August 2019
A Free Monthly Publication
PETROLEUM, NATURAL GAS, AND COAL CONTINUE TO DOMINATE
NEW REPORT WARNS
TURNING AWAY FROM OIL & NATURAL GAS WILL COST UNITED STATES $4.5 TRILLION IN THIS ISSUE: CELEBRATE OUR INDEPENDENCE AND PROTECT IT – guest editorial
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Table of Contents AUGUST 2019 G ROUP PUBLISHER Bill Albrecht
EXECUTIVE EDITORS Beth Bailey bbailey@daily-jeff.com Ted Daniels tdaniels@the-daily-record.com
CONTENT CO ORDINATOR
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A Look Ahead Gas & Oil Events
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Petroleum, Natural Gas, And Coal Continue To Dominate U.S. Energy Consumption
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SHALE INSIGHT TM 2019
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New Report Warns Turning away from Oil & Natural Gas Will Cost United States $4.5 Trillion
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Celebrate our Independence and Protect It - Guest Editorial
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Ohio Oil and Gas Association Presents the 2019 Oilfield Patriot Award
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OOGA Member Spotlight: Kathy Hill, Ergon
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Ohio’s Fifth Appellate District Rules in A Dormant Mineral Act Notice Case
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OOGA President Steve Downey on Ohio’s Oil and Gas Industry
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Oil and Gas Scholarship Given
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Ohio Well Activity
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Horizontal Drilling Activity Graph
“Ohio Gas & Oil” is a monthly publication. Copyright 2018.
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ADVER TISING Paul Reynolds Cambridge, Ohio Office preynolds@gatehousemedia.com 740-439-3531 Aaron Bass Wooster & Holmes, and Ashland, Ohio Offices abass@gatehousemedia.com 330-264-1125 419-281-0581 Mindy Cannon Alliance & Minerva, Ohio Offices mcannon@the-review.com 330-821-1200 Jim Williams Kent, Ohio Office jim.williams@recordpub.com 330-298-2012
L AYOUT DESIG NER Phil Luks
Doris Sigg
dsigg@the-daily-record.com
AUGUST 2019
On The Cover:
The consensus among gas and oil industry experts is clear. The economic benefits of continued expansion far outweigh the risks of cutting back.
pluks@recordpub.com
A Division of GateHouse Media Ohio 212 E. Liberty St. Wooster, OH 44691 330-264-1125 spectrum@the-daily-record.com. AUGUST 2019
A Look Ahead
Gas & Oil Events AUGUST 22, 2019
PIOGA DIVOT DIGGERS GOLF OUTING & STEAK FRY 8:00 am - 5:00 pm Tam O’Shanter Golf Club Hermitage, Pennsylvania pioga.org
SEPTEMBER 9, 2019 OHIO GEOLOGICAL SOCIETY GOLF OUTING
Chapel Hill Golf Course 7516 Johnstown Rd Mt Vernon, Ohio 43050 The Ohio Geological Society golf outing is an annual event held in the fall at Chapel Hill Golf Course as an opportunity for our members to network with industry sponsors and to raise money for our scholarship fund. Tickets are purchased by attendees; sponsors subsidize food, drinks and prizes. www.ohiogeosoc.org
OCTOBER 6 -7, 2019 OOGEEP RESPONDING TO OILFIELD EMERGENCIES TRAINING
TRAINING LOCATION: Wayne County Fire & Rescue Regional Training Facility 2311 South Millborne Road, Apple Creek, OH 44606 HOTEL LOCATION Hilton Garden Inn 959 Dover Road, Wooster, Ohio 44691 While responding to oilfield emergencies is rare, it can be challenging. Join more than 1,500 Ohio firefighters (and departments from 7 other states) that have taken this training to learn common practices, references and standards used by the fire service and the natural gas and oil industry. The training program incorporates
AUGUST 2019
the following three (3) sections: 1) Interactive classroom presentations and special activities. 2) Hands-on fire behavior labs. 3) Opportunity to participate in a unique oilfield tour. (This will be coordinated on a separate date.) This emergency response program provides insight into how natural gas and oil is explored, drilled, produced and transported, and the importance of establishing a unified command in the event of an emergency. Upon completion of the training, each participant will receive a certificate of attendance, an “Oilfield Emergency Response Training” patch, challenge coin, class photo, field guide, Class B Foam and many other materials. (Reciprocating patches and challenge coins are greatly appreciated). Participants will also receive documentation for up to 12 CEU contact credit hours. These CEU credits must be approved by each department’s Fire Chief in accordance with State Fire Training regulations.
and public affairs sessions, national keynote addresses, and a dynamic exhibit hall integrated with programming activities and networking lounges featuring the major shale players. shaleinsight.com
OCTOBER 22-24, 2019 SHALE INSIGHT: 2019 A SHALE COALITION CONFERENCE David L. Lawrence Convention Center 1000 Fort Duquesne Blvd. Pittsburgh, Pennsylvania 15222 Get a front row seat at the leading conference on American shale energy, industries, and jobs. Network with the nation’s foremost leaders on shale development, pipeline investment, technical innovations, power generation, energy driven manufacturing and the region’s new game changing petrochemical industry. Learn from thought leaders and share with peers workplace solutions during two days of technical
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Petroleum, Natural Gas, and Coal
Continue to Dominate U.S. Energy Consumption U.S. ENERGY INFORMATION ADMINISTRATION | Monthly Energy Review
Source: U.S. Energy Information Administration, Monthly Energy Review Fossil fuels—petroleum, natural gas, and coal—have accounted for at least 80% of energy consumption in the United States for well over a century. Overall energy consumption in the United States reached a record high in 2018 at 101 quadrillion British thermal units (Btu), of which more than 81 quadrillion Btu were from fossil fuels. Despite the increase, the fossil fuel share of total U.S. energy consumption in 2018 increased only slightly from 2017 and was the second-lowest share since 1902. The increase in fossil fuel consumption in 2018 was driven by increases in petroleum and natural gas consumption. Coal consumption fell by 4.3% in 2018, the fifth consecutive annual decline. U.S. consumption of coal peaked in 2005 and has declined nearly 42% since then. U.S. coal consumption fell to 687 million short tons in 2018, the lowest level of coal consumption in the United States since the 1970s. Natural gas consumption increased in 2018, reaching a new record consumption level of 82.1 billion cubic feet per day. Natural gas consumption has increased in
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8 of the past 10 years. Growth in natural gas consumption has largely been driven by increased consumption in the electric power sector. Overall, U.S. consumption of natural gas has increased by 37% since 2005. Petroleum consumption also increased in 2018 as petroleum product supplied reached the equivalent of 20.5 million barrels per day. Despite the increase in 2018, U.S. petroleum consumption remains lower than its peak consumption level set in 2005. Petroleum has been the largest source of energy consumption in the United States since surpassing coal in 1950. The renewable share of energy consumption in 2018, which includes hydroelectricity, biomass, and other renewables such as wind and solar, was 11.4%, slightly less than its 2017 share. The largest growth in renewables over the past decade has been in solar and wind electricity generation. Energy consumption in the United States has undergone many changes in the nation’s history, from wood as a primary resource in the 18th and 19th centuries, to Petroleum continued on page 5
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Petroleum continued from page 4
Source: U.S. Energy Information Administration, Preliminary Monthly Electric Generator Inventory the onset of coal and petroleum use, and to the more modern rise of nuclear power in the late 20th century and renewables in the early 21st century. The Monthly Energy Review’s pre-1949 estimates of U.S. energy use are based on two sources: Sam Sch-
U.S. consumption of natural gas has increased by 37% since 2005
AUGUST 2019
Attorneys and Counselors at Law Since 1964
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urr and Bruce Netschert’s Energy in the American Economy, 1850–1975: Its History and Prospects and the U.S. Department of Agriculture’s Circular No. 641, Fuel Wood Used in the United States 1630–1930, published in 1942. Appendix D of EIA’s Monthly Energy Review compiles these estimates of U.S. energy consumption in ten-year increments from 1635 through 1845 and fiveyear increments from 1845 through 1945. Data for 1949 through the present day are available in the latest Monthly Energy Review. Principal contributors: Michael Mobilia, Owen Comstock
Connolly, Hillyer, & Ong, Inc.
(740) 498-5196 • (740) 498-5197 Fax hillyerlaw@hillyerlawoffice.com
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SHALE INSIGHT
TM
2019
One of the Nation’s Leading Conferences on Shale Energy Development. As the U.S. solidifies its position as the world’s top energy producer, get a front-row seat at SHALE INSIGHTTM 2019 – one of the nation’s leading conferences on shale energy development. With previous keynote speakers including President Donald Trump, EPA Administrator Andrew Wheeler, and former New York City Mayor Rudy Giuliani, SHALE INSIGHTTM is a must-attend industry conference. Hosted by the Marcellus Shale Coalition, the Ohio Oil and Gas Association and the West Virginia Oil and Natural Gas Association, the conference returns to Pittsburgh, October 22-24. “Taken as a whole, the Appalachian Basin is the country’s largest natural gas producing region and we are proud to renew our partnership with the area’s top trade associations,” said MSC president David Spi-
The leading conference on American shale energy, industries and jobs.
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gelmyer. “These partnerships help expand the conference reach and give us an opportunity to offer indepth panel discussions and conversations on topics and issues key to this region.” SHALE INSIGHTTM 2019 will focus discussions on the current state of the upstream industry and how to connect Appalachian production to critical markets. The conference will offer attendees an extensive networking opportunity, and the chance to attend informative keynote presentations and interactive breakout sessions. “SHALE INSIGHT is a great way to present technol-
“Coming together at events like this give us all an opportunity to learn, develop, and share best practices that we can apply basin-wide.” ogy advancements in our region and foster greater collaboration among the trades and our member companies,” said Matthew Hammond, OOGA executive vice president. “Coming together at events like this give us all an opportunity to learn, develop, and share best practices that we can apply basin-wide.” As in previous years, the technology showcase will display cutting edge technologies that can create value and reduce costs for companies operating in the Appalachian region. The conference will also feature a university research showcase, where students and faculty will present groundbreaking studies, projects, and research to some of the nation’s most influential leaders and innovators in shale development. “This conference is a one-of-a-kind opportunity for attendees to network and have a front-row seat to the latest industry modernizations and advancements,” added WVONGA executive director Anne Blankenship. Become a sponsor, host an exhibit, or register for the conference by visiting shaleinsight.com.
AUGUST 2019
New Report Warns
Turning Away from Oil & Natural Gas Will Cost United States $4.5 Trillion ELIZABETH CALDWELL | Energy in Depth
AUGUST 2019
Aside from the abundance and low cost of natural gas, its ability to ramp up or down very quickly has made it popular for power generation. Without substantial battery storage, natural gas serves as an important backup fuel for renewables because solar and wind power experience off-times and seasonal variation, as well as curtailments due to lack of storage capacity, which the report says happens almost daily in California. As Energy Information Administration analyst Dr. Kathryn Dyl explained this year, natural gas has played an important role in ensuring grid reliability: “That build-out of natural gas generation capacity on the grid led to the retirement of several coal generators, but also in many ways enabled the growth of renewables, because renewables — particularly wind and solar power — are intermittent or non-dispatchable reReport continued on page 8
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Removing oil and natural gas from the U.S. energy mix could have dire consequences, costing the country $4.5 trillion – or $35,000 per household – according to a new report from energy consulting firm Wood Mackenzie: “For any country to embrace a nationwide transition to 100 percent renewable energy (RE100) or zero carbon (ZC100) emissions constitutes a massive disruption with far-flung economic and social repercussions.” As the report explains, in order to completely decarbonize by 2030: “We estimate the cost of full decarbonisation of the US power grid at US$4.5 trillion, given the current state of technology. That’s nearly as much as what the country has spent, since 2001, on the war on terror. From a budgetary perspective, the cost is staggering at US$35,000 per household – nearly US$2,000 per year if assuming a 20-year plan.” (emphasis added) This cost “includes everything needed to reliably produce and deliver clean energy to consumers”, which Wood Mackenzie estimates is about 1,600 gigawatts (GW) of new wind and solar capacity, and an additional 900 GW of storage capacity. For perspective, current wind and solar capacity is about 130 GW of the roughly 1,060 GW that make up the U.S. power grid’s nameplate capacity. Worldwide there is about 5.5 GW of storage capacity operational or under construction, according to the report. The estimate does not include additional supply chain costs that could result from the increased demand for things like steel and construction equipment. Wood Mackenzie notes this would be an unprecedented shift: “Today, no large and complex power system (LCPS) in the world operates with an average annual penetration of greater than 30% wind and solar (W+S). RE100 policies for an LCPS represent uncharted territory. There is little to no historical precedence for dealing with the technological and commercial disruptions that would accompany the mass deployment of variable energy resources. “Current evidence shows that an LCPS tends to reach a 25% W+S market penetration with relative ease, assuming fundamental natural resource and grid infrastructure prerequisites. Beyond that point, operational and cost complexities progressively multiply, in large part due to the intermittent nature of renewables.” (emphasis added)
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Report continued from page 7
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sources. They only operate at certain times of the day or under certain circumstances and it’s really beneficial to be able to have complementary generation to be able to respond to that.” Lower cost solutions Wood Mackenzie is not calling for a halt to increasing the U.S. renewable power generation capacity. Instead it acknowledges the complexity of the issue and offers a few more realistic suggestions than what has been called for by those supporting 100-percent renewable power by 2030, which ultimately would “require more capacity to be built every single year over the next 11 years than what has been installed collectively over the past two decades.” The first two suggestions include slowing down to allow for technologies to be developed that could lower these costs and to give a more realistic time-frame. The last two are to include other fuel sources, namely nuclear and natural gas. In fact, the report finds that by including natural gas in the energy mix, the cost reductions are pretty substantial: “Allowing 20 percent of the power mix to come from existing natural-gas-fired generation (ZC80) would reduce RE costs by roughly 20 percent and energy storage costs by at least 60 percent.” (emphasis added) Natural gas helped the United States lower greenhouse gas emissions almost 73 percent from 1970 to 2017, according to the Environmental Protection Agency. The United States has also been a world leader in reducing carbon dioxide emissions, with the EIA attributing the accomplishment largely to the increased use of natural gas in power generation. Reprinted by permission Energy in Depth, Independent Petroleum Association of America www.ipaa.org
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Celebrate our Independence
and Protect It Guest Editorial
GREG KOZERA | Shale Crescent USA “Montani Semper Liberi” (“Mountaineers Are Always Free”). We cherish our freedom. Freedom is never free. There is always a price to pay. We celebrated the USA’s independence a few weeks ago. Americans had to fight and some died to gain our freedom and to keep our freedom for over 200 years. A special “Thank You” to all of our veterans for their sacrifices. Our military has always required public support to be successful. My mother told me about World War II. My Dad and her brothers were overseas in the military. Mom said everyone at home did with less fuel and food so our military had more. Gasoline, metals, rubber, paper and plastics were rationed. President Franklin Roosevelt said, “We must out-produce them (our en-
emies) overwhelmingly, so there can be no question of our ability to provide a crushing superiority of equipment in any theatre of the war.” Out-produce them America did in a way never seen before. Pre-World War II the USA could produce 3,000 aircraft a year. From 1940 to 1945 the USA produced 300,000 aircraft. We also produced 6,000 ships and 88,000 tanks. Energy was a big factor in winning World War II and keeping us free. By the end of the war our military had fuel and Germany didn’t. My uncle, who served in Patton’s Army, told me about marching past German tanks that had run out of fuel on his way to Berlin. Even today our military runs primarily on natural gas and oil for its fuel and petrochemicals to manufacture planes, weapon systems and even uniforms. Celebrate continued on page 10
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The Arab Oil Embargo of the 1970s showed us how vulnerable we were and how dependent we were on OPEC. Every time there was a war or threat of war in the Middle East we saw the price we paid for gasoline in the USA increase almost immediately. We didn’t have a solution. In the early 2000s we couldn’t meet our domestic natural gas demand. Plans were being made to build 16 terminals around the country to bring in natural gas from our “friends” in Russia and OPEC nations. Thanks to the Shale Revolution we never needed them. The few terminals like Cove Point, Maryland that were built have been turned into export terminals for our natural gas. Russia and OPEC are not happy with us. Thanks to new American horizontal drilling technology the USA is now the leading oil and natural gas producer in the world. Not only were we not a major customer of theirs we became their biggest competitor. The USA was responsible for driving down world oil prices from $120 per barrel to the $60 per barrel range. The US natural gas industry is lowering the price of natural gas globally because of incredible gas production. The Shale Crescent USA now produces more natural gas THAN EVERY COUNTRY ON PLANET EARTH except RUSSIA and the REST of THE USA. Jobs and economic growth are returning to the Shale Crescent USA. Wages are increasing. People have hope again. Our people are free again to move away or choose to stay here because of the new job growth in our Region. Even today our freedom is under attack by our enemies like terrorists. It is also under attack by our own people who are ignorant of energy. There are Americans (including some who want to be our next President) working hard to restrict or ban the use of fossil fuels. Maybe they don’t understand that our military runs on oil and gas. Maybe they don’t know that electric cars, cell phones, solar panels and medical equipment like inhalers and epi pens require petrochemicals from natural gas and oil to exist. Maybe they don’t know that the USA has already used natural gas to lower carbon dioxide emissions 14%, more than any other nation. (The rest of the world is UP 19%) US natural gas is lowering air pollution and carbon dioxide in countries like India. Maybe the anti-fossil fuel people are ignorant of the fact that a 3 MW wind turbine requires 2 tons of rare earth. Electric motors also require rare earths for their magnets. Mining and refining of rare earths is not an environmentally friendly process. We don’t notice because China has 95% of the world’s rare earth production. A shift to renewables would make the USA more dependent on China for energy than we ever were of OPEC. Does this make environmental, economic or national security sense? Since the 1970s we have watched our manufacturing and petrochemical industry jobs leave the region be10 OhioGas&Oil
cause energy was cheaper and more abundant overseas or in the Gulf Coast. Our location in the middle of the customers and on top of abundant natural gas and natural gas liquids has given us the opportunity to create local jobs, a more stable world and a cleaner environment. This is a once-in-a-generation opportunity. An educated public is our best weapon in this fight. Last Monday (July 1st) I was a guest on the nationally syndicated Jim Bohannon radio show. We talked about energy, jobs, The Green New Deal, the Shale Crescent USA and took calls. It was an incredible opportunity to educate a national audience. You can listen to the hour-long segment by going to… www.jimbohannonshow.com click on “podcasts” and click on “July 1st”. My interview is the second hour. We all need to do what we can. Do your part. Share the truth. You understand and know what is at stake for our region, our people and our country. Our children and grandchildren’s future and freedom is at stake. Thoughts to ponder. © 2019 Shale Crescent USA Greg Kozera, gkozera@shalecrescentusa.com is the Director of Marketing and Sales for Shale Crescent USA. He is a professional engineer with a Masters in Environmental Engineering who has over 40 years’ experience in the energy industry. Greg is a leadership expert and the author of four books and numerous published articles.
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Celebrate continued from page 9
AUGUST 2019
Ohio Oil and Gas Association Presents the
2019 Oilfield Patriot Award MIKE CHADSEY | Director of Public Relations, OOGA The 2019 Oilfield Patriot Award was presented to worked for Magnum Hunter Resources Corporation in Amanda Finn, Director—Government Relations at As- government relations. Finn has an wide-ranging backcent Resources, an annual honor bestowed by the ground in government affairs and marketing. She has OOGA. The award recognizes an individual who has been involved with the Ohio Oil and Gas Association made significant contributions to protect, promote and since 2015, currently on the Association’s executive committee, board of trustadvance the common interees, chairs the government ests of those engaged in all affairs committee, and is an aspects of Ohio’s crude oil active participant on the and natural gas industry. communications and reguThe patriot award reclatory committee. ognizes leadership within When asked what the the Association that steps award and presentation up and works for the benefit of all in this industry. ceremony meant to her she shared that “it is a huge OOGA President Steve privilege to be able to repDowney said that, “Amanresent the industry as a da is a leader and patriot in whole in all aspects of my that respect because of her job. Being added to a list involvement with the new and disruptive changes of amazing recipients that have been presented this that are happening in our award was humbling and a industry, and her concern highlight of my career”. that everyone who is a part 2019 Oilfield Patriot Award winner Amanda Finn, Director— This year’s award was of this industry benefits”. Government Relations at Ascent Resources presented at the Summer And for that reason, Finn is Meeting of OOGA at the Glenmore County Club in the highly deserving of the 2019 Oilfield Patriot Award. Finn has been with Ascent Resources for three years, Canton area. working out of the Cambridge office. Prior to that she
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OOGA MEMBER SPOTLIGHT:
KATHY HILL, ERGON LYNDSEY KLEVEN |Communication Manager, OOGA. Re-printed by permission.
Kathy Hill was born in Southampton, Pennsylvania 2013 as a crude buyer covering southern Ohio and areas outside of northeast Philadelphia. Hill attended Penn in West Virginia. The main facets of this role are managState University to study engineering, and with some ing customer accounts including purchasing, trucking, influence from her school advisor, she enrolled in the and proper payment; all in an effort to supply Ergon’s petroleum engineering program. With no family ties in West Virginia refinery. Hill meets with the seller and gets the oil and gas industry, this program appealed to Hill a list of the tanks they want hauled, assigns a tank’s as the career opportunities were described as working number, and then goes to the site to actually strap the both outside and in an office, which she saw as being tank. Strapping a tank entails measuring the circumferthe best of both worlds. Once in the program, the cur- ence, doing calculations to determine the volume so riculum was a good fit for Hill and she enjoyed the ge- that they get paid correctly, and includes directions ology, engineering, and math and science and detailed information for that tank. She coursework. will then work a number of haulers includIndustry Experience ing Ergon Trucking, BD Oil Gathering, Oil After graduating from Penn State with Haulers, EnLink and Energy Transportaa degree in petroleum engineering, Hill tion to coordinate hauling schedules. continued moving westward and found “It is nice working for Ergon to work with her first job in Belpre, Ohio working for producers; I get to see what they’re doing Quaker State. Ohio would remain home as and discuss the industry,” said Hill. “I feel Hill continued to build her career in the oil like I’m able to give them good service, and gas industry. Quaker State had wells because I understand what they’re going in Ohio and West Virginia and Hill started through since I’ve also been on that side in the production department. of the business. Ergon has been a great Her first field experience was in Ashland company to work for, they treat all their Kathy Hill County, where she was assigned to the employees like family.” Red Haw Water Flood project, which Hill This role has brought Hill’s career in the found to be a great place to start out. This was excit- oil business full-circle, from starting out on drilling projing because it included a comprehensive introduction ects all the way to completion, to now being on the serto the industry. Hill found herself working with field vice and purchasing end. In her role as a crude buyer she personnel in the maintenance of injection and produc- works closely with the other branches of Ergon, specifiing wells. She also got involved in new drilling projects cally with Ergon Trucking and Ergon Terminaling. The and dealt with spacing producers and injection wells for transitioning from many years in the production side good water flood flow. All of this allowed her to learn has been an adjustment and Hill is glad to still be able the operations of the business and see drilling projects to work with the same group of people and build strong all the way through to completion. Hill described the relationships. Hill brings a high level of knowledge and most interesting part of this role and time period was experience in the industry that she’s able to bring to the seeing wells being shot with nitroglycerin. purchasing role, if a customer is experiencing a problem Early on Hill was faced with the ebbs and flows of the she’s able to help solve it. industry and found herself looking for a new position as Ergon’s operations have continued to expand with the the industry was entering a downturn. The next step for needs of the industry. As shale drilling started in this her was working for small local producers around Mari- region, Ergon expanded from hauling PennGrade oil and etta. The following 16 years gave Hill the full experience now also hauls condensate. One of the greatest changes of how oil and gas companies function. She experienced Hill has witnessed in the industry has been shale drilling, everything from oil and gas production monitoring, gas and the enormous scale of the new drilling operations marketing nominations, workovers, drilling and comple- from what she was previously used to. tions, all the way to planning joint ventures with other “When I started strapping tanks for Utica shale comcompanies. Hill felt it was the right time to move on just panies, it amazed me because the service roads were as shale drilling started happening in Ohio, thinking her extremely well done, and the tank pads are huge,” deemployer was likely to sell to a larger company. scribed Hill. “I was used to going for a PennGrade cusErgon tomer and strapping one or two tanks, now I go to these Hill started working for Ergon Oil Purchasing, Inc. in sites and there can be upwards of 14 tanks to strap.” 12 OhioGas&Oil
AUGUST 2019
OHIO’S FIFTH APPELLATE DISTRICT RULES IN A DORMANT MINERAL ACT NOTICE CASE David J. Wigham | Attorney On June 28, 2019, mineral rights to the property. FarOhio’s Fifth District well died in 1965 in Guernsey CounCourt of Appeals issued ty, and the reserved mineral interits opinion in Gerrity v. est was transferred to his daughter, Chervenak, 2019-Ohio- Jane Richards, through the estate. 2687, holding that the surface own- Meanwhile, in 1999, Robert Schaefer er’s attempts to locate the heir of a conveyed the surface rights of the severed mineral holder were reason- property to the Chervenaks, who on able, and, therefore, the reserved June 14, 2012, recorded an affidavit mineral interest was deemed aban- of abandonment with the Guernsey doned under the 2006 version of County Recorder pursuant the DMA. In August 4,2017, Tim Gerrity, the Ohio’s Dormant Mineral Act, O.R.C. sole heir of Jane Richards, filed a 5301.56 (the “DMA”). The Gerrity case involved a fact lawsuit, challenging the validity of pattern that is typical in many DMA the Chervenaks’ affidavit of abancases. The property in question, donment, and the Chervenaks counlocated in Guernsey County, was terclaimed, seeking to enforce their transferred in 1961 by warranty deed DMA affidavit. The trial court ruled from T.D. Farwell to Robert C. Shae- in favor of the Chervenaks, holding fer, with Farwell reserving all the the mineral interest was deemed
abandoned under the DMA. Title to the minerals was ordered to be vested in the surface owner. Gerrity appealed this decision to the Fifth District Court of Appeals (which covers Ashland, Coshocton, Delaware, Fairfield, Guernsey, Holmes, Knox, Licking, Morgan, Morrow, Muskingum, Perry, Richland, Stark, and Tuscarawas Counties). The issue on appeal was whether the Chevenaks complied with the notice requirements of the DMA by publishing their notice of abandonment, rather than first attempting to serve it on the heir of Jane Richards by certified mail. Under the DMA, a surface owner seeking to abandon severed mineral interests must first Dormant continued on page 14
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Dormant continued from page 13
serve a notice of its intent to abandon the minerals via certified mail. If certified mail service cannot be completed, the surface owner may publish its notice of abandonment in the local newspaper. The Seventh District Court of Appeals (which covers Belmont, Carroll, Columbiana, Harrison, Jefferson, Mahoning, Monroe, and Noble Counties) has already issued several recent rulings that set forth when surface owners may skip the step of first serving it via certified mail and directly publish their notice of abandonment. In Shilts v. Beardmore, 2018-Ohio-863, the Seventh District held that surface owners must use “reasonable diligence” in attempting to locate heirs before they can skip the certified mail requirement and serve via publication. Then in Sharp v. Miller, 2018-Ohio4740, the Court ruled that there is no “bright-line rule” as to what efforts constitute “reasonable due diligence,” and although an internet search is not required in every case, each case is different and should be reviewed on an individual basis. In Miller v. Mellott, 2019-Ohio-504, the Seventh District then determined that, because the surface owners failed to submit any evidence of their efforts undertaken to identify the names and addresses of mineral holder’s heirs, the surface owners failed to comply with the DMA notice requirements, and therefore their abandonment notice was legally ineffective. Finally, in Soucik v. Gulfport Energy, 2019-Ohio-491, the Court held that service by publication is a “last resort” and can only be used “only after actual service cannot be obtained.” Turning back to the Gerrity appeal, the Fifth District noted that the Chervenaks attempted to serve Jane Richards via certified mail at her last known address in 1965 and also searched the public records of Guernsey County but were unable to locate any address for her. (In reality, Jane Richards had died in December 1997 in Florida, and her will was probated in Florida. Ms.
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Richards’ sole heir was Tim Gerrity, a Columbus Ohio attorney.) The Chervenaks argued that their searches for Jane Richards were reasonable. Gerrity argued that the Chervenaks did not use reasonable diligence because an internet search would have located the online obituary of Jane Richards. The court of appeals agreed with the Chervenaks, holding that, “We do not find that the ODMA contemplates a worldwide exhaustive search for a ‘holder.’” The court also noted that Gerrity did not show proof of how discoverable her obituary was. One judge dissented, noting that, “Given that very few people remain at the same address for 45 years due to the transitional nature of modern society, along with the availability of online obituaries, person locator websites and other internet resources, such an attempt by Appellee falls woefully short of being reasonable in the 21st century.” The Gerrity case is most recent case in a series of cases in which Ohio courts have been grappling over the surface owner’s compliance with the mandatory notice requirements of the Ohio. The Gerrity court seems to depart from the Seventh District’s line of cases, which hold that the issue of whether a surface owner’s reasonable diligence should include an internet search is measured on a case-by-case basis and that service by publication is only to be used as a “last resort.” At the very least, it seems that the court could have remanded the case back to the trial court for a trial on the factual issue of the reasonableness of the surface owner’s diligence, in light of Gerrity’s evidence that an internet search would have located the Jane Richards estate. However, the court rejected the mineral owner’s argument that a reasonable search, in this case, should have required an internet search since, according to Gerrity, Jane Richards’ 1997 obituary was “readily available.” It is not apparent from the decision whether the mineral owner properly argued the
“reasonable diligence” standard on appeal or made an appropriate record at the trial court level to establish that an internet search would have located the heir of Jane Richards, which would have most certainly rebutted the surface owner’s claim of reasonable diligence. As the Seventh District held in Sharp v. Miller, although an internet search is not required in every case, each case is reviewed individually. In other words, in cases where an internet search would locate mineral owner’s heirs, a surface owner’s reasonable diligence would necessarily include an internet search. Here, had Gerrity made a proper record before the trial court that an internet search in 2012 would have located the 1997 obituary of Jane Richards, which would have identified her heir, Tim Gerrity, perhaps the outcome of the case may have been different. In short, Ohio law regarding the abandonment and preservation of mineral rights under the DMA is still evolving. Although the rights and obligations of surface owners and mineral holders under the DMA were seemed to be more defined, with the rulings in Miller v. Mellott, Soucik v. Gulfport Energy, and Stalder v. Bucher, Gerrity v. Chervenak shows us that each case is unique, the law is interpreted differently between appellate districts and evidence of reasonable diligence differs in each case. Thus, it is safe to say that surface owners and mineral owners continue to face significant challenges in disputes over ownership of valuable mineral interests. This uncertainty and the need for litigation highlights the importance of retaining an experienced oil and gas attorney to advise clients with regard to the abandonment, preservation and the ownership of mineral interests. David J. Wigham is a second-generation oil and gas attorney at the firm of Roetzel & Andress, with more than 27 years of experience in the industry. He maintains offices in Akron and Wooster, Ohio, and can be reached at 330-762-7969 or dwigham@ralaw.com.
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OhioGas&Oil 15
OOGA President Steve Downey
on Ohio’s Oil and Gas Industry SHANE HOOVER | GateHouse Media Ohio
The Ohio Oil & Gas Association held its annual summer meeting at Glenmoor Country Club earlier this week, and GateHouse Media Ohio caught up with OOGA President Steve Downey. Downey, EnerVest Operating’s vice president of business development, is a 32-year veteran of the in-
“The Utica has done really well since its inception… We’re producing probably about 9 billion cubic feet of natural gas a day in Ohio now.”
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dustry. He is in the first of two years as OOGA president. Between golf sessions Tuesday, he kept an eye Steve Downey, of EnerVest Operating, is president of the Ohio on the upcoming vote on the state budget bill that in- Oil & Gas Association. (GateHouse Media Ohio / Michael Balash) cluded OOGA supported provisions concerning drill- his thoughts on the following topics: ing units and eliminating the $60 minimum severance “The Utica has done really well since its inception… tax and the $100 per well transfer fee. He also shared We’re producing probably about 9 billion cubic feet of natural gas a day in Ohio now, somewhere in that neighborhood. It’s ramped up greatly… As prices have moved for (natural gas liquids) and dry gas, the areas have fluctuated just a little bit. Where’s the real drilling? It’s kind of jumped back and forth between the wet gas and the dry gas just depending on economics… “Some producers have the ability to go back and forth. Encino Energy – used to be Chesapeake Energy’s assets – they have both wet and dry gas, so they can shift as they see fit, to some degree. You have other companies that are strictly dry gas. …I think the acreage positions are pretty well set now.”
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Ohio continued on page 18
AUGUST 2019
Oil and Gas
Scholarship Given DAILY ADVOCATE | Reprinted by permission.
Sixty-five students, including two from Darke County, have been awarded scholarships from the Ohio Oil and Gas Energy Education Program (OOGEEP) and Foundation. These scholarships are awarded to qualified students pursuing careers in the natural gas and oil industry. Among this year’s scholarship recipients are these individuals from Darke County: Kiley Grilliot of Greenville plans on attending The Ohio State University to study mechanical engineering. Grilliot is a first time OOGEEP scholarship award recipient. Samuel Rhoades, also of Greenville, plans on attending the Hobart Institute of Welding Technology to study welding technology. Rhoades is a first time OOGEEP scholarship award recipient. To date, OOGEEP has awarded close to half a million dollars in scholarships to students from Ohio,
or students pursuing higher education in Ohio, in order to help relieve some of the financial burden of attending the college, university, technical or trade school of their choice. This year, these winners represented 32 Ohio counties, 27 institutions of higher education and 17 different majors. To be considered for a scholarship, students were required to submit an essay describing their personal career goals in the natural gas and oil industry, submit multiple letters of recommendation and meet other academic requirements. The scholarships are made possible by contributions from those who are passionate about the future of the industry’s workforce, funded through OOGEEP’s 501(c)(3) Foundation. Each scholarship is renewable up to four years.
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Ohio continued from page 16
The pool of qualified job candidates in Ohio: “We probably have a workforce of about 200,000plus folks in the industry and there are additional needs for that. If you look at some of the technical colleges here in the (Appalachian) Basin, many of them offer programs in oil and gas fields… I think that’s a great thing. I think there’s probably jobs to be had today and there may not be enough of a workforce to be able to fill them.” The Ohio Department of Natural Resources orphan well plugging program: “As part of our severance tax we pay into a wellplugging fund. …That’s a great deal of dollars that’s sitting in that fund right now. ODNR has been very slow in plugging those idle and orphan wells… Ohio has the funding to eradicate those wells… We would love to see that program really ramped up.” EnerVest’s presence in Ohio and Stark County: At one time we had 8,500 wells and 1.1 million acres (in Ohio). Today, through different divestitures, we’ve had well plugging also, we probably hold about 7,000 wells and we still hold the 1.1 million acres — 350,000 of those 1.1 million acres were the feedstock for Chesapeake when they came in…and we still have a joint venture with Encino, which has taken over the Chesa-
peake assets…We also have interests with Ascent. (We have) a huge presence in Stark. If you think about it, we own almost 100 percent of what they call the East Canton oil field (a geologic formation underlying Stark, Tuscarawas and Carroll counties). Drilling more horizontal wells in the Clinton sandstone, like EnerVest did about five years ago in eastern Stark County: “We’d like to. Oil prices need to cooperate. We need a pretty significant oil price in order to be able to do it…It was difficult drilling a Clinton horizontal (well). We tried different methodologies to do it, we had different techniques to complete the wells, we had different techniques to produce the wells. Every one we did, we learned something different and tried to apply it to the next…. I think that’s the next opportunity for conventional producers.” Opposition to fossil fuel projects: “The one thing that concerns me is that every project that’s fossil fuel related … it is so hotly contested and protested and it’s frustrating… The only entities that benefit from our lack of development of the commodity are foreign countries. That’s a problem. That is a problem. We could have complete energy security through our use of the oil and gas we develop.”
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TOP COUNTIES WITH HORIZONTAL DRILLING ACTIVITY BY NUMBER OF SITES
1. Belmont County........ 662 2. Carroll County......... 527 3. Monroe County........ 489 4. Harrison County........474 5. Guernsey County.......274 6. Jefferson County...... 239 7. Noble County.......... 223 8. Columbiana County...163 9. Mahoning County....... 30 10. Washington County... 22 11. Tuscarawas County.... 20 12. Portage County........ 15 Trumbull County........ 15 13. Stark County............ 13 14. Coshocton County....... 5 15. Morgan County.......... 3 Muskingum County...... 3 Holmes County........... 3 16. Knox County.............. 2 17. Ashland County.......... 1 Astabula County......... 1 Geauga County.......... 1 Medina County........... 1 Wayne County............ 1 I VARIOUS SSTAGES: PERMITTED DRILLING, ,D WELL SITESS IN PLETED PRODUCING, PRODUCINGPLUGGED, PLUGGED DRILLED, COMPLETED, SOURCE: OHIO DEPARTMENT OF NATURAL RESOURCES AS OF D L A 7/6/19
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