OIL & GAS

There are only a few experienced attorneys who represent landowners and mineral owners exclusively. Beware. Many firms who tout that they will represent landowners  actively represent the oil and gas industry. Ethan Vessels represents only landowners—never the other side. Ethan regularly files, and wins, lawsuits on behalf of landowners throughout Ohio and the Utica and Marcellus shale region. The law in Ohio is constantly changing. Attorney Ethan Vessels has been a driving force in moving the law in favor of landowners.

Ethan regularly advises and advocates for landowners and mineral owners on the following:

• Royalty disputes (underpaid royalties) 
• Lease termination due to unprofitable production
• Pipeline negotiations and new leases
• Pipeline Easements
• Lease termination disputes involving “savings clauses” such a delay rental clauses, drilling operations clauses, force majeure clauses, “sham” operations to extend the lease, and “shut in” clauses
• Lease negotiations
• Amendment and ratification negotiations
• Sale of mineral rights

Ethan offers free initial consultations. In most cases, Ethan works on a contingent fee: the fee is based upon a successful result for the client. If you have an oil and gas question or need representation in an oil and gas dispute, please fill out our contact form call 740-374-5346.

Oil & Gas Royalty Disputes

Ethan Vessels accepts royalty dispute cases, involving underpayment and miscalculation of royalties, throughout Utica Shale play, including all of Eastern and Southeastern Ohio. Producers are now fully shifting their resources from procuring leasable land and into drilling land already under lease. The focus is now on producing gas and oil. Many wells have been drilled, and many more are coming. Landowners are dismayed to receive their royalty checks and find 25% to 40%–sometimes more than 50% of the gross value of their royalties deducted for “expenses.” The “royalty clause” of the oil and gas lease governs how much the operator must pay the lessor. Some leases are very simple: the operator must pay 12.5% (or 16%, or 20%, or whatever the agreed-upon rate) of any amounts realized for the sale of oil or gas. Many older leases state that royalties are to be paid on the “wellhead” price. The problem is that in modern oil and gas production does not have a “wellhead” price. Gas is sold “downstream” after various points of processing. 

Ohio has not yet adopted a uniform rule on whether such leases would permit the operator to deduct “post-production” expenses. Other leases (the more recent leases) can be more complicated. Some leases state that they are pure “gross” royalty leases, yet still will define and allow for the deduction of some “post-production” costs—which begs the question “gross” of what? Many recent leases contain a “market enhancement” clause that will allow for deduction of post-production costs, typically in proportion to the lessor’s royalty. Often, the lease will specify exactly which types of costs the lessee can deduct from the royalty. It does not matter how the royalty clause is named. What matters is what the royalty clause itself actually allows. The operator is obligated to pay the lessor exactly how the lease directs. And the operator must be honest about the actual charges. Oil and gas companies have a duty to accurately administer and manage their leases, which requires the precise payment of royalties. Yet operators frequently underpay royalties. 

There are many ways that this happens:

• The operator fails to account for all of the land for which the lessor should be credited.
• The operator calculates the royalty on less than the full amount of product sold.
• The operator calculates royalties using an artificially low price—a price not actually paid by the buyer.
• The operator will “sell” the product to an affiliated company using sub-market prices.
• The operator will deduct “post production” costs even when the lease does allow for such deductions. (These costs typically include gathering, separation, compression, marketing, and transportations charges between the well and the point of sale.)
• Even with leases that permit deductions, the operator inflates the costs, or the “costs” are not based on charges actually incurred with unaffiliated service providers.

Ethan Vessels is the lead counsel in a federal class action lawsuit currently pending in the U.S. District Court for the Southern District of Ohio in the case of Cunningham Property Management Trust v. Ascent Resources-Utica, Case No. 2:16-cv-957 (S.D. Ohio). Some cases warrant “class action” treatment. Other cases warrant singular, case-by-case lawsuits.

Some leases require royalty disputes to be handled in binding arbitration. If you believe that you are not receiving the royalty that you are contractually entitled to, please call 740-374-5346. We offer free initial consultations, and in most cases, we offer contingent fees. If there is no recovery, there is no fee. 

He has litigated and won the following cases on appeal:

• Browne v. Artex Oil Co., 2019-Ohio-4809 (2019)—the Ohio Supreme Court reversed the court of appeals and held that a landowner has 21 years, not 15 or 8, in which to sue to declare that a lease has terminated for lack of production n paying quantities.
• Filicky v. American Energy-Utica, LLC, Case No. 15-4061 (U.S. Court of Appeals, 6th 2016)—releasing 168 acres in Belmont County from a lease in which the lessee wrongfully claimed was held by the operations and unitization clauses of the base lease. Read our blog: “Does an existing lease hold your land?”
• Derosa, et al. v. Hess Ohio Resources, LLC, Case 2:13-cv-0472 and Curtis v. Hess Ohio Resources, LLC, Case No. 2:13-cv-0453 (U.S. District Court for Southern District of Ohio 2014)—releasing over 400 acres in Belmont County from lease. The court found that the lessee had not taken reasonable measures to continue development of the leased properties in violation of its implied covenant to develop the property.
• Lang v. Weiss Drilling, Case No. 15 MO 005 (Ohio 7th 2016)—releasing a 30-acre tract in Monroe County which had been wrongfully held based on the operator’s false claims of “profitable production.” Court also definitively held for the first time that commingled production from multiple non-unitized leaseholds cannot form the basis of “profitable production” absent any way to measure production from the leased premises.
• Wilson v. Beck Energy Corp., Case No. 15 MO 0010 (Ohio 7th 2016)—releasing a 40-acre tract which the lessee wrongfully claimed was held under a “delay rental” clause which had expired.
• Holland v. Gas Enterprises, Inc., Case No. 15 CA 42 (Ohio 4th 2016)—releasing a lease in which the lessee had wrongfully claimed “profitable production” despite several years of cessation of production.
• Schultheiss v. Heinrich Enterprises, Case No. 15 CA 20 (Ohio 4th 2016)—releasing a lease due to cessation of production in the 1980’s. Fourth District held that the doctrines of “laches” and “estoppel” did not bar the landowner’s assertion that the lease had expired. (This will be argued in the Ohio Supreme Court on May 2, 2017.) Read our blog: “Is your lessee trying to wrongfully extend your lease?”
• Love v. Beck Energy Corp., Case No. 14 NO 415 (Ohio 7th 2015)—voiding the assignment of the landowner’s lease due to the clear “anti-assignment” provision in the landowner’s lease. Also holding that the requirement to provide a “notice of breach” was an act of futility which did not bar the lawsuit.
• Lauer v. Layco Enterprises, Case No. 12 CA 40 (Ohio 4th 2013)—releasing a lease which was held by lessee’s wrongful claims of “profitable production”

Ethan Vessels has been recognized in the 2016 – 2021 Thomson Reuters SuperLawyers publication, one of only six in Ohio recognized for “Energy and Natural Resources” law. Ethan has argued three times in the Ohio Supreme Court on oil-and-gas issues. Since 2011, Ethan’s litigation efforts have yielded over $18 million in lease bonuses to landowners and millions more in increased royalty revenues. Ethan Vessels has also written a book, “Oil & Gas Leasing. What landowners need to know.”