Lisbon Ohio: Seismic testing company sues property owners over access

Hearings to address lease agreements and seismic testing

By Burton Speakman

LISBON

A company tasked with seismic testing for Chesapeake Exploration LLC on Columbiana County land contends five landowners illegally have kept the company off their properties.

Preliminary-injunction hearings for all the defendants are scheduled for today in Columbiana County Common Pleas Court.

TSG NOPEC Geophysical Co. has filed suit against James and Janet Zimmerman of Salem; Phillip and Brenda Glasser, Homeworth; Gary and Eleanor Carter, Beloit; Larry W. Fryfogle, Beloit; and Golden H. Acres LLC, Salem.

The company alleges that despite oil and gas lease agreements with those properties, the owners refused to sign a permit that would allow TSG to come onto their land to conduct seismic testing, according to court records.

TSG was hired by Chesapeake to conduct the tests.

TSG alleged it was denied access to the properties several times. The company states access to the land is critical to the testing procedure, and that by denying access, the property owners violated the terms of their lease agreements.
All properties in question are located either south or southeast of Salem.

Three of the five leases involved in this case are older leases that provided small payments of $1 to the landowner and then provided 1/8 of total production in royalty costs and a certain amount of free gas per month.

These were pretty standard leases for that time, said Scott Zurakowski, a Canton attorney who represents Gary and Eleanor Carter.

“These older leases didn’t include the right to do seismic testing,” Zurakowksi said.

The key to this case is whether the contract implies the right to do seismic testing, he added.

Other courts have decided that if the contract includes the right to exploration, then it has an implied right for seismic testing, Zurakowski said. The older three contracts do not include references to exploration.

“This case is important in Ohio because the Ohio Supreme Court has not made any decisions on this kind of case,” he said.

The case will have an impact on hundreds and thousands of landowners with similar oil and gas leases throughout Ohio, Zurakowski said.

Frederick S. Coombs III, a Youngstown attorney representing James Zimmerman and Golden H. Acres LLC, said in an email that his clients’ leases were radically different from the others in the TSG case.

They were negotiated in fall 2011 to build in protections for the landowners, he wrote.

Seismic testing helps to determine the potential oil and gas reserves on a property. The testing helps to maximize production and decrease potential impact on the land, according to the complaint filed by TSG.

Bruce Smith, the attorney representing TSG, was not available to comment.

Link to Original Article: http://www.vindy.com/news/2012/apr/18/seismic-testing-company-sues-property-ow/

Blog Post From Dept of Interior: Is the Recent Increase in Felt Earthquakes in the Central US Natural or Manmade?


By David J. Hayes, Deputy Secretary, U.S. Department of the Interior

Last week, following the publication of an abstract intended to preview an upcoming talk by a U.S. Geological Survey (USGS) scientist, a number of news articles started popping up about new scientific evidence of a link between unconventional oil and gas production here in the United States, and seismic activity (earthquakes).

Unfortunately – although not surprisingly given the limited information available in the abstract – the accuracy of these media reports varied greatly. With this blog post, I want to clarify a few points about USGS’s important and ongoing work to study induced seismicity.

Science will continue to play a critical role as the Obama administration moves forward with an all-of-the-above strategy for American energy. USGS’s contributions to this effort, including scientist Bill Ellsworth’s work on the correlation between wastewater injection sites and seismicity, represent an important part of the overall dialogue about how we can continue to expand domestic oil and gas production safely and responsibly.

Background

As part of its ongoing effort to study a variety of potential impacts of U.S. energy production, USGS scientists have been investigating the recent increase in the number of magnitude 3 and greater earthquakes in the midcontinent of the United States. Beginning in 2001, the average number of earthquakes occurring per year of magnitude 3 or greater increased significantly, culminating in a six-fold increase in 2011 over 20th century levels.

These earthquakes are fairly small – large enough to have been felt by many people, yet small enough to rarely have caused damage.

An increase in earthquakes such as this prompts an important question: are they natural, or man-made? To address this question, a team of USGS scientists led by Bill Ellsworth of the Earthquake Science Center analyzed changes in the rate of earthquake occurrence in the midcontinent using large USGS databases of earthquakes recorded since 1970.

Our scientists then took a closer look at earthquake rates in regions where energy production activities have changed in recent years. The following findings will be presented on April 18 at the annual meeting of the Seismological Society of America, with a published study forthcoming.

Preliminary Findings

USGS’s studies do not suggest that hydraulic fracturing, commonly known as “fracking,” causes the increased rate of earthquakes. USGS’s scientists have found, however, that at some locations the increase in seismicity coincides with the injection of wastewater in deep disposal wells.

Wastewater is a byproduct of oil and natural gas production from tight shale formations and coal beds. Generally, wastewater produced from many oil and gas production wells within a field may be injected through a single or just a few disposal wells.

In preliminary findings, our scientists cite a series of examples for which an uptick in seismic activity is observed in areas where the disposal of wastewater through deep-well injection increased significantly. These areas tend to be in the middle of the country – mostly in Colorado, Texas, Arkansas, Oklahoma and Ohio.

What We Know

While it appears likely that the observed seismicity rate changes in the middle part of the United States in recent years are manmade, it remains to be determined if they are related to either changes in production methodologies or to the rate of oil and gas production.

We also find that there is no evidence to suggest that hydraulic fracturing itself is the cause of the increased rate of earthquakes. The fact that the disposal (injection) of wastewater produced while extracting resources has the potential to cause earthquakes has long been known. One of the earliest documented case histories with a scientific consensus of wastewater inducing earthquakes, is at the Rocky Mountain Arsenal well, near Denver. There, a large volume of wastewater was injected from 1962-1966, inducing a series of earthquakes (below magnitude 5).

We also have previously reported that the production of oil and gas (extraction) can potentially cause earthquakes when changes in the underground stresses created by the removal of large volumes of oil, gas or water are large enough.

And, of course, we know that the Earth’s crust is pervasively fractured at depth by faults. These faults can sustain high stresses without slipping because natural “tectonic” stress and the weight of the overlying rock pushes the opposing sides of the fault together, increasing the frictional resistance to fault slip. The injected wastewater in deep wells can counteract the frictional forces on faults, causing an earthquake.

Not all wastewater disposal wells induce earthquakes. Of approximately 150,000 Class II injection wells in the United States, including roughly 40,000 waste fluid disposal wells for oil and gas operations, only a tiny fraction of these disposal wells have induced earthquakes that are large enough to be of concern to the public. Information on wastewater disposal wells and the US Environmental Protection Agency’s Underground Injection Control program is available online.

Earthquakes induced by fluid-injection activities are not always located close to the point of injection. In some cases, the induced earthquakes have been located as far as 6 miles from the injection well.

Current and Future Research

The USGS is coordinating with other federal agencies, including the EPA and Department of Energy, to better understand the occurrence of induced seismicity through both internal research and by funding university-based research with a focus on injection-induced earthquakes from wastewater disposal technologies. For instance, USGS and its university partners have deployed seismometers at sites of known or possible injection-induced earthquakes in Arkansas, southern Colorado, Oklahoma, and Ohio.

Currently, there are no methods available to anticipate whether a planned wastewater disposal activity will trigger earthquakes that are large enough to be of concern. Evidence from some case histories suggests that the magnitude of the largest earthquake tends to increase as the total volume of injected wastewater increases. Injection pressure and rate of injection may also be factors. More research is needed to determine answers to these important questions.

Although we cannot eliminate the possibility, there have been no conclusive examples linking wastewater injection activity to triggering of large, major earthquakes even when located near a known fault.

It’s clear that science is a key part of the Obama administration’s all-of-the-above strategy for American energy, and we will continue to research these important questions – working with industry and our state, federal and academic partners to ensure that we continue to expand oil and gas production safely and responsibly in the United States.

Link to Original: http://www.doi.gov/news/doinews/Is-the-Recent-Increase-in-Felt-Earthquakes-in-the-Central-US-Natural-or-Manmade.cfm

New Division of Soil and Water Factsheet: Water Withdrawal Regulations for Oil and Gas Drilling

Click to view a PDF

Fresh water is a critical component for the drilling and development of Ohio’s oil and gas resources. Water is used for support purposes, such as dust control on access roads and equipment cleaning; drilling operations for making drilling fluids and the cement used for securing casing in the bore hole; and for well stimulation processes such as hydraulic fracturing.

In most cases, between two and six million gallons of water are needed to complete hydraulic fracturing on a Marcellus or Utica shale well. Drilling and hydraulic fracturing of deep shale wells is in its early stages in Ohio, but all indications are that oil and gas development from shale will expand in the next few years. With the expansion of deep shale drilling, the need for reliable water supplies will expand at an equal pace.

To assist oil and gas drilling companies with understanding the regulations governing withdrawal and use of water in Ohio, the following provides general information regarding water rights, water withdrawal regulations, diversions of water across the Lake Erie – Ohio River watershed divide, and consumptive use of water.

Water Rights in Ohio
In Ohio, land owners have the right to make reasonable use of ground water underlying their land or of the water in a lake or watercourse located on or flowing through or along their riparian land. This right to a reasonable use is a property right protected by Article 1 Section 19b of the Ohio Constitution. Withdrawals that unreasonably interfere with the withdrawals of other land owners using the same stream or aquifer may be subject to liability via civil litigation.

Water Withdrawal Registration
Section 1521.16 of the Ohio Revised code requires any owner of a facility, or combination of facilities, with the capacity to withdraw water at a quantity greater than 100,000 gallons per day (about 70 gallons per minute) to register such facilities with the Ohio Department of Natural Resources Division of Soil and Water Resources. It is important to note that the law requires registration if a facility has the capacity to withdraw 100,000 gallons per day even if a lower volume is actually withdrawn. Registration under this program is not a permit to withdraw water, nor does registration impose any restrictions on withdrawals. Withdrawal registration requirements pertain to all of Ohio.

Diversion of Water from the Ohio River Drainage Basin into the Lake Erie Drainage Basin

Ohio Law (ORC 1501.32) requires a permit, issued by the Director of the Department of Natural Resources, to divert more than an average of 100,000 gallons per day, over any 30-day period, out of the Ohio River drainage basin into the Lake Erie drainage basin. Diversion as applied in this section means the transfer of water from the Ohio River drainage basin to the Lake Erie drainage basin.

Diversion of Water from the Lake Erie Drainage Basin into the Ohio River Drainage Basin


The Great Lakes –St. Lawrence River Basin Water Resources Compact (Compact), a binding agreement among the eight states that border the Great Lakes, which has been enacted into Ohio law and carries the force of Federal law, specifically prohibits (with very limited exceptions) any new or increased diversion of any amount of water out of the Lake Erie drainage basin. Therefore, no permits for the transfer of water out of the Lake Erie basin for oil and gas operations, or other types of operations, are allowed.

Consumptive Use of Water
No facility may have a new or increased consumptive use of more than 2 million gallons of water per day, averaged over any 30-day period (60 million gallons per month), without first obtaining a permit from the Director of the Department of Natural Resources (ORC 1501.33). Consumptive use as used in this law, means a use of water resources, other than a diversion, that results in a loss of that water to the basin from which it is withdrawn and includes, but is not limited to, evaporation, evapotranspiration, and incorporation of water into a product. For oil and gas operations, this could include the incorporation of water into drilling fluids and hydraulic fracturing fluids.

Prior Notice and Consultation Requirement of the Compact
In December 2013 and thereafter, the Compact requires all Lake Erie basin proposals for new or increased consumptive uses of 5 million gallons per day or more, averaged in any 90-day period (450 million gallons or more in a three month period), to be submitted to the eight Great Lakes States and the Canadian provinces of Ontario and Quebec for review and comment.

Information contained in this fact sheet was obtained from ODNR, Division of Soil and Water Resources files, the publication entitled Ohio Conservancy Districts, (ODNR-DW, 1975), ORC Chapter 6101, the Ohio Conservancy District Conference, and the directors or staff of Ohio’s conservancy districts.

For more information, contact the ODNR-SWR by:

Phone: 614-265-6610
Fax: 614-265-6767
E-mail: dswc@dnr.state.oh.us

A pdf of the fact sheet can be found here: http://www.dnr.state.oh.us/Portals/7/pubs/pdfs/fctsht68.pdf

State Rep. Okey Introduces Truth in Leasing Act

Posted: Mar 26, 2012 10:30 AM EDT
Updated: Mar 26, 2012 10:30 AM EDT

COLUMBUS,Ohio -
State Representative Mark D. Okey introduced today his “Truth in Leasing” bill to protect Ohio’s landowners against fraud, abuse, and deceptive practices by the oil and natural gas industry.

“We need to make sure that drilling in Ohio is conducted safely and fairly for all parties involved,” Rep. Okey said. “Far too many landowners are deceived into signing leases that deny them the compensation and accountability that they are entitled to.”

According to a press release, The Truth in Leasing Act will include provisions in three main areas: fairness, honesty, and accountability. Minimum royalty payments will be set at a level that reasonably compensates landowners for their resources, while prohibiting oil companies from using legal loopholes to take more than their fair share. Landowners would have the right to yearly audits – at the driller’s expense – to ensure that their royalty payments are accurate.

To guarantee an honest leasing process, the “landmen” who secure leases on behalf of drillers would be subject to a new licensing system. Before any lease is signed, landowners must be informed of their rights and encouraged to consult with an independent attorney to protect their interests.

Finally, companies would be held accountable for the consequences of drilling, by disclosing all chemicals and compounds used to the Ohio Department of Natural Resources, paying for the testing of local water supplies before and after drilling, and issuing public notification of any accidents or incidents related to drilling that may result in property damage or health risks.

“This is common sense legislation that will prevent exploitation of Ohio’s citizens and resources,” Rep. Okey said. “More and more leases are being signed every day. It is imperative to move quickly to protect as many landowners as possible.”

Rep. Teresa Fedor (D-Toledo) will be a joint sponsor of the bill.

 

Link to Original: http://www.wtrf.com/story/17254675/state-rep-okey-introduces-truth-in-leasing-act 

Extension Educator Says: Shale payments subject to Ohio’s Commercial Activity Tax

Landowners across Ohio may be surprised to learn the bonus lease and royalty dollars received for their Marcellus or Utica Shale leases will be subject to theOhio commercial activity tax (CAT) if payments of over $150,000 are received.

What is it?

The CAT was enacted in House Bill 66, which was passed by the 126th General Assembly in 2005. The CAT is an annual tax imposed on “the privilege of doing business in Ohio,” measured by taxable gross receipts from most business activities.

Most receipts generated in the ordinary course of business are included in a taxpayer’s CAT base. This tax applies to all types of businesses: e.g., retailers, service providers (such as lawyers, accountants, and doctors), manufacturers, and other types of businesses.

The CAT applies to all entities regardless of form, (e.g., sole proprietorships, partnerships, LLCs, and all types of corporations). The tax does have limited exclusions for certain types of businesses, such as financial institutions, dealers in intangibles, insurance companies and some public utilities if those businesses pay specific other Ohio taxes.

A person with taxable gross receipts of more than $150,000 per calendar year is subject to this tax, which requires such person to register with the Department of Taxation as a taxpayer.

The term “gross receipts” is broadly defined to include most business types of receipts from the sale of property or in the performance of a service. Please note that certain receipts are not taxable receipts, such as interest income.

The following are some other examples of receipts that are excluded from a taxpayer’s CAT base: dividends, capital gains, wages reported on a W-2, interest (other than from credit sales), or gifts.

 

Oil and gas income

Internal Revenue Code section 1231 provides guidance on why the oil and gas receipts are included in a taxpayer’s CAT base. Specifically, the Code states that timber, coal, and iron ore are considered property used in the trade or business, assuming they are contained in the ground.

Once the mineral is removed from the ground, however, it is no longer an asset used in the trade or business, and therefore receipts from the sale of this mineral are included in a taxpayer’s CAT base.

$150 and 0.26%

 So what are the tax rates for the CAT? The rate for the first $1 million in taxable gross receipts (from $150,000 to $1 million) is a flat $150. The rate for receipts above $1 million is 0.26 percent.

The $150 annual minimum tax is due by May 10 of each year with the annual tax return for calendar year taxpayers or with the first quarter return for calendar quarter taxpayers.

A calendar year taxpayer who will have over $1 million in taxable gross receipts for a calendar year is required to switch to a quarterly taxpayer in the subsequent year and, if it elects to, can switch to a quarterly taxpayer at any time during the current calendar year.

CAT Example

 John B. Landowner owns 400 acres in northeastern Ohio and is a teacher at the local high school. He leases his land for $3,000 per acre, which totals a bonus payment of $1.2 million. To calculate his CAT obligation, Mr. Landowner would pay $150 for the first million dollars and then apply the .26% tax rate for the remainder ($200,000), which equals $520.

He has no other commercial business activity so his total CAT obligation would be $150 + $520 =$670.

Link to original: http://www.farmanddairy.com/news/shale-payments-subject-to-ohios-cat-tax/35664.html

 

ABOUT THE AUTHOR 

David Marrison is an agricultural extension educator in Ashtabula County.

E-mail: marrison.2@osu.edu

Thanks for your Support!

Last night http://www.lookbeforeyoulease.org crossed over 10,000 “hits”. This is great news,being that the site is less than 6 months old. We thank you for your support of Look Before You Lease and for sharing links, articles and our toolkit with your friends and family.

We are also grateful that so many landowners in Ohio, and elsewhere (we have distributed toolkits to landowners, attorney’s, and community leaders in 6 states) are choosing to do research and learn about shale development and leasing issues before deciding whether to lease their property.

We will keep on keeping on, but for now we just wanted to say Thank You!

Athen’s County: Lease situation gives signers more time to reassess situation

A letter to the Editor of the Athens News that mentions “Look Before You Lease”. Thanks to Bob Sheak for helping us to spread the word about the importance of information based decision making around shale development. We don’t know how this will play out in Athens county, but there is a renewed urgency for those who are in the position to extend their lease agreement to review our landowner toolkit and and learn about the other groups mentioned in Mr.Sheak’s letter before making the decision to extend, work out additional terms, wait and see how the first wells produce, or wait for results from studies currently being conducted by federal agencies before making a final decision. If you have a neighbor or friend who is in the group awaiting payment from Cunningham, or is thinking about leasing through another landowner group make sure they have visited our site, or request a landowner toolkit for them. We will send a CD version by mail.

To the Editor:

This Cunningham Energy decision not to sign the oil and gas leases aggregated by local attorney John Lavelle illustrates how little control Athens Countians have in such matters, even with legal advice. Low natural gas prices, too much supply, a moderate winter, perhaps new questions about how to dispose of wastewater — all may help to explain why Cunningham has had trouble finding a corporate partner prepared to share the costs of shale gas/oil mining and to take responsibility for the various operational aspects of such mining.

Groups and individuals such as Look Before You Lease, SD-Frac, Sierra Club, Heather Cantino, Christine Hughes and their many strong allies, letter writers, and others in Athens have worked hard to educate local officials and the general population about the extensively documented dangers of shale gas mining. According to a student-driven poll of over 350 mostly Athens County residents reported Monday in The Athens NEWS, about half of the respondents opposed the option of going ahead with fracking until there are adequate safety regulations in place. My guess is that, despite the economic recession that still rages, the number is this high because of the educational efforts of the aforementioned groups.

I also guess that when, for example, natural gas prices rise and the infrastructure to move the gas is in place, Cunningham will find a corporate partner to commence the drilling in Athens. There are not many large economic alternatives available now for new public investments, publicly supported projects, or a significant shift to solar or wind energy. And the low-or-no tax and small-government policies of Republicans seem to resonate powerfully with a large number of citizens across Ohio and the U.S. So, if there is oil or gas in our part of the Utica shale formation and it can be profitably extracted, the mining corporations will be back.

In the meantime, from the perspective of about half of Athens County, there is some welcome additional time for residents to learn and think about and perhaps see implemented (to some extent) more adequate regulations than now exist. Though we probably should not count on much regulatory assistance from Ohio Gov. John Kasich and the Republicans at the state level. At the state level, with Kasich at the helm, we may well end up unfortunately looking more like Pennsylvania (very supportive of gas/oil shale mining) than New York (which continues to postpone final decisions on the acceptability of shale-gas mining).

Bob Sheak
Athens

(A-news) Editor’s note: Though this won’t be known until actually drilling begins in this area, some geological experts predict that the main “play” in Athens County and the surrounding area will be for oil rather than “dry” natural gas. Currently, natural gas prices are depressed while oil prices are relatively high. TS

 

Link to original Article: http://www.athensnews.com/ohio/article-36389-lease-situation-gives-signers-more-time-to-reassess-situation.html