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Setting a legal precedent

Landowners’ fight over drilling rights

April 29, 2012
By LINDA HARRIS - Business editor ( , The Herald-Star

STEUBENVILLE - The Columbus attorney who successfully represented Jewett Sportsmen club in its battle to keep Chesapeake Energy from drilling a horizontal well on its property says the ruling is, potentially, a precedent-setter for Ohio.

Harrison County Common Pleas Judge Michael K. Nunner in January ruled that while the energy giant had every right to drill on the Jewett Sportsmen club property, those activities had to be confined to recovering only the oil and gas that lies directly beneath the club's property - in essence, banning Chesapeake from drilling horizontal wells on the club's property to capture gas from neighboring properties.

So far, Chesapeake hasn't said if it will appeal the decision. To date the energy giant has filed only a motion asking Nunner to reconsider but no timetable has been set for that proceeding, however.

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ON THE HUNT – Landsmen research property titles in the recorder’s office at the Jefferson County Courthouse. Old deeds often severed the mineral rights from the rest of a property, leaving surface rights owners to deal with the drilling headaches without enjoying the financial rewards that typically come with leasing. In some cases, landowners signed leases long before the full potential of Ohio and West Virginia’s shale deposits was realized, in many cases leaving them with what they now consider less-than-advantageous terms. Landowners should “talk to a professional before they sign anything,” a Columbus attorney specializing in oil and gas litigation said. - Linda Harris

Meanwhile, the club's attorney, Gregory D. Brunton of Columbus-based Reminger, said in Ohio it's not uncommon for mineral rights to a particular property to be held separately from surface rights.

"Just because a company may own the oil and gas under the surface doesn't necessarily mean they have the right to use the surface however they want," said Brunton, who earlier in the week had addressed residents at a public meeting at Old Fort Steuben. "There may be limitations as to how they can use the surface, particularly when it comes to horizontal well production and the types of uses that might encumber the surface."

In other words, while owning the mineral rights might allow a company to use the surface to extract underlying oil and gas deposits, there's "no presumption that (the mineral rights owner) can use the surface to extract oil and gas from a neighbor's property," Brunton said.

Brunton earned his bachelor's degree in English from the University of Akron and his law degree from Ohio State University in 1993. He's been with Reminger for 14 years and currently chairs the firm's oil and gas department, "spending quite a bit of time litigating issues related to pipelines, easements and eminent domain."

He said horizontal wells obviously are capable of extracting oil and gas beneath the surface a mile or more away, "but you cannot do that unless their deed gives them the right to do that," he said.

"It can be a (game changer)," he said. "It just depends how many deeds there are out there with similar language or a similar limitation of language - a company may go in and purchase the rights for oil and gas, and then it's something they can negotiate up front with the landowner. But if you were purchasing rights to an old deed ... it could pop up quite bit. I believe there are similar cases in Pennsylvania and West Virginia right now, with almost identical issues."

While Judge Nunner's decision has the potential to be a game-changer for the drilling industry, Brunton said also of note locally is the potential for cancellation or forfeiture of old gas leases, "depending whether (landowners) can show breech of the lease."

Brunton said Ohio law recognizes implied covenants in leases, so if landowners "have old oil and gas leases where they have not really been producing at all and they've not gotten royalty checks or the royalty checks have been sporadic or insignificant, they should at least look at it to see if the lease could be canceled."

"Whoever holds the lease is likely going to want to argue that they complied with the terms of the lease," he said. "Or even if they haven't, that the lease should be forfeit and they should just pay damages."

Brunton said there's an Ohio statute that allows landowners to send a certified letter claiming breech of lease. "You file it in the county recorder's office, but the owner of the oil and gas leases has the opportunity to file their own affidavit. Almost always it's going to end up in court," he said.

Still, Brunton said he gets "at least one or two calls a week from someone trying to find out if they can cancel an old gas lease." He said every lease has to be considered on its own merits.

But, he noted, there's a lot at stake.

"If you have someone who's maybe getting $100 or $200 a year in royalty payments, but they have 100 acres and now they could be getting $4,000 or $5,000 ... obviously that's a huge issue," he said.

His advice to landowners: Talk to a professional before you sign anything, no matter how seemingly innocuous the document might appear.

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