Ohio landowner misses out on Utica shale bonanza

by Chris Cotelesse

for TheNewsOutlet.org

Originally published in the Akron Beacon Journal March 17, 2012

The "Buell" well is Ohio's most producing natural gas well, generating royalties estimated at more than $40,000 per day. (Photo by Doug Livingston for TheNewsOutlet.org)

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.

Former coal country

Buell’s thinning hair is white and usually covered by a ball cap that sops up the sweat from planting, tending and harvesting crops on additional land he owns in Delaware County.

After four back operations and three heart surgeries, he says he was in such bad shape, “We had the casket and the pallbearers chosen.”

He leased the Harrison County land to a friend who grew hay to feed livestock, but he says Chesapeake Energy LLC of Oklahoma City is holding his 243 acres, and won’t let him use it.

“I still got to pay real estate taxes on it. I still got to pay insurance on it. And I can’t even harvest any hay. And that part just doesn’t seem right,” Buell said.

It’s not a situation he ever imagined. This area was once coal country.

Coal companies began buying the hills of Harrison County in the early 1940s to gain access to a vein known as Pittsburgh No. Eight. Over the next two decades, the North American Coal Corporation of Plano, Texas, acquired much of the surface land and the mineral rights, both through land deals and acquisition of other companies.

By the 1960s, coal mining was in decline. The company began to sell off the surface but retained the mineral rights. It kept more than 3,000 acres in Archer Township, where Buell has his farmland.

David Straley, spokesman for North American Coal, said its policy is not to comment on the business practices of the company, its clients or associates.

In 2009, the company leased the rights to the Mountaineer Natural Gas Co. of Washington, Pa., which later transferred the lease to Chesapeake.

Chesapeake is the nation’s second largest producer of natural gas and the largest player in Ohio’s Utica shale development. The company declined comment for this story.

It was a Chesapeake unit — Ohio Buckeye Energy LLC — that showed up with the drilling rig.

“It was coal country, and the coal had basically been stripped,” Buell said of his purchase more than 30 years ago. “You didn’t think about a hundred years down the road.”

Now, everyone is paying attention.

Landowners regularly walk into the Harrison County courthouse in Cadiz wanting to know who owns the dirt under their homes. The clerks point them to the timeworn stacks of deeds that line the walls.

They fight for table space with landsmen — employees of energy companies such as Chesapeake who research land ownership and tax liens. For the last two years, they’ve crowded the narrow halls of the courthouse. They can be found each business day sifting through the tomes of public records or clacking away on laptops.

What they’ve learned is that North American Coal owns much of the mineral rights and is leasing those rights to drillers that clear the land and build well pads, sometimes over the objections of the surface owners.

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.

State lands unprotected

Ohio taxpayers might not be as fortunate as the sportsmen’s club.

Bethany McCorkle, a spokeswoman for the Ohio Department of Natural Resources, said the state would not allow drilling in its parks.

However, the deeds to a combined 3,428 acres of state forests in Harrison and Jefferson counties do not have the “through and under” clause, which would allow drillers to bore horizontally under state lands without permission.

In addition, North American Coal has easements on state land for such things as power and telephone lines, other utilities and for storage. The language gives the company “the right of ingress and egress [a way in and out] at all times for the purposes of drilling,” according to the deed.

No gas wells yet exist within the boundaries of the forests, but Hess Ohio Resources LLC operates a well just a quarter mile south of the Fernwood State Forest. The horizontal drilling process allows the company to take the natural gas from beneath the land without touching the surface.

Wells can reach about a mile horizontally. To get at all the natural gas from outside the state forest, drillers would have to build several well pads around the perimeter.

It would be much more cost effective to build one well pad in the center of the forest and drill horizontal wells in several directions.

State officials say they will not allow that.

“The state has no intentions of allowing surface activity or access in the park, so there would be no impact to the forest,” McCorkle said.

Time to negotiate

For now, the Jewett Sportsmen & Farmers Club is satisfied with the court’s decision. It brings Chesapeake back to the bargaining table, but club president John Harris believes it may be too late for the outdoorsmen.

“The existence of the club for its intended purpose has been threatened. The loss of acreage and wildlife has caused immediate and irreparable harm to the club and its members,” he said in an affidavit filed with the original complaint.

And Buell, too, has suffered losses.

He tries not to let the situation bother him. Having come so close to death, he wants to enjoy the rest of his life with his family.

As long as he is able, he’ll make the trip to Delaware County when the weather turns warm to work his fields.

“I ate breakfast this morning, and I think I’ll eat breakfast tomorrow morning,” Buell said. “I’m not here to be a multimillionaire. I’d rather see everybody have a little.”

The NewsOutlet.org is a collaborative of the Youngstown State University journalism program, Kent State University, the University of Akron and professional media, including WYSU-FM Radio and the Youngstown Vindicator, the Beacon Journal and Rubber City Radio of Akron.

Read a Columbus Dispatch article, which was published a month later and shares some remarkable similarities, here.