Couple denied mortgage because of gas drilling

WASHINGTON COUNTY, Pa. – Brian and Amy Smith seem to be the first example in western Pennsylvania of a homeowner being denied a mortgage because of gas drilling on a next-door neighbor’s property.

The drilling goes on day and night at a new Marcellus Shale well in Daisytown, Washington County, and Brian Smith told Channel 4 Action News investigator Jim Parsons that he has no complaints — except one.

“As far as drilling and the noise and the lights in the window? No,” he said. “But when it affected the value of my home? Absolutely.”

The Smiths live across the street from the new gas well. They applied for a new mortgage on their $230,000 home and hobby farm, and Quicken Loans congratulated them on their conditional approval.

“They said all the paperwork will be done by the end of the week and we’ll be able to close,” Brian Smith said. “Somewhere in there, they called us and said, ‘Your loan got denied.’ ”

In an email, Quicken Loans told the Smiths, “Unfortunately, we are unable to move forward with this loan. It is located across the street from a gas drilling site.” Two other national lenders also turned down Brian Smith’s application.

Quicken Loans emailed the following statement to Channel 4 Action News: “While Quicken Loans makes every effort to help its clients reach their homeownership goals, like every lender, we are ultimately bound by very specific underwriting guidelines. In some cases conditions exist, such as gas wells and other structures in nearby lots, that can significantly degrade a property’s value. In these cases, we are unable to extend financing due to the unknown future marketability of the property.”

Clean Water Action said that in other parts of the country, when shale gas drilling has arrived, mortgages at nearby properties sometimes get denied. This is the first case they’ve heard in Pennsylvania.

“The banks aren’t stupid,” said Myron Arnowitt, director of Clean Water Action in Pennsylvania. “They’re going to look at that and be more cautious in terms of what they are willing to mortgage.”

“If I can’t refinance, could somebody get a loan to purchase my house? And that would be my concern. That’s definitely a worry,” Brian Smith said.

Homeowners who are denied by national lenders because of gas drilling could try local banks. First Federal in Washington, Pa., said it does not deny mortgage applications based solely on nearby drilling.

Video coverage within link.

Source: WTAE

Cunningham Energy offers new deal to fund its test-drilling plans in Athens County

Photo Credits: Map courtesy ODNR.
Photo Caption: Attorney John Lavelle, in his letter Friday to landowners who signed his oil and gas leases blamed the lack of big investors in Cunningham Energy’s drilling plans on a new map that shows Athens County well outside the expected “core play area” for developing deep-shale resources in Ohio

Another chapter has opened in the drama that began last fall when a West Virginia oil and gas company came into Athens and started throwing theoretical money around.

A local attorney who has negotiated a lease for deep-shale drilling for hundreds of Athens County landowners with Cunningham Energy of Charleston has informed his remaining clients that the company is now proposing a significantly less lucrative lease.

The new, scaled-down lease deal, according to attorney John Lavelle of Athens, will enable Cunningham (and/or an as-yet-unnamed venture partner) to drill five test wells in different parts of Athens County. Without test wells showing promise, no oil and gas development will occur in Athens County.

The company apparently doesn’t have the financial wherewithal to drill the test wells as well as honor the $2,500 per acre signing bonuses with numerous Athens County property owners. Moreover, it can’t find a joint partner to fund those leases at the $2,500 amount.

The new lease terms, Lavelle wrote in a letter to landowners who had extended their leases with him in March, are based partly on a state geology report indicating that Athens County lies to the south of the prime Utica shale play.

Under the newly proposed lease terms, Lavelle wrote, Cunningham Energy, LLC, is ready to commit to drilling five vertical test wells into the Utica shale formation in Athens County by the end of January 2014. If the wells don’t show that the deep-underground Utica shale layer will be productive here, Cunningham (or whatever company it’s working with) won’t proceed with production wells.

In the meantime, Cunningham Energy is willing to pay landowners a nominal sum to keep their leasing options alive, with a much bigger payout years in the future if the company’s wells become productive.

Rather than paying the $2,500 per acre signing bonus it had earlier been willing to pay, according to a letter Lavelle sent to his clients Friday, the company is now willing to pay the far more modest amount of $125 per acre to keep the already-signed landowners under contract while the company investigates the geology of the county.

The property owners, according to Lavelle, will get the initial reduced payment even if Cunningham doesn’t put together a joint venture to drill. If the project does come to fruition, the leases will pay off $5,700 per acre over the life of the lease – though this will be more of a “back-end” than an up-front payment, and a landowner won’t get this full amount if his or her land goes into oil and gas production and royalty provisions start kicking in. As the amendment states, “The likelihood of that many vertical wells being drilled and finding oil and gas in commercial quantities to hold the leases by production within the time frames in question is very unlikely and highly doubtful so if the results are good, you will likely get most of the bonus rental payment until your property is drilled.”

The higher payment is contingent on the Utica actually producing here, and Cunningham and/or its venture partner drilling production wells. (This prospect also depends on the company’s finding a new investment partner, which according to Lavelle it’s in the process of locating.)

Lavelle said the decision by Cunningham Energy appears to be based in part on information released by state geologists, indicating that Athens County is outside of the richest part of the Utica shale formation for oil and/or natural gas. (He also suggested, however, that the presence of “an outspoken minority group opposed to all hydrocarbon development” may be making Athens County less attractive to investors than other Ohio counties.)

After the Ohio Department of Natural Resources’ state geologist released a map indicating that Athens County may be 20-30 miles south of the high-potential part of the shale play, Lavelle said, a number of Fortune 500-sized industry players dropped their interest in investing in drilling here.

“The big companies are using that map as a bludgeon,” he said. “Basically, they just left the table.”


OTHER SOURCES, HOWEVER, HAVE POINTED out that the big companies have their own geology reports, much more sophisticated and complete than anything Ohio’s state geologist has to go by. As a result, the big companies weren’t likely to have been discouraged by the state’s geology report, since they already have their own better information.

In fact, in an interview with The Athens NEWS in late March, state Geologist Larry Wickstrom readily conceded that the newest report is just a semi-informed prediction about where deep-shale drilling will bear fruit in Ohio. The report depends on scanty test-bore evidence, especially in our area, he said, also agreeing that the big oil companies have much better and more valuable information.

Wickstrom made special pains to point out that being placed outside the best-case Utica map doesn’t necessarily mean successful oil and gas development can’t happen in Athens County.

In the interview, Wickstrom emphasized that his agency “fully expects people to go outside that core area and explore, and we hope they do.”

He said he agreed with an oil and gas expert at Marietta College, who March 21 advised not to “abandon the ship” just yet on the oil and gas potential in the Athens area. “My feeling all along is that the most southeastern part of Ohio is on the marginal end, at best, of the Utica-Point Pleasant shale play,” Robert Chase, chair and professor in Marietta College’s Department of Petroleum Engineering and Geology, told The NEWS. “However, until someone gets bold enough to drill something in the area, I don’t think we can conclude there’s nothing here.”

As the drilling inches farther south in search of oil and liquid natural gas, production in nearby areas will have more bearing on what happens here. So far the closest oil and gas deep-shale wells are in Noble and Muskingum counties, but plans are afoot for wells in Morgan and Washington counties, two counties adjoining Athens to the north and east.

Another source familiar with the oil and gas industry and market noted that Cunningham’s difficulty in finding a venture partner may be because the big players in the oil and gas industry are busy developing deep-shale prospects elsewhere. With fully committed materials and crews, they can’t commit too early to an uncertain play, since most leases have a five-year production window.

This point is actually made in Lavelle’s letter to lease-holding landowners on Friday. In explaining why Cunningham has had difficulty finding a Fortune 500 venture partner, Lavelle writes, “The onset of thousands upon thousands of other Utica shale acres available on the market in proven geological counties in eastern Ohio has further exasperated (sic) marketing efforts of our leaseholds. The risk involved with a dearth of information pales against the known quantities elsewhere.”


CUNNINGHAM HAD SIGNED LEASE options with many local landowners agreeing to pay a $2,500-per-acre signing bonus, plus 16 percent royalties on any oil or gas drilled from their land. The company reportedly has options on around 100,000 acres in the county, about 36,000 of them using the Lavelle lease terms. They originally had signed property owners representing 42,000 acres, though some apparently didn’t renew after being offered an extension in mid-March.

Lavelle said Friday that with the current uncertainty about whether drilling in Athens County will be profitable, he felt the best move for his landowner clients was to work out a deal to keep their drilling leases with Cunningham viable, and get the company to commit to gathering some hard scientific data.

“It’s basically allowing us to keep our landowner-friendly leases alive,” the attorney explained. The reduced per-acre payment, he said, “is basically pocket change (landowners can collect) while they’re drilling the wells.”

Lavelle, who will still receive $25 per acre for providing “landowner-friendly” leases to his clients (with the potential for an additional $25 an acre later, if the play proves out), said Cunningham is now aiming to put together about 40,000 acres in Athens County to drill. That $25 fee means the initial payment to property owners will be $100 an acre.

The attorney said that in addition to letting landowners keep their involvement alive in the potential payoff of local oil-and-gas development, the new lease terms will help provide the hard test data on the shale play here that up till now has been difficult to come by.

“We felt this was the only way we could ever get those five vertical test wells drilled,” he explained.

In his letter, Lavelle stressed that while the new development may seem like taking one step back to later take two steps forward, he remains confident that Cunningham does want to drill here, though the drilling may be the more traditional vertical type rather than horizontal.

“It is my belief that Cunningham Energy remains committed to proving the viability of the Utica play in our area,” he assured his clients.


ONE PROPERTY OWNER WHO originally signed Lavelle’s Cunningham lease, and then signed the extension in March, told The NEWS Sunday that he doesn’t intend to sign the new offer. “I am not going to sign the extension,” said the property owner, who asked that his name not be used because of the sensitivity of the issue. “I think it would be silly to put a well on my property for $150 an acre more or less, and if nothing comes up, then I got a mess to deal with. If they drill somewhere and they hit good, then I can sit back and wait for the offers.”



Ohio Fracking: State Agency Proposes Rules For Drilling In State Parks

COLUMBUS, Ohio (AP) — An Ohio natural resource agency’s proposed guidelines for drilling in state parks would require natural gas and oil companies to stay at least 300 feet — the length of a football field — from campgrounds, certain waterways and sites deemed historically or archaeologically valuable.

Documents on proposed guidelines were released by the state Department of Natural Resources this week after the Ohio chapter of the Sierra Club filed a lawsuit claiming the agency ignored repeated requests by the group to review them.

The 89-page report lists the “best management practices” on site restoration and other topics, and guidelines for emergency and pollution incidents. Other proposals include state approval before companies could store drilling waste in pits and an agreement on the locations of all drilling equipment.

The agency also released proposals for drilling leases. They show possible arrangements for companies interested in drilling directly below or drilling horizontally from land adjacent to property with oil and gas deposits.

Agency spokesman Carlo LoParo, who said the 300-foot buffer proposal would be applied above ground, said there are no specific policy decisions yet on what state land will be put up for competitive bids for drilling. But he emphasized that hundreds of other state properties besides state parks would be considered. He said a five-member commission that will be appointed later this summer will select the properties and lease the mineral rights, though the state can move forward with plans before the commission is appointed.

Natural gas drillers in Ohio are active in the eastern part of the state, going after deposits in the underground Utica Shale. The state passed a law in September that opened its parks and other state-owned lands for drilling, and officials have been developing leasing terms for drilling companies.

Jed Thorp, the Sierra Club’s Ohio chapter manager, said the proposals are inadequate. He said he’s hopeful state lawmakers will eventually reverse the law.

“When people go to a state park, they don’t want to see fracking, or hear fracking, or smell fracking,” he said in a statement. “They want to relax.”

Thorp also said the Sierra Club, which filed its lawsuit Monday, won’t drop its suit. He said the agency failed to follow the state’s public records law by ignoring requests for the documents as far back as October.

LoParo called the group’s reaction premature because the documents are draft proposals that don’t apply to a particular circumstance. He said the documents were only completed this week.

“Public records are something that we take very seriously,” he said. “You can’t provide something that you don’t have. And these documents were provided as soon as they were available.”

Opponents say they’re concerned about the environmental impact of the drilling, which includes hydraulic fracturing, or “fracking.” The process involves drillers blasting millions of gallons of water, sand and chemicals deep underground to break up rock deposits.

Supporters of the law say there’s a potentially vast reservoir of oil and gas in the Utica Shale, which lies below the Marcellus Shale, where oil companies in Pennsylvania have drilled thousands of wells in search of natural gas and oil.

But natural gas drilling has become a contentious issue in Pennsylvania, where public health advocates have criticized a new law that will limit accessible medical information on illnesses that may be related to gas drilling. It takes effect April 14.

According to the National Conference of State Legislatures, more than 130 bills have been recently introduced in 24 states to address fracking. It includes a range of topics like waste treatment, disposal regulations and requirements to publicly disclose the composition of fracturing fluid chemicals. At least nine states have proposed fracking suspensions or studies on their impact.


Source: Huffington Post

Ohio Utica Shale Map Creates a Big Buzz

The Ohio Department of Natural Resources (ODNR) recently released an updated map showing their best guess as to where the best prospects are for Utica Shale drilling in the state (a copy of the map is embedded below). And boy oh boy, is that map creating a buzz! Some residents are excited that their property may now become highly desirable to be leased for drilling, and other residents are discouraged that their properties, once thought desirable, may be less so now.

Larry Wickstrom, one of four men involved in developing the map, says he is a little flabbergasted by all the attention it is getting.

The map is “just the addition of new information … and fine-tuning what we have,” he said. It is merely the state’s best guess as to what might be found thousands of feet underground.

Areas outside the main development area could still be productive, he advised, and the map probably will change as state geologists get even more information.

The map, relying on new data, shows a slightly different footprint in eastern Ohio for Utica shale, identifying a core area for drilling that covers 10.8 million acres from Ashtabula County south into Guernsey County.

Much of the drilling in Ohio has been located in Carroll, Harrison, Columbiana and Jefferson counties. Those four counties generally rate good to very good, according to the new data.

Summit, Medina, Wayne and Portage counties are all in the good area. Most of Cuyahoga, Lake and Lorain counties are now excluded.*

So far energy companies have drilled 60 Utica gas wells in Ohio, with permits to drill an additional 194 approved by the state. Estimates are that over 2,000 wells will be drilled in the Utica in Ohio by 2015, so we’re just at the beginning of major drilling activity. It means there’s a lot on the line for landowners who want to lease their land—and maps like this one will play a part in whether or not they lease, and if they do, how much money they will receive. So contrary to the flabbergasted ODNR rep, it’s no surprise to MDN that there’s a big buzz over this latest map.

Source:  Marcellus Drilling

Lisbon Ohio: Seismic testing company sues property owners over access

Hearings to address lease agreements and seismic testing

By Burton Speakman


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:

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.


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:

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

A pdf of the fact sheet can be found here:

State Rep. Okey Introduces Truth in Leasing Act

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

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: 

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.

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David Marrison is an agricultural extension educator in Ashtabula County.


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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!