Fracking in Ohio: State law gives energy companies right to force landowners into leases

Julie Grant/The Allegheny Front

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Julie Grant got her start in public radio at age 19 while at Miami University in Ohio. After studying land ethics in graduate school at Kent State University, Julie covered environmental issues in the Great Lakes region for Michigan Radio’s Environment Report and North Country Public Radio in New York. She’s won many awards, including an Edward R. Murrow Award in New York, and was named “Best Reporter” in Ohio by the Society of Professional Journalists. Her stories have aired on NPR’s Morning Edition , The Splendid Table and Studio 360. Julie loves covering agricultural issues for the Allegheny Front—exploring what we eat, who produces it and how it’s related to the natural environment.

Julie Grant / The Allegheny Front

Chesapeake Energy built a well pad, but never drilled a well. The landowners are now waiting to see what happens next.

June 28, 2019 | 6:20 AM

Julie Grant / The Allegheny Front

Patrick Hunkler and Jean Backs get drinking water for their house from spring water collected in this cistern. They are concerned that fracking could impact their water.

Deciding what happens on private property might seem like a basic right. But when it comes to fracking, Ohio and other oil and gas-producing states have laws that can force landowners to lease their underground mineral rights to energy companies.

That’s what happened to Patrick Hunkler and his wife, Jean Backs. It began in 2010, when a landman for an energy company knocked on their door.

Hunkler didn’t know much about fracking then. The landman offered them $137 an acre for the mineral rights under their 21 acres in Belmont County, in eastern Ohio.

“$137 dollars, that’s probably the closest I ever came to signing a lease,” he said.

But they held out. By 2014, they were offered $8,500 an acre.

Concerns for water

Jean Backs was getting ready to retire. After 30 years working for the Ohio Department of Natural Resources (ODNR), the money might have been nice. But, she worried about the millions of gallons of water used to frack each well, and the waste it creates.

“My big concern about signing a lease would be where’s that water going to come from and then what will happen to it when they’re finished,” she explained. “You can’t know that at the time that you signed a lease.”

Still, her husband, who had worked for the Ohio EPA, and built a passive-solar house with recycled materials, was open to the idea. But he wanted a way to assure a lease would take into consideration his environmental concerns, including the bright lights used at well pads.

“This is a beautiful dark sky out here,” he said. “If there is a well pad down the road, it’s just like Hollywood.”

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And landmen pursued Hunkler and Backs like celebrities, making hundreds of calls to the family.

“We would express our environmental concern, the only thing that they could offer us was money – a price per acre, and royalties,” he said.

But making money wasn’t as important to the family as protecting their environment. They say landmen called them foolish. They went as far as following them on vacation, even threatening to bring the sheriff over to force them to sign.

Backs said she felt harassed.

Then in 2017, they got a notice from ODNR that Chesapeake Energy was seeking to unitize their property. That meant the state could force the family to sign a lease under a state law.

An old Ohio law meets fracking

“We normally think of the rights of the landowner as being things like the right to decide what’s done with your land. Or what’s not done with your land,” explains Heidi Robertson, a professor of law and environmental studies at Cleveland State University. She published a law review article in 2018 about Ohio’s unitization law.

Submitted

Heidi Robertson, Steven W. Percy distinguished professor of law at Cleveland Marshall College of Law and a professor of environmental studies at Cleveland State University.

The law, passed in 1965, was to ensure the efficient extraction of oil and gas. Before, landowners used to set up wells all over their land, without regard to their neighbors. But, too many wells so close together adversely affected the underground pressure that allowed the oil and gas to be extracted.

So the law requires the land for a well to be a certain size and shape. For shallow wells, that was an acre.

The law didn’t get much use until the fracking boom. Nowadays, wells snake horizontally for miles, deep beneath the ground. According to industry experts, most land units in Ohio today range from 300 to 1,100 acres.

Robertson says one unit of land can have hundreds of different landowners.

“Then you have to have the agreement of all of the landowners in order to cobble together the rights to drill,” she said.

The problem for energy companies and for people who want to lease their land comes when other landowners in the unit, like Patrick Hunkler and Jean Backs, say no to drilling.

“It’s almost like a veto, a single landowner being able to veto the ability of all the surrounding landowners to drill,” Robertson said.

Under the law, if a company gets 65 percent of landowners in a unit to agree to lease their mineral rights, it can apply to the state to unitize the rest, forcing dissenting landowners into leases.

Since 2011, the chief of ODNR’s Division of Oil and Gas Resources Management has approved 144 forced unitizations.

Voluntary leases?

Energy companies offer up-front bonus payments and royalties as a carrot to get landowners to sign leases. Robertson says the unitization law also gives companies’ landmen a stick.

“They come in and say things like ‘We’re offering you X amount of money.’ They’ll in fact say if you refuse to, quote, volunteer, you’ll be forced through this administrative process through the state, and it will cost you more.”

Still, energy companies try to avoid unitization, because the state fees, $10,000 to unitize a landowner, and attorneys fees can add up. ODNR also requires continued efforts to negotiate with holdout landowners.

Around the Hunklers, one neighbor who leased his land to Chesapeake was fine with it. The signing bonus meant he could take time off work for his back surgery.

But down the road, Jos Miller said he would have been better off without leasing to Chesapeake. He’s an Amish farmer with horses and sheep, and seven children. He teared up when describing what happened. He said he shouldn’t have admitted to the landman that he couldn’t read or write.

“I was desperate,” he said.

Miller leased his 170 acres for $50 an acre. But he later found some of his neighbors were getting as much as $6,000 per acre.

“I like to be fair so but I guess the world don’t work that way anymore,” he said. “It’s whoever got the most who’s the smartest to wiggle it around.”

A Columbus hearing

When companies can’t get landowners to sign leases, they can ask the state to step in.

Every month, the Division holds multiple unitization hearings like one in Columbus on May 15. Ascent Resources applied to unitize landowners who have refused to sign a lease. The company brought a geologist, an engineer, and a landman to testify, along with a slew of attorneys.

At the hearing, in front of ODNR staff, the landman details efforts to locate unleased landowners, and get them to sign. The company engineer testified that Ascent’s project is a $20 million investment. Without those last, unleased tracts of land, the company would lose the ability to collect enough gas for the project to be financially viable.

“That would likely be the difference between what we would pursue vs what we would not pursue,” testified Ascent Reservoir Engineer Taylor Henderson.

The profitability of the project is the only factor the state can consider in unitization hearing.

Profits over landowner rights?

Megan Hunter, of Fair Shake Environmental Legal Services in Akron, who represented Hunkler and Backs in their case, calls the law unjust.

“I think you have constitutional problems where the reason you’re taking it is because it’s more profitable than not for a private company to develop those resources. So at that point you’re not doing an evaluation of whether there is a public benefit.”

At Chesapeake’s unitization hearings against his family, Patrick Hunkler asked the state to also consider his environmental concerns. But transcripts from the hearing confirm that ODNR told him they had no authority to do that.

“Hey ODNR, we have concerns about our natural resources. Who can we talk to? They didn’t listen to us in the hearing,” he said.

Chesapeake declined an interview request.

Hunter says the process is stacked against landowners. The state has never ruled against an energy company in a unitization hearing.

“It is just so clear that [the company] is really well represented and the government is often aligned with them in these administrative forums and the citizen is left to fend for themselves,” she said.

ODNR did issue orders for Chesapeake to unitize Hunkler’s property. But after constructing the well pad nearby, the company abruptly sold all its Ohio assets and the unitizations were dissolved.

Now, Hunkler and Backs, along with their neighbors, wonder what will happen with the next company.

This is part of the series, “Who’s listening?” examining claims made by Ohio residents, and how state regulators have responded, supported by the Fund for Investigative Journalism and the Sears-Swetland Family Foundation.