Utica and Marcellus shale: Landowners seek court ruling on the legality of holding land

ADENA, Ohio — Two Jefferson County landowners are seeking a summary judgment in U.S. District Court, Southern District of Ohio, Eastern Division, on a joint lawsuit they filed last year against the Hess Energy Corporation. The case involves oil and gas leases they signed five and six years ago with the Mason Dixon corporation.

Landowners

David E. Cameron, and Stephen J. Griffith and Melissa D. Griffith filed the original joint lawsuit in January 2012. Cameron owns approximately 166 acres in Jefferson County and the Griffiths own approximately 228 acres in Jefferson County as well. The Griffiths signed their lease in 2007 and Cameron signed his lease in 2008, both with the Mason Dixon Corporation. The Mason Dixon leases were sold to Hess Energy in 2011.

Invalid leases

Like similar lawsuits filed over oil and gas leases, both Cameron and the Griffiths claim the leases are invalid. According to the lawsuit, Cameron signed his lease without a notary present, and Stephen Griffith claims in the lawsuit he was told to sign his wife’s name without her present. The landowners also claim the leases are fraudulent because they were never told about the potential Utica and Marcellus shale drilling. Instead, they understood the leases to be for the traditional Clinton wells.
No wells have been drilled on either property since the leases were signed.

Delay rentals

What the landowners are most upset about is the ability to hold their property through the delayed rentals without production. In essence, their land could be held without drilling for 10 years after they signed the leases. According to the lawsuit, the Cameron lease is now in the delayed rental stage and the Griffiths’ lease has ended the primary term and is now entering the delayed rental term.

The outcome of the lawsuit could affect many landowners in Belmont, Jefferson and Harrison counties who signed leases with the Mason Dixon Corporation before the potential of the shale boom was public knowledge. Some of the landowners leased their land for as little as $5 or $20 like the Griffiths and have been waiting to get out of the lease as they have been entering the extended term on many leases.

Both Cameron and the Griffiths were supposed to receive $100 per acre of the delay rentals after the initial term of the lease expired. Although the checks have been issued to both landowners, they are not cashing them.

However, a statement in the lease agreement is what the Griffiths and Cameron are banking on that can help end the lease now rather than waiting for the delay rental or lease extension to expire.

According to the lawsuit, the lease states “if operations for drilling are not commenced on the leased premises or on acreage pooled therewith, on or before twelve months from the date (June 14, 2007 in the Griffiths’ case), this lease shall then terminate as to both parties unless lessee (Mason Dixon), on or before the expiration of the said period, shall pay or tender to lessor the sum of $100 per mineral acre of the associated lease, hereinafter the called the ‘delay rental,’ which shall extend for 12 months the time within which drilling operations may be commenced.”

Summary judgment

Earlier this month, the three landowners filed a motion in the federal court asking for a summary judgment. A summary judgment in the case is expected within a couple of months. According to the lawsuit, Cameron and the Griffiths are asking for an answer from the judge on the legality of the lease(s) and the law itself. They are asking what their rights are according to the terms of the lease instead of a lawsuit that would involve depositions and a lengthy court battle. This will make this case proceed faster than others.

In a summary judgment, the landowners are questioning the terms of the lease and asking that it be declared void. Cameron and the Griffiths are asking the court to determine what a reasonable time period would be for the company to begin drilling. They are asking that their land not be held by the leasing company without production.

According to the landowners, they feel it comes to the primary term limit and not the additional time, as the company claims.

The lawsuit seeks to create a precedent that would stop leasing companies from holding the land beyond the primary term without drilling. Both landowners are seeking the right to cancel the lease or put the land into production.
Cameron and the Griffiths are seeking in excess of $25,000 and an injunction that would stop Hess Energy from drilling on the property.

A phone call was placed to Hess Energy seeking comment, but they declined.

About the Author

Kristy Foster Seachrist lives in Columbiana County raising sheep and horses. She earned her degree from Youngstown State University and has worked in both print and broadcast journalism. You can follow her on Twitter at http://twitter.com/fosterk96. More Stories by Kristy Foster Seachrist

5 Comments

  1. pete elder says:

    I beleive the article mis-quotes the delay rental amount of $100.00/acre/year to actually be $1.00/acre/year. The premise of the Lessee (the Oil company holding the lease) utilizing a “delay rental clause” in an oil & gas lease has been utilized for over 100 years. It’s purpose is to defer the drilling until the next anniversary date of the lease. It allows the Lessee to choose to develop/drill wells according to their priority.
    Refusing the payment or not cashing the check doesn’t impact the validity of the lease.
    The purpose of a notary acknowledgment is to “acknowledge” the proper parties signed the lease in the presence of a notary. Having signatures “acknowledged” is a requirement for recording a document, however the lease/document is entirely “valid” without being acknowldged or recorded. Recording a document only “gives the public proper notice” that such a document exists.
    The Lessors have a WEAK arguement and the attorney that represents them should take this case “pro-bono” if he’s so certain of its outcome. Otherwise, I equate his representation for a fee to stealing candy from an idiot.

    • One thing that all landowners have to remember is that every lease is different. I rarely see two leases that are exactly the same. Every parcel is different and every company is different. What one landowner agreed to is not what another may have agreed upon. The story did not misquote the amount paid for delay rentals.
      In this case, the lawsuit states (on page 11) that the delay rental is $100 per mineral acre included in the lease.

  2. Steve Harding says:

    You are incorrect Kristy. The delay rental is not $100/ nma in both these leases. The leases are recorded at the courthouse, check it out.

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