On Thursday of last week, the Ohio Oil and Gas Commission issued its first order addressing unitization under R.C. 1509.28. See Gary L. Teeter Revocable Trust v. Division of Oil & Gas Resources Management (Appeal No. 895) (Sept. 17, 2015). The Commission, in effect, affirmed the issuance of the unit order by the Division of Oil and Gas with one modification, despite a host of objections raised by the unleased owner in the unit. Notably, the Commission found:
Ohio’s pooling and unitization statutes ensure that a mineral owner located within the possible ‘reach’ of a well will be fairly compensated for any resources possibly removed from beneath that landowner’s property. So, the pooling and unitization provisions of Ohio law are actually protective of the interests of mineral owners, who choose not to voluntarily participate in the development of a well. ***[T]hat owner, in fact, benefits from the statutory protections enacted to ensure that he will be fairly compensated for any resources that might be drawn from beneath his property as a result of the operation of a well, which a majority of his neighbors wish to have drilled. (Emphasis in the Commission’s order.)
Among other things, the Commission held that the Division properly utilized R.C. 1509.28, rather than the provisions of R.C. 1509.27 regarding mandatory pooling; that the operator had satisfied the statutory requirements necessary to obtain a unit order, and that the Division’s evaluation of the evidence presented was proper; and that, with one exception, the terms and conditions of the Division’s order were just and reasonable, including the application of a 200% interest charge and the omission of a lease signing bonus. The Commission did, however, modify the order to require the payment of the average royalty in the unit during the payout period only, rather than the 12.5% royalty contained in the underlying order for that period. After payout, the royalty reverts to 12.5%.
For more, click the link above to access the order. [Disclosure: Vorys represented the operator both before the Division of Oil and Gas and at the Oil and Gas Commission.]