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...

Views: 9638

▶ Reply to This

Replies to This Discussion

Permalink Reply by Joseph-Ohio on March 17, 2015 at 10:21pm
In your scenario I think the 5 acre 'donut hole' (delaying development) would be easily circumnavigated or bought out myself.

The 'donut hole' logic just doesn't 'wash'' with me.

Delay of game via nonsense legislation does.
Permalink Reply by Joseph-Ohio on March 17, 2015 at 10:26pm
Just because some of us share ideas that seem 'paranoid' to others doesn't mean they're not 'out to get us' all !
Permalink Reply by Mark Allen on March 17, 2015 at 6:05am

wow, Do you really think this administration has any regard for the landowner?  This current leadership is for the Oil and gas industry no doubt and for their governor. Each house rep is scared to challenge either the OOGA or their leader.  Kasich may well be the next president if he can balance his budget.   HB 8, is not for the landowner it is for the OOGA lobbyist and as a olive branch to Kasich.

True back stabbing, but right in our own eyesight and we are too stupid to see it.

Wake up.  

Permalink Reply by Joseph-Ohio on March 17, 2015 at 6:10am
No not stupid.

Powerless is a better / the best word IMHO.
Permalink Reply by Mark Allen on March 17, 2015 at 7:20am

the majority is never powerless.  Organize and demand to be treated fairly.

Permalink Reply by Joseph-Ohio on March 17, 2015 at 7:54am
Problem is I don't think we as landowners are in the majority of all of the voters here in Ohio.

I think most Ohio voters live in one city or another and could care less about our rights of ownership (maybe not even theirs). I'll guess most are apartment dwellers these days.
Permalink Reply by Joseph-Ohio on March 17, 2015 at 8:06am
I think as we have an 'Electoral College' there also ought to be an 'Ownersip College' (especially for land / mineral owners); to protect them (us) from the non interested majority. Owners should have weighted votes on matters of private ownership.

Would that fly ?

Why does the 'Electoral College' fly ?
Permalink Reply by Mark Allen on March 17, 2015 at 8:17am

The NARO, National Association of Royalty Owners, would be a good starting point.

The locals must work from the grassroots up. It starts with bordering landowners and their Township Trustee's and then the neighboring township and then County Commissioners and make sure we include each county's Engineer/Highway Dept. and  the county Sheriff.  Then the neighbors, bordering township, etc....door to door land owner to landowner.

A REMINDER, it is your land and your mineral interest, protect it.  

Permalink Reply by Joseph-Ohio on March 17, 2015 at 9:33am
Would NARO represent all landowners and mineral owners or only those receiving royalties ?

The damage this Bill creates is occurring to all of the above.

We all need representation IMHO.
Permalink Reply by Joseph-Ohio on March 17, 2015 at 9:50am
Is everyone reading / understanding how screwed land / mineral rights owners seem to be ?

How do you all like it ?

I don't like it a bit.
Permalink Reply by Joseph-Ohio on March 17, 2015 at 8:16am
Where do we sign ?
Permalink Reply by wandering juju on March 24, 2015 at 4:35am

Every layer that gets drilled..  the land owner gets paid.. why put on more restrictions.. ??  more Government isnt the answer..  working together is what sets precedents.. 

RSS

© 2024   Created by Keith Mauck (Site Publisher).   Powered by

Badges  |  Report an Issue  |  Terms of Service