NiSource, Ohio and Pa. land owners still assessing terms of partnership


By Chris Kick and Kristy Foster

SALEM, Ohio — Land owners who have existing oil and gas leases with Columbia Gas continue to assess a decision announced July 9 that the company would pursue the development of the oil and gas in the Utica shale in northeast Ohio and western Pennsylvania.

They were notified through letters and a press release that Columbia Gas, a subsidiary of NiSource Gas Transmission and Storage, has partnered with Hilcorp Energy Co., based in Houston, to conduct activities related to natural gas extraction and transportation in Ohio and Pennsylvania.

According to NiSource, conditions of each lease would be the same as when they were signed, or amended, if any amendments were included.

“Residents will receive royalty payments per the terms of their lease, which vary among the landowners,” said Chevalier Mayes, communications manager for NiSource. “Any given lease may contain different terms from other leases as the result of negotiations that took place at the time of grant, or as a result of later amendments.”

Property owners with current leases through Columbia Gas have expressed concern, the past couple years, that their leases could be outdated and “inadequate” for the modern drilling practices, which involve hydraulic fracturing and at a much deeper depth, for a resource that was unavailable when leases were signed.

Many of the existing leases date back 40 or more years.

NiSource said it is willing to work with community leaders and property owners who have questions about the production process, but that previous leases are binding.

Other options?

Several land owner groups within northeast Ohio were formed in part to address what they felt were unfair leases. One of the largest, the Mohican Basin Land Owners Association, represents about 100,000 acres, 40 percent of which is bound by an existing lease.

“They are unsatisfactory in terms of protection of our land and our water because of the new technology for drilling these big horizontal wells,” Clark Sprang, the organization’s vice president, told Farm and Dairy in fall of 2011.

The land owner group said it is still reviewing the partnership with NiSource and Hilcorp and declined to answer questions about negotiations or potential litigation.

“We do not yet have sufficient details about the partnership to be able to make any comments,” Sprang said in an email.

In Columbiana County where the Brinker Storage Field sits, many landowners are voicing their concern and outrage over the leases that may be tied to this announcement because it may not mean any benefits to the landowners.

Old leases

Jill McNichol, a property owner in the Brinker Storage Field, said many of the leases in Columbiana County tied to NiSource and Columbia Gas date back to the 1950s and 1960s.

The storage field crosses over the middle of Columbiana County. It is an area where prior drilling left spaces in the sandstone. This is where the natural gas is stored once it is drilled and put in the pipelines.

The lease on her family’s property has little recourse for protecting the environment and includes the provision that the drilling company can use all water available on the property without compensation. There is also no clause for any type of reclamation work after the drilling ends.

In addition, McNichol said that many of the leases in the properties tied to the Brinker Gas Storage Field only provide a $200 one-time royalty. This royalty is also for all of the gases that may be reached on the property. And in most cases this is only if the well is located on your property.

A separate one-eighth royalty is provided for in the old gas leases for any oil produced on the property.

“These leases are about as bad as you can get,” said McNichol. She added that many of them were signed under eminent domain.

McNichol said the group is working with an attorney to file lawsuits and direct discussions with Columbia Gas over the lease issue.

She said to make matters more complicated no maps have been provided to tell landowners where they store gas.

In addition, landowners in the middle of the storage field were released their deep mineral rights providing some the ability to sign a strata lease but landowners on the edges of the storage field have not been given that right.

Minimum payment

McNichol said as a group they are waging lawsuits against Columbia Gas and working to create legislation that will require all landowners to be eligible for a 15 percent royalty if their land is drilled upon.

McNichol said there are a total of 16 storage fields in Ohio and expects more situations like this as drilling and leasing continue across Ohio.

But for now, McNichol, and other landowners in the Brinker Storage Field, plan to work together and stick together to get a fair deal.

Engineering and construction plans are already in progress, according to NiSource, and community outreach will begin immediately.

Hilcorp and NiSource said they will work closely with individual surface rights owners and community officials regarding the production process and timing, as well as lease specifics. Questions can be directed to 888-499-3450.

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