Mon., 7:08am: Property owners forced to lease land for drilling

LISBON – Several Columbiana County property owners unwilling to lease their land for horizontal drilling were recently forced to do so under a nearly 50-year-old state law, and at least two other such applications in the county remain pending.

The so-called “unitization” law, which dates back to 1965, is a legal process by which companies drilling for oil and gas in Ohio can force unwilling or reluctant property owners to become part of a drilling unit.

Unitization and the more commonly known term of “mandatory pooling” are the same thing, according to Mark Bruce, a public information officer for the Ohio Department of Natural Resources, except unitization applies to horizontal drilling permits, while mandatory pooling refers to vertical drilling.

Nearly 100 horizontal drilling permits in the county have been issued since the Utica shale boom in eastern Ohio took off in 2010, and the unitization applications filed with the ODNR have likewise increased. Approximately 27 unitization requests have been filed statewide to date, eight of which were approved. Until 2011, the law had only been used twice.

Under the unitization law, at least 65 percent of a proposed horizontal well unit’s mineral rights must be owned or leased by the applicant. Applications to create a forced unit must be to enhance the unit’s profitability through increased production and for the purpose of either achieving a 640-acre unit or to meet minimum distance requirements from non-unit properties.

The only approved unitization application to date involving county property owners was for the Leslie North unit that encompasses portions of Hanover Township in this county and East Township in Carroll County.

The applicant was Chesapeake Exploration LLC, which is the largest oil and gas leaseholder in the county. The proposed Leslie North unit was for 615 acres, plus another 32 acres that were not under lease, and Chesapeake was requesting those remaining five property owners be forced into the unit. Following the required public hearing, the ODNR approved the application on Oct. 3.

The group included property owned by county commissioners, the Ohio Department of Transportation, Ohio Edison, and two residential property owners who chose not to lease their land.

The decision can be appealed to the Ohio Oil and Gas Commission, a state board comprised of governor appointees, and then to Franklin County Common Pleas Court in Columbus.

The forced property owners will not go away empty handed. The ODNR order requires those forced into the Leslie North unit be paid 12.5 percent royalties for any oil and gas production that occurs within the unit, which the ODNR’s Bruce said is often based on what the lease landowners are receiving. Unlike those who willingly entered into leases, the forced property owners will receive no lease bonus payment, however.

Anyone forced into a unit is afforded a certain level of protection: State rules prohibit any surface well operations, roads, or pipelines from being located on any of the land forced into a unit.

Bruce said the law encourages larger drilling units as a way to prevent multiple property owners from each drilling individual wells into the same deposit. This was done to not only reduce the blight created by the sight of numerous wells located in the same vicinity but to maximize production, which is driven by underground pressure and diluted when there is more than one well in the same unit.

“Maximizing the recovery of the oil and gas resources, that’s the nuts of an bolts of it,” he said of the unitization law.

The following is a list of the other unitization applications involving county property owners:

– Firestone Unit A in Fairfield and Unity townships.

Status: Awaiting hearing.

The applicant is Atlas Noble LLC and it encompasses 666 total acres, 589 acres of which are leased by Atlas, and most of those parcels are owned by Meadowbrook Development, The Links at Firestone Farms, and Firestone Homestead. Chesapeake and its partners hold the leases on the 77 acres Atlas is seeking to add to the unit.

– Huffman Trust South Unit in portions of Butler, Hanover and Center townships.

Status: Under review.

The applicant is Chesapeake and encompasses 483 acres, 411 of which are under lease to Chesapeake and its partners. There are four parcels encompassing 72 acres that Chesapeake has asked be added to the unit.

– Leona South unit in Franklin Township.

Status: Application withdrawn.

The applicant was Chesapeake and it encompassed 521 acres, of which 455 acres are under lease to Chesapeake. The remaining 66 acres are owned by four property owners, mostly by the Norfolk & Southern Railroad and county commissioners.