased mineral rights owner." 

In other words, unitization limits specified in a lease would be of no effect.

Lessors, do you hear the sound of your lease being ripped up by ODNR?

It is time to be contacting your state legislators to express your concern. Your carefully negotiated oil and rights are at stake!

# # #

________

Alan D. Wenger is an oil & gas lawyer in Youngstown, Ohio, and chair of the Oil & Gas Law Practice Group at HHM.

http://hhmlaw.com/blog/oil-gas-lessors-beware-terrible-changes-prop...

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Replies to This Discussion

Permalink Reply by Ronald L. Rohr Jr. on March 9, 2015 at 4:07am

sound's to me that our fearless leaders in office just do'nt care about the voter's or there right's let's vote all the dummie's out of office.

0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on March 9, 2015 at 5:53am

I don't believe oil and gas companies look at leases once they are signed, they are stuffed in a fire proof file drawer.

Signing a lease is the same as agreeing to being stolen from, take a look:

Buck Well 1H 1 year royalty results: Low $45 per month per acre.  High $150 per acre per month.

In the words of the CHK VP "It's a good business practice not to pay landowner royalties then go to court and pay only what the judge orders".  Farm & Dairy Sept 2013.

That quote is an admission of guilt.

 

Permalink Reply by Sage59 on March 9, 2015 at 8:20am

If this came from the desk of Alan D. Wenger, this issue should be taken most seriously. Mr. Wenger was one of, if not the, major architect of the Trumbull ALOV leases. These leases are considered to be among the most landowner friendly leases written. I don't know Mr. Wenger personally, but I do regard him as a top expert on these types of issues. If he thinks that this is both serious and damaging to landowners, it is. I am going to contact my state rep. I don't carry a lot of faith in government representatives these days, but to not say anything is not an option.

Permalink Reply by Dexter Green on March 9, 2015 at 3:47pm

Obviously you don't know Mr. Wenger.

Permalink Reply by Sage59 on March 10, 2015 at 12:02am

Dexter. I respect your opinions and knowledge that you show on these pages. I stated that I do not know Mr. Wenger personally. I wanted that fact to be obvious. I was referring to the work he had done on behalf of ALOV members. I felt that his lease was a very effective and landowner protective one. If I am wrong about his abilities or intentions in this matter of forced pooling, please straighten me out. As a landowner with some property with ALOV, and some held by production, I might need further services of a Lawyer. He may have been my choice. Could you please elaborate?

Permalink Reply by Dexter Green on March 10, 2015 at 2:05am

I don't respect shameless self-promoters.  The legal profession used to be one that people respected or at the very least didn't find contemptible.  I also have issue with people whose egos are the size of the Hindenburg.  As far as legal counsel goes he's perfectly competent.  But just know that any time you use him it's the Alan show and you are merely in the audience.  He'll negotiate on your behalf and I'm sure he'll do a fine job.  But that doesn't change the fact that he's an epic putz.

Permalink Reply by Sage59 on March 10, 2015 at 2:51am

Thanks Dexter. Looking at my original post, it did smack of Wenger worship. That was not my intent. Such things as arrogance matter greatly to me also. There are other good choices out there. Character reveals a lot.That is why I respect and value your opinions.

Permalink Reply by Joseph-Ohio on March 9, 2015 at 11:01pm
Reads to me like being a landowner and mineral rights owner - leased or unleased - is like agreeing to and paying for being stolen from.

This process and other parallel legislative processes are the real reason why development is stalled.

It's not a conspiracy theory claim to recognize the O & G industry working in tandem with our elected legislators - it's a recognition of fact.

All only IMHO as it always was and is.
Permalink Reply by Joseph-Ohio on March 9, 2015 at 11:21pm
Should have titled your discussion "Ohio Landowners / Mineral Rights Owners - Leased Or Unleased - READ THIS DISCUSSION".

We, however, seem to me to be a minority who the industry and legislators pay no attention to.

Seems to me Ownership Rights mean nothing to the O & G Industry or our Legislators - other than Rights to be dismantled / abolished.

Seems to me we are at the mercy of the Oil & Gas Industry and the State.

It appears to me that we have no meaningful representation.

Right here in the U. S. A. the land of the free and home of the brave.

It appears to me that politics are a rotten, fetid, corrupt mess.
0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on May 28, 2015 at 4:23am

Update:  Buck Well 1H 1 year royalty results: 

Low - $25 per acre per month.

High - $150 per acre per month.

When your producer can't satisfy their greed, they will reduce your royalties in spite of your lease.

Chesapeake is leading the way.

Permalink Reply by Robert Bond on March 9, 2015 at 10:12am

I just put the link in my post.  Someone else added the article, I do think all should read it!

Permalink Reply by countrygirl on March 9, 2015 at 12:18pm

This probably why I have not got paid for my ammendment to oil and gas lease from AEU....it was to be paid for pooling to unitization.......time up and tried calling and no one calls me back....

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