Ohio

Leases

Gas and oil leases are the first step to gas and oil production. Leases – like contracts – describe the rights of the landowner, and the obligations of the producer. Disputes between landowners and producers nearly always can be resolved by looking to the lease. These articles discuss the basic structure of a lease, unique clauses, as well as case law that interprets lease clauses.

Oil and Gas Lease Ownership Challenges – Seminar Materials

Below are the materials the National Business Institute asked me to prepare for a seminar on Oil and Gas law.

LEASE / OWNERSHIP CHALLENGES, DISPUTES AND NEGOTIATIONS

A.  Recent case law and litigation trends

Though Ohio was one of the earliest states to have commercial production of oil and gas, surprisingly, it has not developed much of a body of case law in the field of oil and gas.  Frequently, the laws of other states must be reviewed to find cases on point – Texas, Oklahoma and Louisiana seem to have the most published opinions concerning oil and gas.

The advent of the Utica shale has changed things. …


Nils Peter Johnson
Written by
about Leases + Ownership and Transfers
on October 2, 2014

Non-Consenting Landowners and Conflicts Between Leases

This article discusses situations arising when several people own the same piece of land, and only some of them sign an oil and gas lease.  Resolving this issue requires a discussion of basic property ownership principles.

Types of Land Ownership

Ownership in land takes many forms.  Some individuals are the sole owner of their land.  Another piece of land could be owned by several people, such as when brothers and sisters inherit land from a parent.  This joint ownership of a piece of property is usually called a tenancy in common, with the owners themselves known as tenants in common , or co-tenants.


Nils Peter Johnson
Written by
about Drilling and Producing + Leases
on June 11, 2014

Free Gas Issues

Many oil and gas leases provide the lessor with free gas.  This provision was fairly common in older leases, but has disappeared to a large extent for newer leases tailored to shale gas wells.  Here is a list of frequently asked questions and concerns about landowners exercising their right to free gas under an oil and gas lease:

Who is entitled to free gas?

You may be entitled to free gas if the oil and gas lease affecting your land contains a free gas clause, and if no other houses already use it.  Read your lease carefully, and look for free gas language. …


Eric Johnson
Written by
about Drilling and Producing + Leases + Royalties
on December 13, 2013

Forced Pooling – Overview

Before drilling an oil and gas well in the state of Ohio, a driller must first apply for a permit from the Ohio Department of Natural Resources (ODNR).  Part of the driller’s permit application includes a map indicating the leased lands the driller wants to include in the drilling unit.  Several considerations dictate the size this drilling unit can be.  The underlying oil and gas lease, for example, might specify a maximum unit size.  Ohio law also speaks to minimum well unit sizes. Generally speaking, the deeper the well, the larger the unit size must be.   A vertical well drilled deeper than 4,000 feet requires 40 acres of unitized land. …


Eric Johnson
Written by
about Geology + Leases
on November 26, 2013

Implied Covenant to Reasonably Develop – Geologic Formations

In a previous post I wrote about certain terms that are implied in all mineral leases: the covenant to reasonably develop.  In that article I described how a judge might cancel a certain area of an oil and gas lease if the producer hadn’t reasonably developed all of it.

This same idea can be applied to unused geological formations.  Let’s assume an energy company (the “lessee”) takes a lease for a 200 acre farm.  Let’s also assume that the lessee successfully drills five 40-acre wells on the acreage thirty years ago.  These five wells are all relatively shallow, and seek to produce oil and gas from the Clinton Sandstone geological formation. …


Eric Johnson
Written by
about Leases
on November 25, 2013

Implied Covenant to Reasonably Develop – Acreage

Many of my clients come to me hoping that I can help break their oil and gas lease.  As a general proposition, oil and gas leases are hard to terminate.  Given that they are drafted by oil and gas companies, it should not be surprising that they often favor the oil and gas companies themselves.  Every landowner’s situation will be different, but as long as the lessee to the oil and gas lease (the producer) pays a royalty to the lessor (the landowner), the lease is nearly bullet-proof.

However, there might be other ways to terminate an oil and gas lease even if the lessee is paying a royalty to the landowner. …


Eric Johnson
Written by
about Leases + Royalties
on November 14, 2013

Class Action Landowner Royalty Litigation

Twice I have successfully represented large groups of landowners regarding the proper calculation of landowner royalties.  The first case was Charton v. MB Operating Co. Inc., (1990 CV 110417), which involved about two thousand landowners in Tuscarawas County, Ohio; the matter was filed as a class action.  In that case, it was alleged that MB Operating was deducting about 25% of landowner’s natural gas royalties to cover its costs of transporting and marketing same.  Because MB Operating used a number of different lease forms, and because those forms did not have consistent language which addressed how royalties were to be calculated, there was a concern that the class members claims might not meet the commonality requirement under class action rules. …


Eric Johnson
Written by
about Drilling and Producing + Leases
on October 28, 2013

Notes from the Utica – October 2013

We have been quite busy since our last update.  Most -if not all- of the most valuable lands have already been leased, and energy companies have essentially staked out their positions.  An incredible 169 wells are currently producing from the Utica shale in eastern Ohio.  Chesapeake Energy is far and away the biggest producer in the region, as they operate 114 of these 169 wells.  The lion’s share of these producing wells are in Carroll county.  Carroll saw such a boom due to its underlying geology, but also because it had never seen significant oil and gas development.  As a result, energy companies like Chesapeake did not need to navigate around already existing wells and older leases: it had a relatively blank canvas with which to operate.…