Landowners Sue Over Held Leases

July 2, 2012
By CASEY JUNKINS - Staff Writer , Shale Play

ST. CLAIRSVILLE - Citing a lack of permission to drill for oil and gas in Belmont County because of coal interest objections, Zanesville, Ohio-based Oxford Oil Co. wants to extend several leases without paying the landowners.

However, the southern Belmont County landowners are suing Oxford in an effort to release themselves from the contracts that would only pay them $5 per acre at 12.5 percent of production royalties, far below current market value.

The landowners' attorney, Tracey Lancione Lloyd, said Oxford should have known about Murray Energy's right to object to drilling in a coal bearing township like Wayne - and should not be able to hold leases because of the company's inability to receive permission from the Ohio Department of Natural Resources to drill there.

"The damages to the plaintiffs can be substantial because of the significant market changes," said Lloyd, noting amounts offered for natural gas and oil drilling in Belmont County have now gone at least as high as $5,000 per acre and 19 percent of production royalties.

Jesse Beamer signed a low-priced lease with Oxford on Sept. 26, 2006, for land in Wayne Township, Belmont County. According to the complaint, this lease was to expire on Sept. 26, 2011, if no drilling activity had taken place by then.

The complaint states on Sept. 23, Beamer received an "Affidavit of Facts Relating to Title" alleging the lease with Oxford should simply continue under the concept of force majeure, which is often defined as "an event or effect that cannot be reasonably anticipated or controlled." The definition also indicates an idea of a "superior or irresistible force."

Lloyd said Beamer and her other clients will receive no additional lease bonuses if Oxford is permitted to extend the leases under this method.

According to the complaint, another letter sent to Beamer states Oxford is declaring force majeure because "the state of Ohio would not issue a drilling permit due to a Murray Energy objection."

"The coal issue has been in place for a long time; they should have known about it," Lloyd said of Oxford.

Ohio Department of Natural Resources records show the agency has issued several drilling permits to Oxford, many of which are in the vicinity of Murray's coal mining operations at Powhatan No. 6 Mine and the Century Mine. The Century Mine straddles the border of Belmont and Monroe counties, with much of the Belmont County portion lying in Wayne Township.

Robert Murray is the founder and chief executive officer of Murray Energy Corp., the parent company of American Energy Corp.'s Century Mine and Ohio Valley Coal Co.'s Powhatan No. 6 mine in southern Belmont County, as well as the OhioAmerican Energy Inc. Red Bird West mine near Brilliant. He has said he does not want to stop oil and gas drilling in eastern Ohio, as he said he wants to see his friends and neighbors profit from the oil and natural gas leases they have signed with companies like Chesapeake Energy, XTO Energy, Gulfport Energy, Hess Corp. and Oxford.

Documents provided by Murray show that from March 2005 to March 2012, gas and oil companies applied to drill more than 60 wells in the area of his local coal mining operations. Most of these were free to proceed with no objections from Murray, while a few needed to be moved to avoid the coal mines.

Only four out of more than 60 well drilling operations since 2005 were unable to proceed at all because of Murray's objections, his records show. However, three of these are for Oxford permit applications in in Wayne Township.

"There are many areas ... where gas and oil wells can be sited without objection of our longwall mining companies," Murray wrote in August to the ODNR. "Again, directional wells may be drilled horizontally beneath any of our ... longwall panels laid out for mining. We are only concerned with the penetrations of our coal seam."

Lloyd said Oxford has until June 29 to file a response to the complaint recorded in the Belmont County Court of Common Pleas. Oxford officials directed requests for comment to their attorneys, who could not be reached.

 
 

 

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