Ohio

Royalties

In a typical gas and oil transaction, the producer must pay the landowner a percentage of the gas and oil sold from his or her land. This percentage payment is often called a landowner royalty, or “LOR” for short. Articles in this section discuss how royalties are calculated, how to read royalty statements, and how to verify that royalties are being properly paid.

Contributors

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. …


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 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 Leases + Royalties
on September 20, 2013

Landowner Royalty Calculations

One of the questions we’ve been getting a lot of recently is: “how are my oil and gas royalties calculated?”  There are actually a few different ways to answer this question.  The first angle has to do with how a royalty is calculated as part of a drilling unit.  Let’s say that you own 50 acres in a 100 acre drilling unit.  Your lease probably says you are to earn 1/8 (or 12.5%) of all oil and gas produced from the premises.  The premises in this instance is the 100 acre drilling unit, of which you only own 1/2 (50 acres = 1/2 of 100 acres). …


Nils Johnson
Written by
about Ownership and Transfers + Royalties + Taxes
on June 18, 2012

Minimizing Tax Impact of Oil and Gas Royalties

The impact oil and gas leasing has had on Ohio is remarkable.  A farmer who struggled to make ends meet one year could find himself with an income tax bill he never imagined the next.  Though we Ohioans have been blessed by these essential resources, allocating their value can be troublesome from a financial standpoint.  Many people may find themselves unsure of what to do with signing bonus money.  It doesn’t take a financial adviser to outline the basic options: save it or spend it.  Prudence dictates the best of these two options.

Everyone’s financial situation is different.  However, people from all types of situations certainly have people that they care about and would like to support if they are able. …


Eric Johnson
Written by
about Drilling and Producing + Leases + Royalties
on January 4, 2012

Oil and Gas Lease Forfeiture or Expiration in Ohio

Recently, I’ve been receiving a number of calls from prospective clients who are looking for ways to extract themselves from an old lease that covers their property. Various scenarios exist: (1) an old lease was signed years ago, but no well was ever drilled; (2) a well was drilled, but has sat idle for some time, with no royalties being paid; (3) a well was drilled and royalties have been paid, but they are sporadic or of a very small amount. With the recent increase in leasing in Ohio, and considering the large sums being offered, these clients want to know if they can cancel the old lease to allow them to sign a new lease for large dollars.…


Gas and Oil Leasing FAQ

Frequently Asked Questions About Oil and Gas Leasing and Drilling

Q. How long does an oil and gas lease last?

A. Usually, a long time. Most leases have two terms that affect their duration. The primary term is a fixed period of time (e.g. five years) during which the lessee has to achieve a certain result. If that result is achieved, then the secondary term kicks in, which is of indefinite duration. Most often, a lease will specify that a well must be drilled within the primary term and that once this happens the secondary term commences and continues for so long as there is production from the well.


Eric Johnson
Written by
about Drilling and Producing + Leases + Ownership and Transfers + Royalties
on January 4, 2011

Oil and Gas Law 101

The first commercial well drilled for oil was the “Drake” well, which was drilled in 1859 in eastern Pennsylvania,. Many years and many wells have passed since that time and, as would be expected, many disputes have arisen concerning the leasing, drilling and operation of oil and gas wells in the United States.

Since I began practicing law in 1983, I have been involved in all manner of such disputes – some of which ended up in court. Some involved claims between landowners (Lessors) and the company who took an oil and gas lease (Lessees). Some involved claims between co-owners of a lease rights.…