Ohio Court Ruling Could Have Major Ramifications in the Utica Shale

by Kenneth E. DuBose on July 13, 2012

An Ohio court ruling could have major ramifications for wells that are completed using horizontal drilling and hydraulic fracturing. My guess is there are close to ZERO Utica Shale wells that are commercial without fracking and most will be drilled utilizing horizontal wells.

In Harrison County Ohio, Jewett Sportsmen & Farmers Club, Inc. filed an injunction against Chesapeake Energy et al. regarding development of the Utica Shale on their property. In the case in question, the surface owner moved for an injunction on all activity after the operator had built two well pads and planned to drill up to 16 natural gas wells.

The court decided in favor of Jewett (surface owner) due to language that is common in older leases written when coal mining was the concern. The deed uses the phrase “through AND under” when referring to rights to access minerals on the described land. If you’d like, jump to the full judgment HERE.

Why Worry About Mineral Deed Language “Through and Under”?

Coal Mine Photo

In Ohio, the language “through and under” was used to limit surface activity directly related to mining. It kept mining companies from using a certain tract of land as the removal site for coal mined outside the premises. A landowner might not mind the operator producing their coal, but they didn’t want the whole town’s coal (exaggeration) produced from their property. It essentially protects the landowner from operations on their property that are larger than needed to produce the coal under their property. If you’ve seen the equipment used in mining, you understand why you might not want more than needed on your property.

A Limitation to Rule of Capture? – Kind Of

The court ruled the operator had the right to access natural gas within the property boundaries of its lease, but did not have the right to access natural gas or hydrocarbons located in adjacent tracts of land. The company COULD produce oil and gas from adjacent tracts as long as activity, the horizontal wellbore and fractures, stayed within the boundaries of the property exclusively (rule of capture). If activity extends beyond the boundaries of the premise, minerals can not be produced through this location. That’s where the wording of this deed limits what can be produced from the property. It’s not a direct challenge to “Rule of Capture”, but it does limit the ability to produce oil and gas from certain properties.

The court decision might have been different if the deed read “through OR under”, but the term AND was a sticking point in the final judgement. This language was common for mineral owners who wanted to protect surface disturbance on their property and in this case it’s Jewett protecting against surface disturbance related to oil & gas operations.

Deeds and Mineral Reservation Language Related to Surface Locations Just Got More Important

The judgement does not keep the operator from constructing a well pad on adjacent property, that doesn’t have the same language in its deed, and producing minerals related to this judgement. It does limit Chesapeake’s ability to drill across multiple tracts of land from this property. The language used in the deed is fairly common in mining areas, but there isn’t an easy way to judge how big of an impact this could have on operators in Ohio. If the decision is upheld in higher courts, surface locations will be forced to locations that don’t have the same “through and under” language in their deeds.

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