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Thursday, June 28, 2012

UPDATED: Buell Well the Golden Goose of Utica Shale Production to Date, But Court Battle May Take Some Shine Off

UPDATE:  View the motion filed for a permanent injunction by Kenneth Buell right here:






ORIGINAL ARTICLE FROM 6/20/12:


The story of the Buell well in Harrison County is an ongoing saga.  For those who may not be aware of what is happening, here are a couple of things to help you get up to date.  The legal battle that is going on here is something that may be of interest to landowners who are getting squeezed out of lease payments because they don't hold mineral rights to their property.

First, a March story from the Akron Beacon Journal (read the whole article here):
In Ohio’s Harrison County about 40 miles southeast of Canton, the picturesque landscape is that of post cards. 
Unpaved roads roll over slopes and through woods of the Appalachian foothills where farmland gives way to hunting clubs and state forests. 
Kenneth Buell bought 243 acres here in 1979. A 73-year-old farmer from suburban Columbus, he leases the land to a friend who grows hay for livestock. 
Buell won’t say how much he makes on the lease, and that he doesn’t want to be a millionaire, but he thinks he could make more. Lots more. 
A little over a year ago, an Oklahoma City company moved onto his land with a drilling rig, punched a hole about 8,000 feet deep and more than a mile horizontally and opened what so far is the biggest oil and gas find in Ohio’s new energy boom. 
Some estimate that the volume of gas, oil and byproducts could be worth $41,000 in royalties each day. 
In the industry it’s known as “The Buell well.” 
But in spite of it bearing his name, Buell gets nothing. 
Like many other landowners in Ohio, the Utica shale energy bonanza is passing him by. He doesn’t own the mineral rights. 
So, when drillers with mineral rights show up on private property, they build a road, clear the land and pour a concrete pad. The owners have little recourse. 
“They never notified me. They just went in and started drilling,” Buell said.
Also in the same article:
The Jewett fight 
The Buell well made news last year after the company reported its peak production at 9.5 million cubic feet per day and 1,425 barrels of natural gas liquids and oil — the equivalent of 3,010 barrels of oil — per day. 
For comparison, an average Ohio well produces only 50,000 cubic feet of gas and less than one barrel of oil daily. 
Health problems and limited resources have kept Buell from mounting a fight. 
“They knew I was just a little guy and couldn’t do anything to stop them,” he said.
But that’s not the case for everyone. 
In November 2011, Chesapeake cleared about 15 acres of trees, alfalfa and other crops from another Harrison County property with the intention of drilling on land owned by the Jewett Sportsmen & Farmers Club. 
The club filed suit Dec. 7 seeking an injunction against the drillers. 
Gregory Brunton, the club’s lawyer, cited a 21-year provision in the deed that limited how long the mineral rights owner had to drill “through and under” the land. Buell has an identical provision in his deed. 
The provision allows them to drill straight down, but Harrison County Judge Michael K. Nunner says the “through and under” clause prevents a horizontal bore to other properties. 
That’s the key in the Utica shale boom — the ability to drill down and then horizontally for a mile in any direction, inject water and sand under high pressure, fracture the shale and break loose the gas, oil and byproducts. 
“It was up to the judge to interpret language in the deed that on one hand gave Chesapeake certain surface rights, but on the other hand there was language in the deed that limited those surface rights,” Brunton said. 
Nunner ruled that the 21-year provision did not restrict the company’s “right to use the surface of said premises to the extent necessary to remove the mineral assets.” 
But he also said that the through-and-under provision was written during the coal-mining era to “prevent the subject premises from being used as the removal site for coal [and other minerals] mined outside the subject premises” — even if the mineral rights owner might be the same.
In this case, North American Coal owns rights across many of the boundaries. 
Chesapeake can drill on the club’s land for the minerals underneath, but it cannot drill horizontally to other properties without the sportsmen’s club’s approval. 
“It certainly lends support to people who might want to be compensated for the use of their surface, particularly if they have similar deed language,” Brunton said. 
The coal company has asked Nunner to reconsider his order, saying it conflicts with state efforts to encourage development of shale gas.
So that was the situation then, with the club getting an injunction based on the "through and under" clause.  A fairly significant legal ruling, actually.

In May, Kenneth Buell joined into the ongoing court battle between Chesapeake and Jewett.



The decision rendered in this case could have an impact on many Ohio landowners, and it also must be a frustrating thing for Chesapeake to be addressing in light of their many other difficulties.  Even the Buell well, which they have hailed as a harbinger of the success to come in the region, is now the source of more headaches for them.

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