Law Prof Writes About Challenges of Surface v Mineral Rights in WV
A West Virginia law professor and one of his students (who went on to become a trial attorney with the U.S. Dept. of Justice), have just published a research paper on the topic of surface and mineral rights in the Mountain State. The paper, titled “Horizontal Drilling Vertical Problems: Property Law Challenges from the Marcellus Shale Boom” (full copy below) discusses property law challenges that can impede business development and negatively impact landowners and mineral owners in shale regions, with a focus on the West Virginia Marcellus. The paper explains the horizontal drilling and hydraulic fracturing process. A widespread problem in WV is that (because of coal) in many cases the owners of the mineral rights under the ground are not the same people who own the property on the surface. The paper makes the point that while courts can handle one-off cases, the WV legislature should develop better “large-scale policies” to deal with an ongoing, contentious situation…
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A couple of weeks ago four companies won bids on 17 parcels totaling 719 acres of federal land (for Utica Shale drilling) in the Ohio Wayne National Forest (see 
A significant court case was decided last week in West Virginia. The WV Supreme Court ruled in a gas royalty case that not only has significant implications for WV landowners (and drillers), but also may reverberate across the border into neighboring Pennsylvania where the same issue has been a long and contentious fight–what we call a civil war between landowners and drillers. Like all such cases, this one is complicated and not easy to summarize, but we’ll do our best. The WV Supremes have just handed down a decision that says, in essence, that EQT (and by extension other drillers) cannot deduct post-production expenses when calculating royalty payments to landowners. Specifically, the justices in their ruling said that drillers can “not deduct from that (royalty) amount any expenses that have been incurred in gathering, transporting or treating the oil or gas after it has been initially extracted, any sums attributable to a loss or beneficial use of volume beyond that initially measured or any other costs that may be characterized as post-production.” Yikes! That is fantastic news for landowners who now have a case to recoup money deducted from their checks–and really bad news for drillers who will owe that money. The big winners are, of course, the lawyers who will litigate this for years to come. However, hold on to those briefs–EQT has just appealed the decision, asking the WV Supreme Court to reconsider their decision, gently chiding the court for erring in their interpretation of state law on royalties…
As we previously noted, last week the Bureau of Land Management (BLM) proceeded with an online auction for BLM-controlled land in Ohio’s Wayne National Forest (see 
All seven members of the Bowling Green City Council (Wood County) unwisely voted to reject an offer from Spectra Energy’s NEXUS Pipeline to lease 4 acres of city-owned land for the pipeline. Why unwise? Because the project is close to receiving its final federal approval, which will give it the right to use eminent domain to use the land anyway (see 
MDN has highlighted the importance of the Ohio Supreme Court’s decision with regard to the Ohio Dormant Mineral Act (DMA). In September the OH Supreme Court ruled in three DMA cases, saying all of the other cases come under those three (see 
Black Stone Minerals is one of the largest owners of oil and natural gas mineral rights in the U.S. Black Stone owns mineral interests and royalty interests in over 40 states and 60 onshore basins in the continental U.S–including leases in the Marcellus/Utica region. Black Stone also owns and selectively participates as a non-operating working partner in drilling programs, primarily on its own leased acreage. Black Stone reported its third quarter earnings yesterday. The numbers show the company made $37.5 million in 3Q16 (down a bit from making $53.9 million in 3Q15). However, for the first nine months of 2016 the company is in the black this year, while it was in the red last year at this point. Our point: yet more evidence that drilling and royalties and everything in our industry that was down is now trending up, once again…
MDN has been reporting on the Ohio Dormant Minerals Act (DMA) for years. In a nutshell, there are two DMAs in Ohio–one passed in 1989 that went into effect in 1992, and another in 2006 which added certain additional procedural requirements to the 1989 version. The DMA in its various versions provides for mineral rights that had previously been separated from surface rights to transfer back to the surface owner under certain conditions. The problem, for drillers and for landowners in Ohio, is in knowing which set of DMA rules to use (1989 or 2006) in determining who owns the mineral rights. A number of DMA cases went before the Ohio Supreme Court. In May, Ohio attorney David Wigham (Roetzel & Andress law firm) said there are signs that the Supremes were about to release a massive, all-in-one-go ruling on the DMA (see 
On Monday, October 24, 2016, the Third Circuit Court of Appeals (in Western Pennsylvania) ruled that Marcellus driller ECA (Energy Corporation of America) did not prove a need for a new trial in the case it previously lost. Pennsylvania landowners sued ECA in federal court beginning in 2010, saying their royalty checks were shorted because ECA was improperly deducting post-production costs. Sound familiar? In February 2013 a federal judge upheld a split decision that said most of what ECA was deducting was OK, but the one thing they can’t deduct from royalty checks are charges for interstate pipeline transmission (for the full story, read our post 
MDN reported on Monday of this week that we are down to the wire with passing Pennsylvania House Bill (HB) 1391, a bill that would guarantee a 12.5% minimum royalty payment for PA landowners (see 
Yesterday Murray Energy, which operates coal mines in Ohio, Illinois, Kentucky, Utah, and West Virginia, announced it had sold the leases for 5,900 of the acres it owns in Belmont and Monroe counties (in eastern Ohio) to an unidentified shale driller for $63.6 million. That works out to be ~$10,800 per acre. According to Murray officials, the sale will allow the company to focus on its core activity–coal mining. The money will also help the company stay out of bankruptcy court. The sale, which is slated to close “in the coming weeks” doesn’t ID the buyer. But we have a guess as to who bought…
Tim Greene is owner of Land & Mineral Management of Appalachia and a former West Virginia Department of Environmental Protection inspector. He knows a thing or two about leasing and drilling in the Mountain State. As part of a recent article, Greene was asked about the many leases signed five years ago that are coming up for renewal (or release). Greene said five years ago landowners in WV and OH were getting signing bonuses of $5,000 per acre and more, with royalties going as high as 20%. As those leases come up for renewal, Greene cautions landowners that they won’t see anywhere near those terms if they sign again. What will they see?…
We’ve written a number of stories about Pennsylvania House Bill (HB) 1391 that would guarantee landowners receive a 12.5% minimum royalty on the gas extracted from their land, regardless of post-production costs. The issue has led to what MDN calls a civil war between landowners (particularly in Bradford County, PA) and the drilling industry. The clock is ticking and this week is it for this legislative session in PA. If supporters of HB 1391 don’t get the bill passed this week, it will have to be reintroduced and go through the entire process again next year. Supporters like Doug McLinko, a Bradford County commissioner, have warned of serious consequences for the industry if the bill doesn’t get passed. The industry appears to have convinced enough lawmakers to keep the bill bottled up so it doesn’t come to the floor for a vote, which riles landowners. HB 1391’s supporters in the legislature are sounding like it’s already over for this year, and that they will have to fight again next year. We’re concerned what this ongoing situation will do for what has, in the past, been good relations between landowners and drillers. That relationship appears to be souring, at least for some landowners…