Beware of Renegotiation Requests on your Ohio Oil and Gas Lease

July 18, 2012

Oil and Gas Leases

Ohio oil and gas leaseWhen a drilling company offers you money to drill for oil or gas on your property, you would instinctively think that they would show up and start drilling sometime during the primary period of the lease.  You would also expect that they adhere to the original terms of any lease that they agreed upon with you.  However, some drilling companies have altered their traditional methods of drilling, and as a result, they have now altered the way they handle the leases with the property owners they contract with.

Chesapeake Energy Corp. has spent over $2 billion dollars on leases just in Ohio obtaining mineral rights to about 5% of the state’s property.  The recent discovery of an abundance of oil in the Utica Shale fields has led to the inundation of leases in the area.  Initially, this sounds as if Ohio land owners are cashing in and Chesapeake must be a booming company.  To the contrary:  There are problems on the horizon concerning these leases.

Chesapeake is approaching Ohio land owners and requesting that their original Ohio oil and gas leases be renegotiated.  They want the leases changed to suit their own needs, because they are having cash flow problems which have led to an inability to fulfill their end of the bargain with the leases.  They apparently haven’t been able to drill enough wells fast enough to satisfy the primary period of the leases—which means Chesapeake risks losing the coveted mineral rights to a great deal of property.

Chesapeake has sought to “bundle the leases” into larger units which include more property owners.  The problem with bundling leases into larger units is that the property owners end up with smaller shares of any oil proceeds, though they could end up with shares from more wells—but it’s a gamble.  The problem with Chesapeake seeking to renegotiate leases is they way they have approached it.  They have been sued over a hundred times in Ohio since 2008 for backing out of leases in which they failed to uphold their end of the bargain.  They have allegedly told landowners “You will be shut out of the oil and gas boom if you do not renegotiate your lease with us.”

Ohio landowners need to understand that oil and gas drilling is a complex business that can be fraught with lease issues if not properly handled.  You must know what your lease says, what you are entitled to, and what your rights are if the lease is breached by the drilling company.  Your property is your biggest investment—protect it by hiring an experienced oil and gas attorney at Slater & Zurz LLP.  Please call 1-800-297-9191 for a free consultation, or send us a blog message to set up an appointment to discuss any questions you have about a proposed or existing oil or gas lease on your property.

Learn more about Ohio oil and gas leases by visiting oilgasleaseohio.com.

Excerpts taken from Wall Street Journal, Daniel Gilbert, “Chesapeake Irks Landowners As it Renegotiates Leases.” July 16, 2012. 

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About slaterzurz

Slater & Zurz LLP is an Ohio law firm of highly experienced and respected attorneys. Over the last 40 years, we have developed a reputation for getting positive results for clients. We've been trusted with handling over 20,000 personal injury cases and our clients have received more than $120,000,000.

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