Ohio Gas & Oil Magazine November 2018 by Gannett NEO

November 2018

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OhioGas&Oil

Table of Contents NOVEMBER 2018

A Look Ahead Gas & Oil Events

G ROUP PUBLISHER

Ascent Resources Ascending as a Leader in the Industry

Bill Albrecht

Call Before you Dig - OHIO811 now Includes Oil & Gas Producers

EXECUTIVE EDITORS

Groundbreaking for Guernsey Power Station slated for March

Cabot Searching for New Locations for Well Pad Sites

Ray Booth rbooth@daily-jeff.com Ted Daniels tdaniels@the-daily-record.com

CONTENT CO ORDINATOR Doris Sigg

dsigg@the-daily-record.com

OhioGas&Oil

OOGA Member Spotlight: Kevin Ellis, Antero Resources

Ohio Oil and Gas Legend Leaving a Legacy In Muskingum County

Ohio Court Refuses to Apply Statute of Limitations in Lease Validity Dispute

EnergyInDepth.org Chart

Ohio Well Activity

Horizontal Drilling Activity Graph

On The Cover:

The Ohio Utilities Protection Service (OUPS), in collaboration with the Ohio Oil and Gas Association (OOGA) and the Ohio Gas Producers Underground Protection Service (OGPUPS), have announced the consolidation of Ohio’s two utility protection services under the unified OHIO811 trademark.

NOVEMBER 2018 ADVER TISING John Kridelbaugh Cambridge, Ohio Office jkridelbaugh@daily-jeff.com 740-439-3531 Kelly Gearhart Wooster & Holmes, and Ashland, Ohio Offices kgearhart@the-daily-record.com 330-287-1653 419-281-0581 Mindy Cannon Alliance & Minerva, Ohio Offices mcannon@the-review.com 330-821-1200 Kim Brenning Kent, Ohio Office kbrenning@recordpub.com 330-298-2012

L AYOUT DESIG NER Phil Luks

pluks@recordpub.com

A Division of GateHouse Ohio 212 E. Liberty St. Wooster, OH 44691 330-264-1125 editor@spectrumpubs.com. NOVEMBER 2018

A Look Ahead

Gas & Oil Events November 3 & 4, 2018 November 11-13, 2018 RESPONDING TO OILFIELD EMERGENCIES

Wayne County Fire and Rescue Training Facility 2311 South Millborne Road Applecreek, OH 44606 330-698-3473 www.wcfra.com While responding to oilfield emergencies is rare, it can be challenging. Join more than 1,400 Ohio firefighters that have taken this training to learn common practices, references and standards used by both the oil and gas industry and the fire service. The two-day training will focus on incorporating classroom presentations, activities and “hands-on fire behavior labs” to offer insight into how oil and gas is explored, drilled and produced, 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 and challenge coin, class photo, field guide, spill response kit, 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.

2018 IPAA ANNUAL MEETING

The Ritz-Carlton, New Orleans, New Orleans, LA (NOLA) celebrates its Tricentennial this year and IPAA is excited to be part of this celebration as NOLA hosts our 89th Annual Meeting! We’d like you to join us in this beautiful and colorful city and pro oil and gas state! Our meeting kicks off with a special “Night at the Museum” Dinner on Sunday, November 11th (Veterans Day) at the National WWII Museum complete with a docentled tour by IPAA former chairman, Paul Hilliard, a WWII veteran and the National WWII Museum Board Chairman. He will take you through the Campaigns of Courage pavilion and will be available to you throughout the entire evening as you explore the museum at your leisure.

Our Annual meeting serves as one of our most important gatherings to meet and discuss concerns and opportunities within the industry—from executives themselves. And what better place to do so than at The Ritz-Carlton hotel located on the edge of the French Quarter. The industry is always changing and we offer you the best way to stay up to date on pressing issues and get your questions answered all while getting the chance to expand your network. IPAA cares about our members and wants to provide the best experience possible. In the end, you will only regret the things you didn’t do, like attend our Annual Meeting! We look forward to seeing you in NOLA this November! Read our Speaker Bios. QUESTIONS? Contact Brittany Green at bgreen@ipaa.org.

November 8, 2018

Pritchard Laughlin Civic Center 7033 Glenn Hwy Cambridge, Ohio 43725 Network with other oil and gas professionals, listen to dynamic speakers, and discuss cutting edge topics at this annual industry gathering. In addition to the Technical Seminar, the event will feature indoor exhibits and an outdoor display of large equipment. Join us for the opening Oilfield Welcome Reception held on the trade show floor to kick off this year’s program! Participate as an exhibitor, sponsor or attendee. Don’t miss this exciting opportunity! Online registration is available until: 11/8/2018 http://oogatechexpo.com/. NOVEMBER 2018

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2018 TECHNICAL CONFERENCE AND OILFIELD EXPO

OhioGas&Oil

Ascent Resources

Ascending as a Leader in the Industry Ray Booth | GateHouse Ohio It’s not that Ascent Resources keeps a low profile in Cambridge and Guernsey County, it’s that they’re too busy becoming a leader in the oil and gas industry to do a lot of self-promotion. But their profile is anything but low within the industry itself. According to Mike Chadsey of the Ohio Oil & Gas Association, Ascent Resources is an active member with an office in Cambridge, headquartered in Oklahoma, and has quietly become one of a few leaders in oil and gas development in the entire state. And while the home office is in Oklahoma, with some 240 employees, the development of the company in Ohio is centered within a 6-county span, which now has more than 140 employees. Ascent Resources is a leading private exploration and production company focused on acquiring, exploring for, developing, producing and operating natural gas and oil properties. The company is capitalized with equity investments from various private equity sponsors, led by funds managed by The Energy & Minerals Group and First Reserve. “We have made a large investment in Ohio,” explained Amanda Finn, Government Relations Manager for Ascent Resources. “Our operations are solely focused in Guernsey, Belmont, Harrison and Jefferson counties and we’ve added some areas in Noble and Monroe counties with our recent acquisition.” In June, Ascent Resources, LLC, announced that it had entered into definitive agreements to acquire certain natural gas and oil properties from Hess Corporation, CNX Resources, Utica Minerals Development, and a fourth undisclosed seller. All together the “acquisitions” account for a combined purchase price of approximately $1.5 billion. “Our focus right now is evaluating our recent acquisition and what it means for our company,” Finn said. “We’re always looking at our acreage position but currently are pleased with our recent purchase.” Finn grew up in Mason, Ohio, just north of Cincinnati, until her senior year in high school, when her parents moved to Oklahoma. Finn admitted that she had what she called an “original dramatic thought” that the family would live in a teepee and she would be required to ride a horse. That was not the case. After graduating with a marketing degree from Lindenwold University, near St. Louis, MO, Finn spent three years with a local marketing research firm in St. Louis focusing

OhioGas&Oil

on internal marketing and social media. She then moved back to Ohio, landing in Marietta, where she met an Ohio congressman and joined his staff as director of finance, which led to contacts in the gas and oil industry. She then joined Magnum Hunter Resources as government relations and community affairs manager. When Magnum Hunter filed for bankruptcy in 2016, Finn made the leap to Ascent Resources.

“I think it’s challenging for some to understand or see the magnitude of the legislative process and why it is so important.” In an article for the Ohio Oil & Gas Association website, Finn said, ““I think it’s addicting. I think most people’s jobs get old and they just go through the daily motions. This industry is always something different, it’s always exciting, every day is something new, and you have no idea what’s going to happen when you walk in the door. I think part of the allure of the industry is the many ebb-and-flows that keeps you on your toes and produces some of the best work ethic I’ve ever seen.” Amanda continued on page 5

Amanda Finn, Government Relations Manager for Ascent Resources

NOVEMBER 2018

Amanda continued from page 4

The article goes on to say Finn’s role at Ascent involves a variety of focuses, but a key piece is government relations. The job, which includes working individually and with OOGA involves educating and working with members of the General Assembly on key pieces of legislation, rules and regulations through the Ohio Department of Natural Resources (ODNR) and all aspects of community relations. This includes working with local township trustees, commissioners or mayors, along with land owner relations, mainly updating them on activities in the area and fielding any issues or complaints. “I think it’s challenging for some to understand or see the magnitude of the legislative process and why it is so important,” explained Finn. “These legislative initiatives and rules/regulations proposals are key to the industry continuing to operate at a safe and productive level in the future.” Finn and Chadsey both see the current framework of the gas and oil industry as making a change from the “old guard” to a new vanguard. “This is a huge opportunity for our generation,” Finn said. “The millennial trend is to feel a little more entitled, but we understand the groundwork that has been laid by those before us and now we have a seat at the table. There are people such as Tom Stewart who have created a legacy and now we’re trying to earn a legacy. We’re part

NOVEMBER 2018

of the ‘next new phase’ and that’s really cool. It’s a massive responsibility to keep thinking about what comes next. It’s our turn to take the ball and move it on down the field for those who will come after us.” Also in the OOGA article, Finn said, ““Legislatively we’ve achieved a lot in 2018 with HB 225 and HB 430 being signed and will become law later this year,” Finn said. “The affected mine legislation, SB 236 will be a focus in the next legislative session along with other initiatives that will be finalized in the next few months. Rules and regulations have been more of a struggle, with ODNR doing an overhaul of the rules package as part of their five-year review process. Part of resolving this is to try to get everyone on the same page and ensure that they are interpreting the rules in a way that won’t create added frustrations to the producers. “If you take advantage of your OOGA membership, it’s of huge benefit,” said Finn about her involvement among the Association. “If you participate in committees, pay attention, read the news clips and get engaged. You get as much out of it as you put in. For Ascent, I would not be able to do everything else I do if I didn’t have the legislative assistance OOGA provides. Having OOGA be that support system of representing us on a daily basis is of huge importance to Ascent.”

OhioGas&Oil

OHIO811

now Includes Oil & Gas Producers Expanded One-Call Enhances Safety of Ohioans and Protects State’s Critical Underground Utilities Infrastructure OHIO811 is a vital resource for Ohio residents and businesses, OHIO811 serves as a communication link between those who have a need to excavate and those who own, operate and/or maintain buried utility facilities within the state of Ohio. OHIO811 promotes “Call Before You Dig” compliance through marketing and educational efforts, including a team of liaisons who are available to conduct safety presentations throughout the state. The Ohio Utilities Protection Service (OUPS), in collaboration with the Ohio Oil and Gas Association

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(OOGA) and the Ohio Gas Producers Underground Protection Service (OGPUPS), have announced the consolidation of Ohio’s two utility protection services under the unified OHIO811 trademark. “Call Before You Dig” just became easier for Ohio’s excavators and homeowners, increasing public safety and the protection of the state’s critical underground utilities infrastructure. Ohio’s Revised Code requires that ALL excavation contractors, property owners, or utility operators planning an excavation project must notify local utilities a minimum of 48 hours, but no more than 10 working days, prior to beginning any excavation. Now, a single call to 8-1-1 or a visit to OHIO811.org will insure that affected member utilities as well as those owning, operating and maintaining oil and gas production facilities are properly notified of planned excavations. “This consolidation eases utility notification and legal compliance for Ohio’s 11.7 million citizens and anyone else involved in property excavation projects within our state,” said Roger Lipscomb, Executive Director of OHIO811. “Through this collaborative effort, we can more efficiently and effectively promote responsible digging, decreasing dangerous and costly damage to underground utilities.” “For nearly 30 years OGPUPS has been enabling oil and gas producers to protect their underground systems in conjunction with OUPS,” said Matt Hammond, Executive Vice President of the Ohio Oil and Gas Association. “After much consideration we decided that it was in the best interest of all parties to consolidate and streamline the programs within a unified center managed by OUPS.” The Ohio Oil and Gas Association is a trade association with members involved in all aspects of the exploration, production and development of crude oil and natural gas resources within the state of Ohio. For more information, visit www.ooga.org. Follow OOGA on Twitter, LinkedIn, Facebook, Instagram.

NOVEMBER 2018

Groundbreaking for

Guernsey Power Station slated for March

John Lowe | GateHouse Ohio Efforts are on course now for a March groundbreaking for work on the planned Guernsey Power Station, said Norm Blanchard, executive director of the Cambridge-Guernsey County Community Improvement Corporation. Blanchard conferred with Mary and Michael King who are spearheading the power plant development efforts. The plant is expected to produce 1,650 megawatts of electricity, which would be enough to power about 1.5 million homes. The timetable for beginning work on the project has been moved back several times. That has happened because of the many variables with which the Kings have had to contend. Each power plant project entails its own unique challenges. For the Guernsey Power Station, that challenge has been simply its unexpected complexity. Factors that had to be faced included the site’s proximity to Interstate 77, environmental matters because of the wetlands designation on the planned site and the fact that the area — like much of Guernsey County — sits atop a honeycomb of old, abandoned coal mines. Concerns about those issues have been resolved, Blanchard said. All that remains to be completed are some final negotiations. Those negotiations are progressing, he said. “Occasionally, they have hit a bump in the road, but it’s just a matter of working through it,” he said. The first order of business after the March groundbreaking will be stabilizing the ground at the site. Once that is completed, construction of the plant itself will begin, he said. Construction may take up to three years to be completed but could be completed in as little as 30 months. The project is expected to require from 300 to 500 construction workers. Once completed, the plant will employ 25 people in full-time, highly skilled positions. The developers also have pledged to donate $42 million over a period of 30 years to the Rolling Hills

Local School District — money that would be used as a match to state funds from the Ohio Facilities Construction Commission. The combined funds would be used by the district to construct new school buildings. The Guernsey Power Station, unlike old traditional power plants in the region, will be fueled by natural gas — now abundant locally because of taps into the Marcellus and Utica shale formations.

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Cabot Searching

for New Locations for Well Pad Sites Dylan Sams | Ashland Times Gazette - GateHouse Ohio

the ground in Ashland County. The three current well pads have all been vertically drilled, and the first two — Kameink and Loder — have been hydraulically fractured horizontally as part of the exploratory process, Stark said. The drilling rig has been moved over to Susquehanna County in Pennsylvania for other drilling operations while Cabot searches for new exploratory well locations in the Ashland, Wayne, Richland, Holmes and Knox County areas. “Even as we are getting stuff ready in Ohio, the rig itself if working elsewhere,” Stark said. “It will work for awhile over there, and then it will come back to Ashland.” Stark said it is likely Cabot will be focused on building well pad locations when they get approved, and that it is uncertain when vertical drilling of those well pads will continue. “You cannot rush this work,” Stark said. Possible location in Ashland County He added that as the weather gets colder, the focus will turn more toward building up well pad areas inCabot Oil and Gas filed applications last month to stead of drilling. build well pads south of Loudonville with the Ohio DeThe plan is still to have five exploratory wells in the partment of Natural Resources but is still awaiting ap- area. proval from the department. One of the permits, filed on Aug. 30, was for a site in Hanover Township off of County Road 529, and the second application was for a location farther south County Road 529, just across the Holmes County line, according to the records provided by ODNR. A third application, filed Aug. 16, 2017, lists another potential location on Ohio 95, northwest of the Pleasant Hill Marina. That application has also not yet been approved by ODNR. “We’re still looking,” said George Stark, director of Public Affairs of Cabot Oil and Gas. Stark said the Houston company is still searching for sites of their fourth and fifth well pads. Three have already been built — Kamenik 1 in Green Township, Loder 1 in Mohican Township and Yeater 1 in Vermillion Township. The wells are part of a search by Cabot Oil and Gas, who are trying to find natural gas or oil. The plan is to drill through a Columbia Gas Storage Field and into Knox Dolomite, a geologic feature over 5,000 feet into Well Pad #1 in Perrysville, Ohio, Ashland County

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OOGA

Member Spotlight: Kevin Ellis, Antero Resources Lyndsey Kleven | Communications Manager, OOGA Kevin Ellis has a unique background that brought him to Antero Resources in West Virginia. Ellis grew up in Abbeville, South Carolina, which is a small rural farm town where the primary businesses were the railroad and textile mills. Ellis’ father worked on the railroads and had a military background, as did his grandfather. After high school, Ellis joined the U.S. Army Reserves and the very night that he graduated went off to basic training. In 1990, his unit was called to active duty during Operation Desert Storm, where he was deployed to southwest Asia for almost a year. When he returned, Ellis finished an undergraduate program at The Citadel, in the military college of South Carolina. Ellis remained in South Carolina for the next eight years, where he worked as a deputy sheriff, and he held various positions in the grocery business. In 2002, Ellis and his family decided to make a major career change. He decided to attend law school at West Virginia University, graduating in 2005, and began working at Steptoe & Johnson in Morgantown. Industry Background At Steptoe & Johnson, Ellis practiced energy law,

Kevin Ellis , Vice President – Government Relations, Antero Resources,

10 OhioGas&Oil

focusing on coal and oil and gas, primarily doing titles and transactions. Initially when joining the firm, he spent his first few years as a new lawyer in record rooms researching title and writing title opinions. These actions proved valuable as he learned how to properly do title work. “It became apparent to me even back then, that energy law was the area of law you wanted to be in, in the Appalachian basin,” explained Ellis. “Timing is everything, it just so happened at the time when I joined the firm that energy law had a need and I had an interest, which made it a natural fit for me.” Ellis left Steptoe & Johnson and ultimately went on to work for one of his clients, Bluestone Energy Partners, a small producer based in Richie County, West Virginia. Bluestone was a family run business where Ellis managed landmen, oversaw land management and obtained new leases. “To me, the nuts and bolts of the energy business was understanding titles,” said Ellis. “It was fundamental and there is the old adage, ‘no lease, no grease,’ you have to find out who owns the rights to the lease. I wasn’t an engineer or geologist, so for me this was where I needed to be.” Ellis enjoyed working at Bluestone and got to wear many hats, including working on the permitting, developing drilling units, business development along with doing various legal work. Bluestone held about 40,000 acres of lease holds and drilled upwards of 150 vertical conventional wells and at one point, Bluestone had the most Marcellus wells of any other operator in WV, albeit all vertical wells. Branching into the Marcellus, vertical wells progressed into a drilling a few horizontal wells, and soon Bluestone’s assets became of interest to other operators. Antero Resources Antero Resources acquired Bluestone Energy in 2010. Ellis was retained by Antero to manage the land department in WV. Ellis’ background in lease negotiation, surface agreements and pipeline right of ways put him at the forefront of many deals involving conventional producer’s acreage. Ellis remained in this area for the Member continued on page 11

NOVEMBER 2018

Member continued from page 10

next four years, focusing on land, growth and helping with litigation and title disputes. After this time, Ellis began to work in the area of government and community relations and expanded this work to cover both WV and OH where Antero continues to have signifi-

â&#x20AC;&#x153;Streamlining unitization at the administrative level is a priority, as are timely orders. Getting a well drilled faster than you might be able to in another state or county, is really the name of the game, these companies want to get the wells put in the ground.â&#x20AC;? cant operations.Â Ellis helped to establish an official government relations branch within Antero and was promoted to vice president of government relations and still wears many hats. He covers government relations, community relations, landowner relations and oversees office administrative personal in the Marietta and Bridgeport offices. â&#x20AC;&#x153;There really are major opportunities for people that grew up in this region to be able to stay here, and work in a field that they like,â&#x20AC;? explained Ellis. â&#x20AC;&#x153;The oil and gas industry provides a variety of opportunities that can be really amazing for people that are willing to roll their sleeves up and work hard to get there.â&#x20AC;? Antero employs about 3,000 people, including all its employees and contractors. Ellis enjoys working for Antero because, even though it is a large operation, it still has a small company feel and allows him the ability to do a variety of work. He also respects the values Antero holds for its employees and the communities it operates in. Antero is heavily involved philanthropically with local food banks and among charities impacting children in need. Industry Overview Ellis got into energy law on the front end of shale development in the Appalachian Basin. He described seeing the industry shift and a change in fundamental players within the Basin. Conventional producers have and will continue to play a very important role in the industry in Ohio and elsewhere.Â Ellis commented that â&#x20AC;&#x153;Conventional and unconventional producers are aligned in many ways including the continued produc-

NOVEMBER 2018

tion of conventional wells to maintain HBP lease status even during very difficult economic times.Â As has been the history of the conventional industry â&#x20AC;&#x201C; most being family owned for generations â&#x20AC;&#x201C; they continue to look at their business and adapt to find new innovative ways to be competitive and profitable.â&#x20AC;? On some of the early challenges to Ohioâ&#x20AC;&#x2122;s unconventional shale producers, Ellis observed that, â&#x20AC;&#x153;Iâ&#x20AC;&#x2122;ve seen the industry from the earlier stages where it was really about justifying what we were doing, that we were safe and environmentally responsible, that we were impacting the economy by hiring local people. We overcame those hurdles. We got to a place where you finally put to bed some of the myths. This translates to the messaging, while we continue to evolve operationally, we now need to look at delivering on the value-added benefits of all of this production, how do we get to the downstream opportunities.â&#x20AC;? Ellis is optimistic that the regional alliance being built across the Appalachian Basin is in the interest of all producers and will provide new opportunities. Producers are finding ways to drill longer laterals and derive both cost and operational efficiency in their operations. Much of the positioning is starting to settle, and Ellis thinks most of the big deals are done or startTrends continued on page 15

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Ohio Oil and Gas Legend

Leaving a Legacy In Muskingum County Lyndsey Kleven | Ohio Oil & Gas Association Reserved in nature about his busiMuskingum County will always be a special place to J.W. “Bill” Straker. ness plans and sharing any operatHe has lived in Zanesville since 1925, ing techniques, those close to Strakand the area has afforded Straker a er describe him as the dictionary very good living, which he is gen- definition of work ethic. Often sacerously sharing back with the com- rificing family time for the business, Straker would do whatever it took munity. Straker grew up in Zanesville to provide for his family. He and his where his father owned and oper- wife Mary Helen had four children ated a local oilfield supply business called Zanesville Tool Company, later changed to Buckeye Supply. Straker earned a degree in petroleum engineering at Ohio State University in 1943. His real interest was not in the retail supply business, so in the early 1940s during his college years, Straker approached a local oil production company called National Gas and Oil for a summer job. When National said they were not hiring, Straker then offered to work for free just for the experience. The next summer he went back and National paid him fifty cents an hour. Buckeye Supply was a stable business and introduced Straker to the oilfield and his father’s business approach. In 1946 Straker founded J.W. “Bill” Straker the Oxford Oil Company. In its early years Oxford found success buying wells, salvaging equipment and and from a young age he instilled in finding oil in the clean out of old them the value of hard work. It was wells which allowed the company his way of life to empower others the ability to start drilling its own to want to improve themselves and wells. Straker was meticulous in his make it on their own. His only son operations, forward-thinking, frugal John took over Oxford with that and Oxford’s books were balanced same work ethic years later. Straker served as president and general to the penny. A longtime Oxford employee says manager of Oxford until he retired there was probably nobody in the in 1986. In addition to operating Oxford, state that was more forthcoming about paying its bills than Oxford. Straker remained involved with NaThe drillers could come in the day tional Gas and Oil. After getting his they finished a well and get their first taste of the industry there, Nacheck. That meant a lot to the peo- tional and Oxford did business tople working with Oxford and others gether regularly. When National’s president retired Straker became in the industry.

the president and CEO in 1973, and was elected chairman of the board in 1978, serving in that capacity until he retired in 1991. Through decades of successful drilling operations, ultimately becoming a top driller in the state, Straker became financially successful. Straker was a man of true integrity and unwaveringly devoted to his business operations; yet he kept his accomplishments to himself. Mighty Oaks Warrior Project Straker has never sought fame or recognition in his business dealings, and the same is true for his charitable giving. He simply feels it is most important that the benefits of his giving go back to the community where he was able to build his success. But after celebrating his 96th birthday he is now wrapping up his largest single contribution, a gift to intended to help veterans affected by war. In 1943 Straker had finished his petroleum engineering degree at Ohio State through an accelerated program. Immediately following he entered the U.S. Army Corps as a commissioned officer in the occupation of Japan after World War II. Though he is a veteran, the guiding reason he choose a project to support veterans was the need he saw and his desire to want to help do something about it. Over three years ago Straker discovered the California based Mighty Oaks Warrior Program when reading an article in Forbes magazine. The group’s mission is to help active duty military and veterans facing posttraumatic stress disorder. The program serves as a means of bringing together people who face similar issues and helps them focus on recovery and identifying their Legend continued on page 17

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NOVEMBER 2018

Ohio Court Refuses to Apply

Statute of Limitations in Lease Validity Dispute David J. Wigham | Attorney On October 4, 2018, ment in favor of the producers was Ohio’s Seventh District in error because the language of Court of Appeals is- a letter agreement which amendsued an important oil ed an oil and gas lease, both of and gas ruling, holding which were signed on June 9, 1991, that the statute of limitations did called for the release of undrilled not apply to bar claims brought acreage if three wells were not by landowners to cancel an oil and drilled before the end of the two(This gas lease that had already expired year primary lease term. type of lease clause is known as a at the end of its primary term. In Neuhart v. TransAtlantic En- “Pugh” clause.) It was undisputed ergy Corp., 2018-Ohio-4099, the that only two wells were drilled. Court reversed the trial court’s Therefore, the Court ruled that, ruling, finding that summary judg- pursuant to the Pugh clause, the

lease expired after two years as to all “undrilled acreage” and the oil and gas rights automatically reverted to the landowners. The Court reasoned that the statute of limitations did not apply since the landowners were in possession of the oil and gas. Statutes of limitations typically do not run against parties who are already in possession of property. The underlying lawsuit was filed on June 22, 2015, more than 22 years after the primary lease term Lease continued on page 14

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Lease continued from page 13

expired on June 9, 1993. The trial court, applying Ohio’s 15-year statute of limitations applicable to breaches of oil and gas leases, dismissed the landowners’ claims because the case was filed after the 15-year deadline. However, the Court of Appeals found the statute of limitations did not apply, since, under the Pugh clause, a reversion of ownership the minerals already occurred when the primary term expired in 1993, without the third well being drilled. As a matter of background to this ruling, it is helpful to understand how most oil and gas leases may expire over time and why it is important to be able to know if an old lease has expired. Under Ohio law, most oil and gas leases contain a primary term and a secondary term. The primary term is a period of years within which the producer must commence drilling operations in search of oil and gas, in this case, two years. The secondary term of an oil and gas lease is indefinite and extends the producer’s rights under the lease, usually for so long as oil and gas are being produced in paying quantities. If, after the expiration of the primary term, the conditions of the secondary term are not being met, then the lease automatically expires. A secondary term that continues for so long as oil and gas are found in paying quantities requires that oil or gas actually be discovered and produced in paying quantities. In other words, there must be actual production that generates a profit after operating expenses are attributed to the well. An oil and gas lease that is in its secondary term expires on the day the well stops producing in paying quantities. When an oil and gas lease expires, the oil and gas rights revert back to the landowner. Finally, most oil and gas leases in Ohio cover all geological formations. Therefore, production from one formation typically will indefinitely hold the lease as to all formations, not just the formation that is in production. More specific to the Shale boom, production from a shallow, less productive

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formation will usually hold the deeper, more productive Shale formations. While there is no disagreement over the basic principle that an oil and gas lease automatically expires when its lease conditions are not met, there has been much recent debate over whether a statute of limitations applies to bar a landowner from lawsuits to declare leases expired, and if a statute of limitations applies, which statute controls. Which statutes controls is key because that statute sets forth the length of the limitations period that bars these types of cases. Landowners typically argue that there should be no limitations period because leases automatically expire by their own terms, or conversely, that a longer limitations period should apply. Producers have urged courts to apply a shorter limitations period. The Seventh District Court of Appeals has issued prior rulings that applied various statutes of limitations to bar certain oil and gas cases brought by landowners. In the Neuhart case, the Court was urged to follow some of these cases. However, the Court ultimately found that none of its prior cases involved an oil and gas lease containing a Pugh clause, and “this clause governs the rights and duties of the parties regarding the undrilled property.” Thus, “the discussion of any statute of limitations is irrelevant.” The Utica Shale boom has raised the stakes as to the validity of old oil and gas leases. Many of these leases expired long ago and others are held by decades-old wells nearing the end of their productive lives. When leases expire, the landowner stands to benefit from the lucrative signing bonuses and greater royalty payments found in newer Shale lease. Conversely, if a local producer can operate its wells profitably enough to hold its leases in their secondary term, then the local producer may assign the valuable Shale rights covered by those same leases. Thus, there is new, intense scrutiny over whether oil and gas leases have expired over the years. This increased scrutiny has caused a flood of new lawsuits filed by landowners seeking to declare that old oil and gas leases have automatically expired. This is important to landowners with Shale acreage potentially covered by older lease. A careful review could reveal that the lease has expired. At the very least, a clock could be ticking on the time within which litigation must be filed to challenge the validity of an oil and gas lease based on lack of production. Therefore, landowners should not wait to file their lease validity claims, but instead should timely seek the aid of an experienced oil and gas attorney if they suspect their lease is no longer valid to ensure they do not miss an opportunity to terminate an expired lease and regain ownership of their minerals.

NOVEMBER 2018

Trends continued from page 11

ing to become more predictable. He pointed to the Chesapeake announcement as a recent big event that people have to take notice of, just due to the sheer size of its footprint. “The industry is in the middle of an infrastructure build out of pipelines that is necessary to get the region’s gas to the places that it needs to go. This is what is helping companies and operators still be able to produce in a low-cost environment, to get some production to outlets that provide a better return, which has a ripple effect on the economy of places where the gas is being produced,” described Ellis. “The end game that policy makers and residents want is now the downstream piece that encompasses manufacturing jobs, cracker plants and ethane storage hub.” The industry has changed over the years, yet it is still vibrant and important. Ellis feels the energy industry is the most exciting business to be in, bar none. Every day is different and brings new challenges to face and problems to solve, all in ways to make things better. Trends and Legislation to Watch Rules and legislation impacting the industry need to be closely monitored. Ellis is currently watching the development of new rules packages from ODNR, (including simultaneous operations, waste facility rules and spacing rules). “Anything we can do to help enable a producer to drill a well sooner is always helpful,” explained Ellis. “Streamlining unitization at the administrative level is a priority, as are timely orders. Getting a well drilled faster than you might be able to in another state or county, is really the name of the game, these companies want to get the wells put in the ground.” Another area of particular interest to Ellis is the dormant mineral act (DMA) in Ohio. As it currently stands, the DMA creates uncertainty in business and creates confusion around its application and process. Ellis is leading the OOGA DMA workgroup to help identify the issues and put forth possible solutions, rather than intolerably continuing to react on a case-by-case basis across every shale county. OOGA & Professional Involvement Ellis began to interact with the Ohio Oil and Gas Association early in 2012. As Antero grew its operations, Ellis grew his participation and involvement among the Association. Ellis has been on the OOGA Board of Trustees for the past two years and looks forward to continuing to work with all the other board members to advance OOGA’s common interest. “It all comes back to what policies and goals the Association will undertake to achieve. All of that is informed by a very experienced group of people and many of the board members have been in business in Ohio for generations,” said Ellis. “Companies like Antero that bring in people like myself, want to continue to learn from those experiences, to leverage those

experiences, so we can help each other achieve our business objectives.” Ellis likes being involved with the Association because it’s always good to have friends in the trenches. OOGA is a group of people who have and overall commonality of interest. The members are able to pursue those common goals together and show a unified front. Ellis feels OOGA has demonstrated effectiveness in this regard, in achieving successful legislative outcomes. Ellis’ experience working with and leading other oil and gas trade associations has brought an added value to the OOGA board. Ellis has recently served as a three-term president for the West Virginia Oil and Natural Gas Association (WVONGA), where he has served since 2013. He is currently the interim chairman of Energize West Virginia, the public education and outreach nonprofit affiliate of WVONGA. He is also in the middle of a three-year term serving as an elected board of director for the Independent Oil and Gas Association of West Virginia (IOGA WV), and also co-chairs its government relations committee. He is a board member of the Nature Conservancy of West Virginia, and on the board of the Chamber of Commerce, Harrison County, West Virginia.

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APPALACHIAN BASIN

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Natural Gas Power Plants Bring Major Investment, Jobs to the Appalachian Basin

Project

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Estimated Jobs During Construction

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State

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Lackawanna

Operational

1,500

$1,000

800

Panda Hummel Station

Snyder

Operational

1,064

$1,000

900

Caithness Moxie Freedom

Luzerne

Operational

900

$1,000

500

Panda Patriot

Lycoming

Operational

900

$900

500

Panda Liberty

Bradford

Operational

900

$900

500

CPV Fairview

Cambria

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1,050

$1,100

500

Hickory Run Energy Center

Lawrence

Under construction

1,000

$863

500

Westmoreland

Under construction

925

$900

600

Calpine York 2 Energy Center

York

Under construction

828

$800

650

Birdsboro Power, LLC

Berks

Under construction

485

$600

300

950

$800

500

Lackawanna Energy Center

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Renovo Energy Center, LLC

Clinton

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APV Renaissance Partners OPCO, LLC

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800

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250

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300

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600

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Trumbull

Operational

940

$890

900

Oregon Clean Energy Center

Lucas

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870

$800

900

Carroll County Energy

Carroll

Operational

742

$889

700

Middletown Energy Center

Butler

Operational

475

$645

350

Columbiana

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1,182

$1,300

1,000

Monroe

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485

$500

350

Guernsey Power Station

Guernsey

Construction tentatively to begin March 2019

1,650

$1,400

500

Harrison Power Project

Harrison

Permits issued

1,050

$900

600

Oregon Energy Center

Lucas

Permits issued

960

$880

1,000

Trumbull Energy Center

Trumbull

Permits issued

940

$865

900

9,294

$9,069

7,200

Moundsville Power

Marshall

Delayed

595

$615

400

ESC Harrison County Power Plant

Harrison

Delayed

630

$880

400

Brooke

Delayed

830

$800

1,100

2,055

$2,295

1,900

26,086

$25,347

17,800

South Field Energy Hannibal Port Power Project

Ohio Totals (10 facilities)

Brooke County Power

West Virginia Totals (3 facilities) Appalachian Basin Totals (29 facilities) energyindepth.org

16 OhioGas&Oil

NOVEMBER 2018

Legend continued from page 12

purpose moving forward. The program thrives on an experience-to-experience model where graduates of the program become group instructors, rooted in faith and providing an open forum not found in clinical environments. After sending his daughter Susan to visit the original site in California, it became clear to Straker that the Midwest was lacking this type of program and he has since focused his efforts on creating a facility capable of hosting the program in Ohio. He came up with the idea to build a site at The Wilds, a private non-profit safari park and conservation center just outside his hometown in Cumberland, Ohio. Straker has been a supporter of the Wilds from its inception and saw natural potential at this site. To implement the Mighty Oaks program at The Wilds, Straker is personally funding the construction of seven cabins, along with a community style lodge that will hold class and meeting rooms, a kitchen and laundry facility. The site is located on a beautiful lake, within a few minutes access to fishing, horse back riding and animal safaris, all within a purposefully isolated setting that has very limited Internet access. The combination of these factors are an advantage to the program that host groups for up to a week, the easy access to activi-

Barb and John Hykes of Hilliard sit on adirondack chairs outside the newly-opened Straker Lake cabins at The Wilds before a ribbon-cutting ceremony on May 23. ties are key to helping attendees quickly establish rapport. The Wilds is also directly benefitting by allowing this program, with rights to rent out the site for public Giving Back continued on page 18

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OhioGas&Oil 17

Giving Back continued from page 17

use when it is not occupied by Mighty Oaks. Giving Back In the late 1980s the notion of starting a foundation was something that Straker began considering. In 1994 the J.W. and M.H. Straker Charitable Foundation quietly became a reality. Straker and his wife created the foundation and their daughter Susan Holdren was chosen to direct it. Since then the Foundation has given numerous charitable grants to fund capital projects throughout Muskingum County in excess of two million dollars to date. Most of these the contributors has remained anonymous to the public. Straker’s ultimate view is that he made his money in Muskingum County and the area has afforded him a very good living. He feels strongly that the benefits of that money should stay in the community. The Straker family is encouraged to sit on the board of the charitable foundation, which all of the children do and his grandchild are also welcomed with the stipulation that they must be college graduates or over the age of 25. It has been extremely important to Straker to start the foundation and his children have encouraged it in order to help guide them in where they want their funds to be distributed. Straker’s view of his legacy is replicable to that of the Warren

Buffet mantra of giving your child enough to live, but not so much that they do nothing. In running the foundation, Holdren said there have been some surprises along the way on what her parents want to put their money into. The projects lean towards being mostly brick and mortar, with primary focus areas in education, the arts and children. There are always more projects than there is money, and they have set guidelines for choosing projects. Requirements of accepting a grant from the foundation considers the narrative of what to accomplish, how it will be evaluated and reported on the following year. The project with Mighty Oaks strays a bit from the foundation’s typical focus areas of giving, and is one that Straker has personally led. The foundation has participated in the project, but the majority of the funding has come solely from Straker himself. It is something that is dear to him and he is willing to openly talk about. This fact alone has allowed for some added publicity, in hopes of reaching more veterans. His family is proud of the legacy he is leaving personally as well as professionally and leaving a mark unlike many people are able to do; all in thanks to hard work in the oil and gas industry and smart judgment.

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OHIO WELL ACTIVITY by the numbers

UTICA SHALE

MARCELLUS SHALE 16 6 7 23

Wells Permitted Wells Drilling Wells Drilled Not Drilled Wells Producing Inactive Plugged Total Horizontal Permits

Data as of 10/6/18

476 115 273 2033

2897

Wells Permitted Wells Drilling Wells Drilled Not Drilled Wells Producing Inactive Plugged Total Horizontal Permits

Source: Ohio Department of Natural Resources

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TOP COUNTIES WITH HORIZONTAL DRILLING ACTIVITY BY NUMBER OF SITES

1. Belmont County........ 593 2. Carroll County......... 526 3. Monroe County........ 454 4. Harrison County....... 423 5. Guernsey County...... 238 6. Noble County.......... 224 7. Jefferson County........196 8. Columbiana County...159 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 9/1/18

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