As Ohio clamps down on clean energy, recent changes make it easier to force landowners to allow oil and gas drilling | Energy News Network (2024)

Ohio has seen a big jump in the number of agency orders forcing property owners to allow oil and gas development on their land, whether they want it or not.

The number of so-called “unitization” orders issued by the Ohio Department of Natural Resources has surged in recent years, peaking at 112 in 2022 and continuing at nearly 100 last year, according to data obtained from the agency by the Energy News Network.

The practice is common, with rules varying by state. In Ohio, lawmakers began working to streamline the process for oil and gas companies in 2019, coinciding with a decline in the state’s gas production after a seven-year fracking boom.

Those changes run contrary to other efforts in Ohio to restrict energy development in the name of neighbors’ private property rights, including strict wind farm setbacks passed in 2014 and a 2021 law allowing counties to block new wind and solar projects.

Under Ohio law, companies must meet several conditions before initiating unitization, including a showing that at least 65% of property owners in a project area consent to drilling.

Critics say the process was already tilted in the companies’ favor, and that the recent changes will make it even harder to block drilling or negotiate concessions.

“All the cards are stacked against us,” said Patrick Hunkler. In 2018, ODNR issued an unitization order for property he and his wife, Jean Backs, own in Belmont County, which is one of the state’s top-producing counties for oil and gas. The developer later canceled the project, so the order was revoked. More recently, Ascent Resources had tried to lease their land before backing out.

The legal process known as unitization has been available to Ohio oil and gas companies since 1965 but was rarely used until about a decade ago, after advances in drilling technology made it profitable to tap into harder-to-develop pockets of petroleum.

“The unitization process exists to protect the rights of those … who want to lease their minerals for development,” said Rob Brundrett, president of the Ohio Oil and Gas Association, “so that a small minority of owners … cannot stop everyone else from realizing the full potential of their property and minerals.”

For petroleum companies, the process has also promoted efficient oil and gas extraction. Otherwise, reduced pressure from too many wells could reduce the total recovery from an area.

Companies must show they have consent from owners of 65% of the area above a common oil and gas deposit before they can seek a unitization order. Companies also must show they tried to reach an agreement with holdouts, and that drilling under those properties is necessary to substantially increase the amount of oil and gas recovered. Any added value must also exceed the related costs.

“Our experience at the unitization hearing was that oil and gas runs the show,” Backs said.

Hearings don’t consider environmental impacts or other reasons landowners might not want drilling and fracking. “It’s just not part of the evaluation,” said Heidi Robertson, a Cleveland State University law professor who has written about unitization. Rather, she said, the basic question is: “Will adding this land to the unit make it easier for the developer to more efficiently and more profitably get the oil and gas out of the ground?”

The answer is almost always yes.

The Ohio Department of Natural Resources has denied only one unitization application since 2012, according to spokesperson Andy Chow. Meanwhile, it has approved more than 500 applications, with more than half the orders issued after 2020. The agency hired an additional employee in 2021 to deal with an increase in applications, Chow said.

Owners whose property is unitized won’t have pads or roads on their property, but they still get royalties and other payments. Ohio law requires “just and reasonable” compensation for landowners.

In most cases that compensation starts with a 12.5% royalty. Additional payments are adjusted for the developer’s expenses and other factors and the compensation is often smaller than that for voluntary participants. Orders typically have let companies recoup twice those amounts before unitized landowners can get payouts beyond royalties, said attorney Matthew Onest, whose firm has represented multiple landowners in oil and gas matters.

In some cases, property owners must wait even longer. At a March 27 hearing, for example, drilling company EAP Ohio asked for a “500% penalty” for owners who did not agree to a lease. Anna Biblowitz, a negotiator for Encino Energy, claimed the higher penalty was justified by the developer’s risk and “as a motivator for other working interest owners to participate.” A ruling in the case is due this month.

Why are there more orders?

Some property owners, including Backs and Hunkler, worry about climate change and other environmental impacts. They said companies wouldn’t agree to requested lease terms for no flaring, methane monitoring and monitoring of the spring on their property.

“These oil and gas companies aren’t addressing the important issues of our environment,” Hunkler said.

Other landowners may hold out because they want more money, said Onest. “They kind of dig their heels in,” he said.

Industry experts said market forces could partially explain the rise in unitization cases. Property owners could hold out more often because they want higher payments like others got early on in the state’s fracking boom. Or, higher oil prices might be motivating companies to pursue projects that once seemed too complicated to be worthwhile.

State officials have made the process easier, too. In 2019, lawmakers added language about how to calculate the 65% threshold, tucking the terms into a 2,600-page state budget law. Matt Hammond, who was then president of the Ohio Oil & Gas Association, told lawmakers the added language was meant to “clarify” the law.

In practice, the change likely lowered a barrier for companies to use the tool, according to Clif Little, an Ohio State University Extension educator in Old Washington, Ohio. “If you’re seeing actually more [cases] for forced unitization, that would be a significant player in that,” Little said.

Another law passed in 2022 requires the Ohio Department of Natural Resources to hold hearings on unitization applications within 60 days. The agency must rule within 60 days of the hearing, and also let companies know in advance if an application is incomplete.

For industry, the primary benefit from the 2022 law change was to get certainty about timing. “This impacted how a producer was able to plan their drilling schedules,” said Mike Chadsey, director of external affairs for the Ohio Oil and Gas Association.

The Ohio Department of Natural Resources also changed its guidelines last year to standardize unitization applications. The agency’s website said the changes were “aimed at streamlining the review process” and that applications would include fewer documents.

Among other things, companies don’t need to file testimony from engineers, geologists and landmen in advance of hearings — something they had generally done in the past, said Robertson at Cleveland State. In her view, that further limits any dissenting landowners’ ability to prepare challenges to such testimony when the hearing does take place.

The Covid-19 pandemic also affected unitization hearings, which are now generally held via Zoom. “Allowing these meetings to be held via Zoom is a benefit to all parties involved,” Chadsey said, adding that it’s more convenient for landowners.

Folks in “suits and ties” had to come from out of state when ODNR held the unitization hearing for Hunkler and Backs’ property back in 2017. With a remote format, though, the hearing panel and company personnel “don’t have to look at you in person,” Hunkler said.

Oil and gas companies said they take every step to avoid forced leases, but that unitization is an important tool when that is not possible.

“When those means are exhausted, which often includes situations of poor record-keeping or the inability to locate an owner, unitization can be a tool to ensure property and mineral rights are realized by all stakeholders,” said Zack Arnold, president and CEO of Infinity Natural Resources.

Jackie Stewart, vice president of external affairs for Encino Energy, voiced a similar position. “Encino makes every attempt to lease all landowners in each unit and only utilized unitization after all leasing efforts are exhausted, so the property rights of Ohio’s landowners can be realized,” she said.

“This isn’t something any lawyer can handle. You have to be an expert in this stuff,” Robertson said. “And all the experts are on the other side, because that’s where the money is.”

Robertson is unaware of any legislation to make matters fairer for landowners who don’t want to lease their land. And gerrymandering makes it unlikely such bills will be passed anytime soon. As she sees it, the process is “stacked against the dissenting landowner.”


As Ohio clamps down on clean energy, recent changes make it easier to force landowners to allow oil and gas drilling | Energy News Network (2024)


As Ohio clamps down on clean energy, recent changes make it easier to force landowners to allow oil and gas drilling | Energy News Network? ›

As Ohio clamps down on clean energy, recent changes make it easier to force landowners to allow oil and gas drilling. Streamlined legal requirements and economic factors explain the jump in orders since 2020 to let petroleum companies drill on dissenting owners' land.

What is the Ohio clean energy policy? ›

Originally, Ohio's utilities were required to generate 12.5% of their energy from renewable sources by 2022. HB 6 pushed the deadline to 2026 and lowered the standard to just 8.5% – the lowest in the U.S. out of all states with renewable portfolio standards.

Is fracking allowed in Ohio state parks? ›

The law — which requires the Ohio Department of Natural Resources to allow fracking for natural gas in Ohio's public lands and state parks — went into effect in April 2023.

What are the Ohio energy goals? ›

Ohio Renewable Energy Goals

The state's Renewable Portfolio Standard (RPS) mandates that by 2026, 8.5% of electricity sold by Ohio's electric distribution utilities and electric services companies should be generated from renewable energy sources.

Who regulates fracking in Ohio? ›

The ODNR-DOGRM regulates the location, spacing, construction, design and operation of oil and gas wells in Ohio under Chapter 1509 of the Ohio Revised Code (ORC) and Chapter 1501 of the Ohio Administrative Code (OAC).

What is the Ohio energy law? ›

As written, 12.5% of a utility's electricity mix must come from renewables by 2024, half of which must come from in-state facilities. And 0.5% must be solar. In the same bill, the state created an “Energy Efficiency Resource Standard” requiring utilities to reduce demand by 22% by 2025 relative to 2009 levels.

Is Ohio deregulated electricity? ›

But in July 1999, Ohio restructured its energy market with Senate Bill 3 (SB3) to give consumers choice with their energy provider. Thus, marking the beginning of a deregulated electricity system in Ohio.

Are they drilling for oil in Ohio? ›

In Ohio, the first producing Utica-Point Pleasant well was drilled in 2011 and currently there are approximately 925 wells drilled to this prolific oil-and- gas producing horizon.

What is the number one state for fracking? ›

1. Texas. Texas is situated over parts of numerous basins (Anadarko, Palo Duro, and Permian) and shales (Barnett, Eagle Ford, and Haynesville-Bossier). At the end of the 20th century, when natural gas was giving Texas its second oil boom, Anadarko Basin provided the largest output of natural gas anywhere in the U.S.

What happens when you ban fracking? ›

As this report concludes, a ban on hydraulic fracturing — a practice that has been used for over 50 years in the United States and other countries — would result in the loss of millions of jobs, price spikes at the gasoline pump and higher electricity costs for all Americans.

What is the main source of energy in Ohio? ›

Ohio is among the nation's top 10 electricity producers and one of the top 5 electricity consumers. Natural gas fuels the largest share of Ohio's total electricity net generation. In 2022, it supplied more than half of the state's power.

What is Ohio's main source of income? ›

Industries. Ohio's two largest industries by percentage of GDP are manufacturing and financial activities, respectively.

What is the best renewable energy for Ohio? ›

Wind Energy in Ohio

Ohio's landscape offers significant advantages for wind energy exploitation. The state boasts an installed wind capacity of 1,100 MW as of mid-2023, positioning it among the top states for wind power.

Can I drill for oil on my land? ›

Mineral rights owner do not need the permission of a property rights owner to access the oil beneath the property. The government of some few countries has the right over all mineral resources – including oil – in these countries. In the United States, it is possible for private individuals to own mineral rights.

Do I own my mineral rights in Ohio? ›

You may have title to mineral rights on a property you own, or they may have been sold or leased by a prior owner, in which case they may not be yours to sell. Real estate law firms can research your chain of title to determine if the mineral rights transferred from owner to owner.

Who owns a gas well in Ohio? ›

The owner of the estate of tract, on which the well is located, owns the well. In other words, the person(s) signing this form must own the property and the right to appropriate the gas for their own use. The well must be primarily used to provide gas for the owner's domestic use.

What is the clean energy rebate in Ohio? ›

In 2022, the credit is 30% of the total expenses, up to a lifetime maximum of $500. From 2023 through 2032, the credit is also 30%, but up to a maximum of $1,200 (with the exception of biomass stoves and boilers, which have a separate annual credit limit of $2,000) and with no lifetime limit.

What is clean energy policy? ›

California's RPS is among the most ambitious clean energy policies in the nation. The RPS requires electric utilities and other load-serving entities to procure increasing amounts of renewable energy to serve customer demand.

What is the Ohio energy efficiency Program? ›

The ELF program provides energy efficiency upgrades on projects to existing structures and serves eligible entities such as non-profits, schools, hospitals, local governments, as well as manufacturing and non-manufacturing businesses. Additionally, a set-aside portion of ELF funds is for Ohio K-12 public schools.

What is the clean energy Act? ›

The Clean Energy and Pollution Reduction Act (Senate Bill 350) established clean energy, clean air, and greenhouse gas (GHG) reduction goals, including reducing GHG to 40 percent below 1990 levels by 2030 and to 80 percent below 1990 levels by 2050.

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