Gregory D. Russell
Last year was a good year for oil and gas development in Ohio. We’ve seen a 5-fold increase in the number of wells producing from the Marcellus and Utica shales – going from just 9 in 2011 to 45 in 2012, according to the Division of Oil and Gas Resources Management. With 29 rigs now running in Ohio, there were more than 190 horizontal wells drilled last year, a substantial increase from the 23 wells drilled in 2011. And we’ve seen more and more operators enter Ohio looking to expand their domestic opportunities – to the point that today there are over 20 producers permitting and drilling wells in the Utica alone.
This has led to an increased demand not only for oilfield services, trucks and drivers, but also for new investments in housing, restaurants and commercial locations. Midstream facilities, such as pipelines and processing and treatment plants, are also in the works, with billions of dollars planned to be invested in Ohio over the next several years. And if you have young adults in your life wondering what to do with their futures, you might consider suggesting a career in petroleum engineering. Marietta College has seen a 60% increase in applications for its Petroleum Engineering program this year, and projections are that one-half of the engineers currently working in the industry will retire in the next 10 years.
We’ve also seen an increase in activity on the legal front. As lease bonuses have multiplied from their historical average, landowners have filed suit on the flimsiest of claims to try and break longstanding, existing leases with conventional operators. We have seen landowners assert that a lease is invalid because the broker taking the lease was not a licensed real estate agent (not true – see, e.g., Ohio Rev. Code Ch. 4735). We have seen claims that leases are invalid because there is a possible defect in the acknowledgement by the notary (also not true – see, e.g., Swallie v. Rousenberg). Additionally, we have seen landowners try to prevent seismic and other exploration activities in order to leverage new deal terms (unsuccessfully – see, e.g., TGS-NOPEC Geophysical v. Coldwell).