Responding to a surge in applications, the Ohio Department of Natural Resources (ODNR) has issued rules for new applications. After being relatively unused for decades, the unitization statute (R.C. 1509.28) has found new life in the current shale play and the state agency overseeing the process decided it was time to lay down some groundrules.
SEC Issues Investor Alert for Private Oil and Gas Offerings
We previously blogged about securities regulation of interests in oil and gas exploration and development. Industry participants, state and federal securities regulators have recently cautioned investors regarding investing in oil and gas ventures.
At the federal level, the U.S. Securities and Exchange Commission (SEC) issued an investor alert aimed at private oil and gas offerings. In addition to the usual cautions to investors to do their homework on these deals, the SEC encouraged investors to verify that the person offering the investment is licensed as a broker-dealer. The SEC recently stepped up its efforts to pursue “finders” and other unlicensed persons compensated by issuers to assist in finding investors. Companies raising investment funds need to understand that persons who they engage to assist in selling investments are required to have a securities license. Failure to do so exposes the issuer to civil liability, including rescission claims by investors, and potential criminal liability in cases where material misstatements or omissions are made in the private placement memorandum or other offering material, or other fraudulent activity is present. The investor alert cites several examples of recent enforcement actions where such illegal activity was involved.
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Common Oil and Gas Lease Conundrums
Understanding rights and obligations associated with oil and gas leases can be challenging. Imprecise lease language, implied legal duties, formulaic statutes and evolving case law all affect oil and gas leases in different ways. We’ve written several articles on these topics during the past several months and have compiled them into an eBook to help
Gaining Perspective on Ohio’s Oil and Gas Laws
Ohio’s oil and gas industry has been around for more than 120 years. That means there is plenty of perspective, and precedent, to consider when applying Ohio oil and gas law to the Utica and Marcellus shale plays. We’ve compiled a few Oil & Gas Law Report articles into an eBook to help you build
Unitization in Ohio: Compelled Participation in the New Context of the Utica Shale
In many ways, the Utica Shale play caught Ohio off guard. The state became a main focus of the oil and gas industry almost overnight. Ohio responded by updating its oil and gas laws, including major overhauls resulting from Senate bills 165 in 2010 and 315 in 2012. But in some cases, operators and regulatory agencies are still applying old law that was written with conventional drilling methods in mind. In this post, part 3 of our series on compelled participation (see Part 1 and Part 2), we look at unitization — one of these old laws being put to new use.
What Is Unitization?
Unitization is the creation or designation of a contiguous area of land, called a “unit,” for the efficient development of the oil and gas resources underlying that land. Units can be formed by order of the Ohio Department of Natural Resources (ODNR), on application from an operator. Units also can be formed voluntarily by consent of interest owners, usually owners of the leasehold. Inevitably, the land sought to be unitized — really the geologic formation below the surface — is subject to a patchwork of different ownership interests. The operator attempts to negotiate lease rights with all such land or mineral rights owners, but it is often the case that the operator cannot reach an agreement with all of them. When an operator has the consent of all but a small portion of the land for a unit, Ohio law allows the operator to apply for ODNR to compel the non-consenting interest owners to join the unit.
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ODNR Issues Two More Unitization Orders for Horizontal Utica Shale Wells
The Ohio Department of Natural Resources (ODNR) recently issued two more unitization orders pursuant to R.C. 1509.28. These two orders bring the total number to four since the beginning of the Utica Shale play.
As we discussed after the last order was released, this statute is becoming a valuable tool for operators as they cobble together the rights to drill horizontal production wells. In the early stages of the Utica shale play, each new unitization order is noteworthy for operators who are trying to plan drilling units and to help companies evaluate their lease holdings.
The process of unitization is conceptually related to mandatory pooling (R.C. § 1509.27), and is part of our ongoing blog series on Ohio’s compelled participation laws. (Read part 1 and part 2.). A unitization order allows oil and gas operators to join, or unitize, recalcitrant mineral owners to create large tracts of land — often comprising hundreds of acres — necessary to profitably and efficiently produce hydrocarbons from shale formations while protecting each owner’s correlative rights.
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Drilling Deep into Ohio Regulatory and Environmental Matters
Through the past year, we’ve written numerous articles covering regulatory and environmental issues that affect the Ohio oil and gas industry. We compiled those articles into an eBook so businesses involved in the industry have a go-to resource on topics such as drilling permit appeals, prevailing wage law, RUMAs, waste management, emissions standards and more.
Exploring the Disposal of Fracking Waste Water — UIC Class II Wells in Ohio
As discussed in an earlier post about the management of oil field wastes, most exploration and production waste is not regulated as a hazardous waste. Instead, it is regulated as a solid waste. Even so, as discussed in a recent article by Stephen Ellis:
“One of the biggest problems in the oil and gas industry today is water management. Solving the technical and economic challenges around managing the millions of gallons of water used to properly fracture tight oil and gas wells has been called the holy grail of the industry by Southwestern Energy CEO Steve Mueller. He estimates that water transportation (primarily trucking) costs around $1.5 million (25%) of the $6 million that an average Marcellus well costs.”
See: Stephen Ellis, “Oilfield Water Management: The Oil And Gas Industry’s Holy Grail,” Seeking Alpha, March 31, 2013.
Water Used in Operations
Water is used in the drilling of the well. It is also used in the stimulation — i.e., fracking — of the well. According to the Ohio Department of Natural Resources (ODNR), most of the water used in fracturing remains thousands of feet underground in the formation. However, about 15-20 percent returns to the surface through a steel-cased well bore and is temporarily stored in steel tanks or lined pits. The wastewater that returns to the surface after hydraulic fracturing is called flowback. Later, as the well is producing hydrocarbons, it also produces water named, appropriately enough, “produced water.”
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Management of Oil Field Wastes
The disposal of wastes associated with oil and gas production continues to draw the attention of regulators and concerned citizens. In a series of articles we will examine the waste issue from the characterization of these wastes (discussed below) and their ultimate disposal in underground injection wells.
A Brief History of Waste Management and RCRA
By the 1960s it was becoming clear that the country had a waste management problem. The only modern environmental law on the books at the time was the Clean Air Act. So the Solid Waste Disposal Act of 1965 was enacted as an amendment to the air law. This initial foray into comprehensive waste regulation proved inadequate in many respects. The treatment, storage and disposal of waste — even defining what a waste is — is complicated, especially when recycling is considered.
The modern regulation of solid and hazardous waste can be traced to 1976 with the enactment of the Resource Conservation and Recovery Act (RCRA). Generally, when looking at the world through the lens of RCRA, all material is either a product or a solid waste. A subcategory of solid waste is hazardous waste that is regulated under Subtitle C of RCRA.
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ODNR Issues Second Unitization Order for Horizontal Utica Shale Wells
The chief of the Division of Oil and Gas Resources Management (DOGRM) recently issued a new unitization order pursuant to R.C. §1509.28. This is only the second such order since the beginning of Ohio’s shale drilling boom. The unitization statute has become an increasingly important legal tool for oil and gas operators. We are seeing a new body of law take shape in Ohio, and last week’s order doubled its volume.
The process of unitization is conceptually related to mandatory pooling (R.C. § 1509.27), and is part of our ongoing blog series on Ohio’s compelled participation laws. (Read part 1 and part 2.) A unitization order allows oil and gas operators to join, or unitize, recalcitrant mineral owners to create the large tracts of land — often comprising hundreds of acres — that are necessary to profitably and efficiently produce hydrocarbons from shale formations while protecting each owner’s correlative rights.
Continue Reading ODNR Issues Second Unitization Order for Horizontal Utica Shale Wells