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 Ronald L. Rohr Jr. on March 17, 2015 at 6:46am

when are they suposed to vote on this bill has anyone heard.

Permalink Reply by Mark Allen on March 17, 2015 at 7:16am

They are running it through now...In fact,  what is good for the goose is good for the gander.  The state is moaning about drilling on state lands, primarily state parks, as Kasich is trying to appease both sides. Environmentalist say no to drilling anywhere, the state says well maybe on some of our land, the private owner says, only if I get a fair shake and the E&P says, hire the best attorneys and geologists and create our own rules within the protection of the agency that was created to over see the industry.   Folks the FOX IS GUARDING THE HEN HOUSE! 

The drilling companies have found a compromise, I70 and the minerals beneath it.  The lessee presents a proposed unit configuration that shows leasehold in yellow and State lands under I70 in red.  The lessee applies for forced pooling because under current OHIO standards they have the right to force pool.[RED MARKED LANDS]  But wait a second the state says "not on our land you don't''....so a few wise politically appointed, hand picked Kasich disciples, come up with an alterative plan. We will allow you to drill our lands and include them in your unit, but it will be under these terms.

Out comes from the mouth of House leadership the name for this bill, in order for the public to accept it,   ''the landowners bill of rights"...bull puckie!

Do you as a private landowner get to determine your lease terms?   Under this ruling, good luck with that.

This is oil and gas having their cake and eating it too, while the snake oil republicans claim to be helping you.

Call Andy the bird watcher Thompson or Al the laborer Landis and ask them. 

Permalink Reply by Joseph-Ohio on March 17, 2015 at 9:13am
Democrats = Republicans = Politicians.
Permalink Reply by Kathi Albertson on May 6, 2015 at 2:14pm
Does anyone know if this is still in the budget bill?
Permalink Reply by Kathi Albertson on May 27, 2015 at 1:04pm
Does anyone know if this part of the budget made it out of the house and into the Senate? I tried to talk about it to my representative this morning and he said tha I must have misunderstood it because the unitization bill that was passed was landowner friendly. He seemed unaware of this part. Help please!
Permalink Reply by Kathi Albertson on May 27, 2015 at 1:57pm
After a search of what I believe is the current version of the budget bill, I found a section referring to mandatory pooling (1509.27) on pages 517-519. I see no reference to land held by a previous lease as mentioned by Mr. Wenger. Am I looking in the wrong place? I should think that if it had been there but had been deleted it would still appear as crossed out. Can someone help me here?
Permalink Reply by Joseph-Ohio on May 27, 2015 at 3:12pm
Biggest thing that's always bothered me about the forced pooling / forced unitization rule changes as explained is that if any one feature of an existing lease can be thrown out / ignored / over-ruled, is what else might be thrown out (should the ODNR Gas & Oil Division Chief choose to) ?

Here in this discussion the 'Unit Size Limits' being ignored and thrown out are presented as of great concern.

What about everything else being at risk of being over-ruled ?

What are the limits to the authority of the ODNR Oil & Gas Division Chief insofar as the lease structure is concerned ?

Based on what I've read here there seems to be no limits.

Serious concerns - no ?
Permalink Reply by Kathi Albertson on May 27, 2015 at 3:25pm
But where is this in the budget bill? I can't find it and the state rep. acted like it wasn't there.
Permalink Reply by Joseph-Ohio on May 28, 2015 at 1:03am
Well, if the discussed tresspasses aren't / are no longer in the Bill being discussed here, I think it's a good thing.

Have the offensive proposals been eliminated from the Bill ?

Are they being deliberated elsewhere ?

Anyone know ?

Below a link to another discussion pertaining to manipulation of 'Unit Sizes' that I think to be very important:

http://gomarcellusshale.com/forum/topics/property-in-2-units

RSS

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

Badges  |  Report an Issue  |  Terms of Service