Ohio law requires oil and gas land professionals to hold broker’s license to be compensated

On September 25, 2018, the Ohio Supreme Court issued its decision in Thomas Dundics v. Eric Petroleum, Slip Opinion No. 2018-Ohio-3826, holding that the plain language of Ohio Revised Code 4735.01 does not exclude oil and gas land professionals or oil and gas leases from the definitions of “real estate” and “real estate broker” within the statute. The case considered the specific question of whether “oil-and-gas land professionals, who help obtain oil-and-gas leases for oil-and-gas development businesses, must be licensed real-estate brokers when they engage in the activities described in R.C. 4735.01(A) with respect to oil-and-gas leases,” and “[m]ore specifically, … whether R.C. 4735.21 precludes a person who is not a licensed real-estate broker from bringing a cause of action to recover compensation allegedly owed for negotiating oil-and-gas leases." For more, read the full story

Ohio, Oil & Gas Litigation

7th Circuit Court of Appeals affirms Illinois subsidy for nuclear generation facilities

On September 13, 2018, the Seventh Circuit Court of Appeals issued its long-awaited decision in the consolidated cases of Elec. Power Supply Assn. v. Anthony M. Star, 7th Cir. Nos. 17-2433, 17-2445, 2018 U.S. App. LEXIS 25980 (Sep. 13, 2018).  The decision — authored by the well-known jurist, Circuit Judge Frank Easterbrook — decided an issue that is very similar to an issue also currently pending before the United States Court of Appeals for the Second Circuit, the case of Coalition For Competitive Electricity, et al. v. Zibelman, et al., 2nd Cir. No. 17-2654. The issue in question is namely whether the Federal Power Act preempts a state law that sought to subsidize some of the state’s nuclear generation facilities. The Federal Power Act provision— 16 U.S.C. § 824(b)(1) — provides that the Federal Energy Regulatory Commission (FERC) is to regulate the sale of electricity in interstate commerce, whereas the states are to regulate local distribution and the facilities used to generate power. For more, read the full story

Ohio, Oil & Gas Litigation

Ohio's Fifth District Court of Appeals issues a decision on unitization

On August 13, 2018, the Ohio Fifth District Court of Appeals issued a decision in Am. Energy-Utica, LLC v. Fuller, 2018-Ohio-3250, holding that an order unitizing the landowner’s parcel under R.C. 1509.28 after the landowner chose not to voluntarily consent to the unit “retroactively impair[ed] the obligation of the contract,” namely a provision in the landowner’s oil and gas lease stating, “UNITIZATION BY WRITTEN AGREEMENT ONLY.” In this case, Fuller executed an oil and gas lease in 1981, covering a 40-acre parcel, that contained no explicit restrictions on the formations or depths covered by the lease and included handwritten changes that crossed out the provision allowing for unitization and, instead, provided: “UNITIZATION BY WRITTEN AGREEMENT ONLY!”  After a series of assignments, American Energy-Utica, LLC acquired the deep rights under the Fuller parcel. American Energy approached Fuller to execute an amendment to allow for unitization of the Fuller parcel. The parties were unable to reach an agreement, and Fuller refused to consent to the unit. American Energy then included his parcel in a unitization application to ODNR under R.C. 1509.28.

In the case, American Energy filed a claim for injunctive relief to gain access to the Fuller property to conduct seismic testing, as well as an application with ODNR to force a portion of Fuller’s property into a drilling unit. Fuller filed a counterclaim for breach of the lease agreement provision related to unitization by written agreement only. The trial court held that the oil and gas lease covered all formations under the property and that “R.C. 1509.28 permits the unitization of the lease.” On appeal, the Fifth District reversed the trial court’s decision on unitization, relying on the Ohio Supreme Court’s decision in Burtner-Morgan-Stephens Co. v. Wilson, 63 Ohio St.3d 257 (1992). The Fifth District held that application of R.C. 1509.28 in this case constituted breach of the express provisions of the lease. 

Ohio, Oil & Gas Litigation

Bill protecting oil and gas producers from new tax policy passes Ohio legislature

An Ohio Department of Taxation audit led the state agency to conclude that oil and gas producers are no longer exempt from sales taxes on several necessary capital expenditures, according to Columbus Business First.  House Bill 430, which was crafted to protect producers from these taxes passed the Ohio House and Senate, and recently received Gov. John Kasich’s signature for approval. State Rep. Tim Schaffer, R-Lancaster, said he introduced the bill to protect mom-and-pop production companies and hundreds of jobs. For more, read the full story

Ohio, Oil & Gas Litigation

PA Supreme Court: Oil and gas wells may not be an acceptable use in certain residential/agricultural zoned areas

In a 4-3 decision, the Pennsylvania Supreme Court, in Gorsline v. Board of Supervisors of Fairfield Township, J-13-2017, 2018 Pa. LEXIS 2781 (June 1, 2018), announced a ruling that may impact shale gas development in non-industrially zoned areas throughout Pennsylvania. In the case, Fairfield Township approved an application to permit Inflection Energy, LLC to drill multiple gas wells in a residential-agricultural zoned area. The issuance of the permit was based upon the township board of supervisors’ determination that the drilling and operation of the wells was “similar to and compatible with the other uses permitted in the zone” where the property is located and that the wells constituted a “public service facility” under the local zoning code. Two local families appealed the township’s decision.

The trial court overturned the decision to permit the oil and gas wells, finding that the board’s classification of the wells as “similar to” a “public service facility” was not supported by substantial evidence. The intermediate appellate court reversed the trial court, finding that the oil and gas company’s proposed use was similar to and compatible with a “public service facility” and/or an “essential service.” The Pennsylvania Supreme Court found that the board’s determination to permit the wells as “similar to and compatible with” a “public service facility” or “essential service” was an error as a matter of law. The Court reasoned that the proposed drilling did not demonstrate any benefit to the local community such that it could be considered a public service facility but indicated its decision did not decide that all oil and gas development in residential or agricultural zones is unacceptable as a matter of Pennsylvania law. In fact, the Court noted that the Pennsylvania Municipalities Planning Code specifically “permits the governing body of a municipality to amend its zoning ordinances to permit oil and gas development in any or all of its zoning districts.” For more, read the full Pittsburgh Post-Gazette story.

Oil & Gas Litigation, Pennsylvania

Ohio Supreme Court to review Youngstown ballot issue on hydraulic fracturing

For the third time since 2015, the Ohio Supreme Court is being asked to decide whether a Youngstown initiative to ban hydraulic fracturing used in oil and natural gas operations will be in front of city voters, reports the Youngstown Vindicator. The newspaper says attorneys representing four city residents, who back the charter amendment effort, filed a writ of mandamus with the Court against the Mahoning County Board of Elections and its four members. The filing seeks to overturn the board’s March 13, 2018 decision to keep the proposal off the city’s May 8th primary election ballot, according to the Vindicator. For more, read the full story.

Ohio, Oil & Gas Litigation

Ascent Resources Marcellus files for bankruptcy

Ascent Resources Marcellus Holdings LLC said it has filed for Chapter 11 bankruptcy as part of a negotiated plan with lenders to reduce about $1 billion of debt and boost liquidity, according to Reuters. The news service says the filing in the U.S. Bankruptcy Court in Wilmington, Delaware is for Ascent’s Marcellus assets, which include development rights on 43,000 acres in West Virginia, and has no impact on Ascent's Utica shale play holdings in Ohio. The company said the Marcellus and Utica assets are owned by entities with separate capital structures. For more, read the full story.

Ohio, Oil & Gas Litigation, West Virginia

Ohio Supreme Court denies writ of mandamus in dispute involving ODNR

The Supreme Court of Ohio on January 30, 2018 issued an opinion in State ex rel. Kerns v. Simmers, Slip Opinion No. 2018-Ohio-256, denying a writ of mandamus seeking to compel the Chief of the Ohio Department of Natural Resources (ODNR) to commence appropriation proceedings. In this case, a group of landowners objected to ODNR’s issuance of a unitization order under R.C. 1509.28.  Following the issuance of the order, the landowners appealed to the Oil and Gas Commission, and following an adverse ruling before the Commission, filed a writ of mandamus in the Ohio Supreme Court to order the Chief to commence appropriation proceedings to compensate them for an alleged unconstitutional taking of their mineral interests.

In order to be entitled to the writ of mandamus, the petitioners needed to show (1) they had a clear legal right to appropriation proceedings, (2) that respondents had a clear legal duty to commence the proceedings, and (3) the landowners had no plain and adequate legal remedy. The Court denied the writ and dismissed the landowners’ case, reasoning they should have appealed the Oil and Gas Commission’s decision to the Franklin County Court of Common Pleas. Such appeal to the common pleas court would have constituted an adequate legal remedy. The Court’s decision was unanimous, with Justice Kennedy concurring in judgment only.

Ohio, Oil & Gas Litigation

Ohio Supreme Court affirms dismissal of landowners’ complaint in oil and gas dispute

The Supreme Court of Ohio issued an opinion on January 3, 2018 in Alford v. Collins-McGregor Operating Co., Slip Opinion No. 2018–Ohio–8, affirming the dismissal of the landowners’ complaint for failure to state a claim upon which relief can be granted. The landowners had sought to have the common pleas court forfeit the mineral interests of the operator under a breach of implied covenant theory.

In the case, the landowners argued that because the oil and natural gas lease at issue did not disclaim implied covenants, the operator was subject to the implied covenant of reasonable development and the “implied covenant to explore further.” The landowners said that because the operator breached these covenants, it had forfeited its rights to the minerals underlying the land. The implied covenant to "explore further" requires a lessee to conduct further exploration for minerals in different geologic formations than has been already explored to the extent a reasonably prudent operator would do so.

The Ohio Supreme Court refused to recognize that there exists an implied covenant to explore further under Ohio law. The Court partially relied on decisions from the Oklahoma and Texas supreme courts, which also refused to recognize such a covenant. The Court, instead, held that the implied covenant of reasonable development adequately protected a landowner’s interests in an oil and gas lease, and affirmed the dismissal of the landowners’ complaint.  Click here for the Supreme Court’s decision.

Ohio, Oil & Gas Litigation

Chesapeake willing to settle natural gas royalty lawsuits in Pennsylvania

Chesapeake Energy Corp. has agreed to pay Pennsylvania landowners $30 million to settle federal lawsuits over the company's disputed natural gas royalty payments, but the deal hinges on Pennsylvania Attorney General Josh Shapiro resolving a 2015 lawsuit filed by the state against the shale-gas producer over deductions from royalties, according to the Philadelphia Inquirer. The newspaper reports that Chesapeake's lawyers have told a federal judge in Scranton, Pennsylvania that they had reached an agreement to settle several longstanding class-action suits involving royalties. The Inquirer says the deal calls for payments to 14,000 Chesapeake natural gas leaseholders, and it allows them to "reset" their leases to clarify the terms under which they are paid royalties. For more, read the full story.

Oil & Gas Litigation, Pennsylvania
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