Recent Posts

Eric Johnson
Written by
about Drilling and Producing
on March 17, 2014

Forced Pooling – Trends, Benefits and Detriments

Recently I wrote about Ohio’s mechanisms for forcing unleased mineral owners into a drilling unit.  Oil and gas producers have increasingly started to rely on these mechanisms to drill  horizontal wells to the Utica / Point Pleasant shale formation in eastern Ohio.  These same laws require transparency for these procedures, and as part of a public records request, I obtained several recent orders approving the forced unitization of unleased mineral owners in various parts of Ohio.   I was hoping that I could gain some insight on the issue of whether a landowner is better off signing a proposed lease or being forced into a drilling unit under the applicable statute.  Having reviewed these unitization orders, I offer the following observations:

Producers do not appear to be abusing this process

Producers are relying on an Ohio law that requires that they only lease 65% of a proposed drilling unit before they can force unleased mineral owners into the unit.  However, each of the orders I reviewed showed that producers had leased nearly 90%  of the proposed drilling unit, and frequently that number was much higher.  To me, this indicates two things: 1) that producers much prefer to negotiate with landowners than resort to this process, and 2) that the Ohio Department of Natural Resources prefers leasing efforts that go well beyond the statute’s minimum requirements.…


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.  Horizontal wells, like those drilled in the Utica shale have different requirements.…


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.  Now, it should be pretty clear that the lessee has reasonably developed all of the farm’s 200 acres (5 wells x 40 acre units = 200 acres).  But, what can be said about the lessee’s duty to develop other geologic formations?…


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.  One particular method to cancel an oil and gas lease has to do with implied covenants to reasonably develop the entire leasehold.  This method doesn’t cancel the lease in its entirety, but only cancels it to those lands that have not been drilled or included in a drilling unit.  Ohio has long held that a mineral lease includes an implied covenant to reasonably develop the land.  (see Ionno v.…


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.  The Court did ultimately certify the class and the matter was settled eventually.  The class members received checks representing a significant percentage of the deductions that had been made over a period of several years.…


Eric Johnson
Written by
about Ownership and Transfers
on November 12, 2013

Ohio’s Dormant Minerals Act – Ohio’s Courts Weigh In

Below is an excerpt from a presentation I gave on November 8, 2013 for the Ohio Association of Justice Seminar.  A broader overview of Ohio’s Dormant Mineral’s Act can be found here.

I.  Introduction

Commencing in the spring of 2010, eastern Ohio experienced an unprecedented oil and gas leasing boom due to the discovery of the Utica Shale.  In the recent past, Ohio landowners might expect to receive $10-20/acre for signing an oil and gas lease.  Presently, prices in the range of $3,000-6,000 have become the norm.  Hundreds of wells have now been drilled throughout eastern Ohio into the Utica shale, with some being prolific producers.…


Molly Phillips
Written by
about Pipelines
on November 5, 2013

Pipeline Negotiations

Since most of the leasing has slowed down in the Utica play here in eastern Ohio, many midstream companies are now approaching landowners about pipeline rights-of-way.  Pipeline agreements are typically drafted as a permanent easement, by which the pipeline company is granted a permanent right to access a strip of land on which to install and maintain a pipeline.  Because pipeline agreements can last a very long time, it is essential that landowners retain a lawyer who can interpret the language and negotiate with the pipeline company to change the terms.  Most of the agreements landowners receive from the pipeline company contain many terms that don’t adequately protect the land, and generally aren’t very favorable to the landowner.  On top of this, most landowners are offered a pretty low price in exchange for these unfavorable terms.…


Mineral Rights, Survivorship, and Probate

When an individual dies, the probate court takes all of the real property titled in the deceased person’s name and determines the new owner.  The same is true of oil, gas, and mineral interests, as they are real property.

This process is fairly straightforward if the individual had a will that clearly stated where they wanted these interests to go.  Even so, the probate court must approve of the transfer.  This can be a lengthy process and is subject to court costs and attorney’s fees.

Alternatively, the mineral interests can pass automatically if they are part of a deed containing survivorship language.  These deeds provide that when one of the landowners dies, their interest passes automatically to the remaining landowners.  This process avoids the probate court, but still requires some additional paperwork for it to be valid.…