Ohio Gas & Oil August 2020

August 2020

A Free Monthly Publication

AMERICA’S DECLARATION OF ENERGY INDEPENDENCE

IN THIS ISSUE: COMMON (?) SENSE - GUEST EDITORIAL

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NEWS. BUSINESS. TECHNOLOGY. ALLIANCE Sheila Casler 330.580.8421

CAMBRIDGE Heather Kritter 614.583.5793

OHIO’S GAS & OIL INDUSTRY RAVENNA Elie Stephan 330.996.3093

WOOSTER Aaron Bass 330.264.1125

CALL YOUR LOCAL OHIO GAS & OIL SALES REP. TODAY

Table of Contents AUGUST 2020 G ROUP PUBLISHER Bill Albrecht

EXECUTIVE EDITOR Beth Bailey bbailey@daily-jeff.com

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A Look Ahead Gas & Oil Events

3

The Empowerment Alliance Announces New Campaign to Promote Its Declaration of Energy Independence

5

DOE Report Stresses Importance of Appalachian Shale Production to COVID Recovery

6

Common (?) Sense - Guest Editorial

8

Ohio Oil and Gas Energy Education Program Announces New Executive Director

9

U.S. Crude Oil and Natural Gas Production in April had Biggest Monthly Decreases in Years

11

OOGEEP First Quarter Shale Production Analysis

13

Ohio Appellate Court Rules in Another DMA Notice Dispute

15

Ohio Well Activity

16

Horizontal Drilling Activity Graph

On The Cover:

About The Empowerment Alliance “We launched our campaign to counter well-funded special interests and politicians promoting ideas that threaten America’s national security and position as the number one economy in the world,” said Nathanson.

“This new phase of our campaign demonstrates our message is resonating as we build our grassroots army across the country.”

AUGUST 2020

AUGUST 2020 ADVER TISING Elie Stephan Akron & Kent, Ohio Offices estephan@localiq.com 330-996-3093 Sheila Casler Alliance & Minerva, Ohio Offices scasler@localiq.com 330-580-8421 Aaron Bass Ashland, Ohio Office abass@localiq.com 419-281-0581 Heather Kritter Cambridge, Ohio Office hkritter@localiq.com 614-583-5793 Aaron Bass Wooster & Holmes County, Ohio Offices abass@localiq.com 330-264-1125

L AYOUT DESIG NER Phil Luks

pluks@recordpub.com

212 E. Liberty St. Wooster, OH 44691 330-264-1125 “Ohio Gas & Oil” is a monthly publication. © GANNETT Co. Inc. 2020

OhioGas&Oil

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A Look Ahead

Gas & Oil Events DUE TO THE COVID-19 PANDEMIC, MANY EVENTS HAVE BEEN CANCELED OR POSTPONED. PLEASE CHECK WITH THE EVENT COORDINATOR(S) FOR NEW DATES AND TIMES.

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Other Instructors: Includes a team of 15+ state certiOOGEEP RESPONDING TO OILfied fire instructors, emergency reFIELD EMERGENCIES TRAINING sponders and industry experts with INSTRUCTORS more than 500 years of combined Lead Fire Instructor: experience in the oil and gas indusChief Brent Gates, New Concord try and/ or fire service.

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AUGUST 2020

The Empowerment Alliance Announces

New Campaign to Promote Its Declaration of Energy Independence

www.EmpoweringAmerica.org One hundred and forty-one political leaders from reliable and environmentally responsible bridge across the country today joined The Empowerment to our energy future.

Alliance (TEA) by signing the Declaration of Energy • Abundant Energy for Our Future. Technology Independence. Signers include eight U.S. senators, and exploration have guaranteed that America nine U.S. representatives, three governors, 15 state has a continuous 100-year supply of natural gas attorneys general, more than 50 local state officials and the potential for even more. and more than 20 candidates running for positions •Domestic Energy for Our Security. The use of doat the national and state levels. A full list of signers mestic natural gas discovered, produced, and can be viewed at https://empoweringamerica.org/ refined in the U.S. makes certain America is no declaration/. longer dependent on rapidly changing global “American energy producers have ushered in an markets and unstable or hostile countries. energy renaissance and made the United States the number one producer of oil and gas in the world,” “Energy production has delivered an energy resaid Senator Ted Cruz (R-TX). “Maintaining our en- naissance to Eastern and Southeastern Ohio,” said ergy dominance is key to ensuring American fami- Representative Bill Johnson (R-OH). “America is no lies have access to affordable energy and it’s imperDeclaration continued on page 4 ative for our national security. In the midst of the global COVID-19 pandemic, it’s become even more important to support America’s energy producers to spur economic growth, lower energy costs, help employ thousands of hardworking men and women, and increase America’s energy independence. In the Senate, I am committed to standing with American energy producers and continuing our energy renaissance.”

“America is in the midst of an energy revolution,” Thousands of Seals and packing in Stock! said Governor Pete Ricketts (R-NE). “I applaud the Empowerment Alliance for its efforts to educate Americans about the economic, national security, and environmental benefits of natural gas and am proud to stand up for efforts to continue America’s energy independence.”

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• Clean Energy for Our Environment. We lead the world, by a wide margin, in cutting CO2 emissions. America’s natural gas is the fiscally-sound,

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Declaration continued from page 3

longer dependent on foreign sources, many of them hostile, to meet our energy needs. Instead, we are putting hard-working Americans to work and producing it ourselves. I will continue to advocate for a robust “all of the above” energy platform. Our hard-fought, newfound American Energy advantage must be preserved and utilized for the benefit of all Americans.”

“For too long, Americans have spent their hardearned dollars on energy that is produced overseas, risking our nation’s security and stability and shunning millions of family supporting jobs,” said Louisiana Attorney General Jeff Landry (R-LA). “The Declaration of Energy Independence is something all Americans can agree on — a commitment to a cleaner environment, an investment in the livelihoods of millions of our neighbors, and lower energy costs for all.”

“Affordable, clean, and abundant domestic energy will be critical to America’s economic recovery,” said Jim Nathanson, Executive Director for TEA. “We cannot afford to squander our domestic energy advantage, and we call on all political leaders to join us and embrace natural gas as essential to our shared future prosperity.”

Domestic natural gas has helped power America’s energy revolution and provides clean, low-cost energy to millions. America has also surpassed Russia and Saudi Arabia to become the world’s top producer of natural gas and oil and is poised to be a net energy exporter. Because of natural gas, America is on its way to energy independence, a boon for our national and economic security.

“We launched our campaign to counter wellfunded special interests and politicians promoting ideas that threaten America’s national security and position as the number one economy in the world,” said Nathanson. “This new phase of our campaign demonstrates our message is resonating as we build our grassroots army across the country.” More information about TEA’s grassroots network, the Blue

Energy Nation, can be found at https://empoweringamerica.org/get-involved/ About The Empowerment Alliance The Empowerment Alliance (TEA) is harnessing the power of American ingenuity, the tenets of our free market system, and the abundance of our nation’s natural gas supply to forge a more realistic, rational, and effective approach to energy consumption and environmental conservation than the risky tax scheme known as the “Green New Deal.” The Empowerment Alliance’s common-sense approach will engage the American people in an open and honest dialogue about the best way to re-establish the United States as a global energy superpower. It’s time to safely and smartly control our destinies and reassume our rightful position as a beacon for the world. TEA is a 501c4. More information about The Empowerment Alliance can be found at www.empoweringamerica.org.

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AUGUST 2020

DOE REPORT STRESSES IMPORTANCE OF APPALACHIAN SHALE PRODUCTION TO COVID RECOVERY NICOLE JACOBS | EnergyInDepth The energy-rich Appalachian region is on the cusp of an “energy and petrochemical renaissance,” according to a recently-released Department of Energy report.

Praising the magnitude of the shale gas revolution in the Appalachian Basin in the past decade, a region that has accounted for 85 percent of the growth in U.S. natural gas production during the same period, the report highlights the need for continued investments in public infrastructure, workforce development and innovation:

The DOE also recommended the expansion of workforce development efforts, including education and training opportunities, and investments in research and development, both areas that will support the future growth of the industry.

Though much of the report was drafted prior to the COVID-19 pandemic and associated economic downturn, the report’s authors expressed their confidence in the industry in a foreword noting:

“[A] major component of the United States “There are three areas where public sector ineconomic recovery will be the abundance of relivestment is critical: (1) creating a pro-growth able, affordable energy to enable United States business environment, (2) developing public manufacturing and other sectors of the econoinfrastructure, and (3) supporting workforce my to reignite the pre-pandemic boom.” development. In addition, government has an important role to communicate the economic The DOE’s bullish attitude is shared by state ofopportunity to help mobilize and align public- ficials and industry representatives from around the and private-sector efforts.” region, who see the affordable, reliable shale oil as a key to the post-pandemic recovery. As Pa. Chamber Natural gas produced in the Appalachian region of Business and Industry President and CEO Gene supplies manufacturers and industries with a reliable Bar explained: supply of energy as long as they can access it. Ensuring future supplies of natural gas means investing “Time and again, Pennsylvania’s business leadin energy infrastructure, the report concludes, noters and workers have come together to make the ing that several major pipeline projects have faced best use of our state’s diverse natural resources significant delays due to regulatory and permitting to power this nation in times of war and peace. concerns and encouraging continued streamlining of “Now, as we look to recover from the pandemic the federal permitting process. and re-shore American manufacturing, this reArea industry groups already realize the need for port makes abundantly clear the Appalachian continued investment in energy infrastructure, notBasin is perfectly suited to be a cornerstone of ing that the natural gas produced in the Appalachian making that strategy a reality and to position Basin can be shipped elsewhere. As Ohio Southeast America for long-term economic and environEconomic Development President Mike Jacoby said: mental success.”

“This remarkable transformation does not happen without supporting policies and infrastructure. The commodities could easily just be piped elsewhere. If our region is going to reap the economic benefits of these resources long-term, we need comprehensive policies.”

AUGUST 2020

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Common (?) Sense Guest Editorial

GREG KOZERA | Shale Crescent USA I was on a Zoom call this week with an executive of a company we would like to have in our Region. I asked him, “What keeps you awake at night?” His response, “The challenge of finding people with common sense.” surprised me. Later I was talking to a friend whose company does solar power installations. His big challenge was, “People don’t understand solar panels don’t work at night.” That simple fact was common sense to both of us. It is called “solar power” and not “dark power”. We both understand solar power requires a dependable back up power source like natural gas or coal. Batteries haven’t developed to be able to store large amounts of power.

Common Sense is defined as the ability to reach intelligent conclusions. It suggests an average degree of judgement and reasoning without special knowledge. Common sense on the job would be taking book knowledge and applying it to a real situation. Some examples of common sense would be; not wearing sunglasses at night or wearing a coat on a cold day in winter or washing hands after using the bathroom.

Doing a task the same way and expecting a different result shows a lack of common sense. Being in a crowd particularly of strangers without a mask during this pandemic is a good way to catch the virus and shows a lack of common sense. There are plenty of examples on the internet showing a lack of common sense. Stories of people committing a crime and posting a video of the act on Facebook are common.

That shows a lack of common sense.

There are people, some in elected office, who believe we don’t need fossil fuels. They have convinced others this is a good idea. They can’t explain how to manufacture an M-95 mask using a windmill. They are part of the “Don’t understand solar panels don’t work at night” crowd. These folks don’t understand fossil fuels are required to make windmills and solar panels. They also have no problem using cars, planes, cell phones and other fossil fuel products. Their actions show a lack of knowledge and a lack of common sense.

Common sense is our ability to think and reason for ourselves. It is not blindly following the crowd or believing everything we read on the internet. For example, we don’t need government to regulate the wearing of masks during this pandemic. We do need government to tell us the truth and give us guidance.

With a little common sense and respect for others, 6

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we can figure out the rest. An individual running outside by themselves doesn’t need a mask. Wearing one could be dangerous. Someone showing up at my church on Sunday without a mask shows disrespect for our congregation especially for our elderly who would be at risk if they caught the virus. Wearing a mask in that circumstance, even if the person thought they were well, shows common sense and doing the right thing for others.

As a District Manager, I inherited a District with a horrible safety record. Our employees wouldn’t wear safety equipment. We had rules with punishments up to termination if we caught someone not wearing PPE. At night, on a well-site in southern West Virginia the odds of getting caught were low. As the manager, I realized I had to change. We changed the focus from rules to employee and family well- being.

Our safety record became one of the best in the comCommon (?) Sense continued on page 7

AUGUST 2020

Common (?) Sense continued from page 6

pany. Most important our employees went home in one piece every night to their families. We went from rules to common sense.

How can we make sure we use common sense? We need to think before we act or speak. We need to consider the consequences and possible results of our actions. We can’t just blindly follow or believe everything we hear or read. We need to educate ourselves. Sometimes we may need to let go of long held beliefs that are wrong or not true.

We are working with a foreign company interested in Shale Crescent USA. The CEO is a great guy. He is sharp, creative and an environmentalist. I learned his story. He wanted to clean up the beaches in his country and keep plastic out of the ocean. He felt the way to do this was to recycle plastic and reduce the use of plastic, reducing waste.

As he gained experience, he learned how important plastic is for people’s healthcare, for sanitary wellpreserved food and for thousands of other important products like cell phones. He realized our planet will require more not less plastic. In Maryland, where my kids live, walking into a grocery store with a reusable bag that could contain Covid-19 will get you thrown out. They use disposable plastic bags.

The CEO changed his thinking of plastic as a waste

to be disposed of to a valuable feedstock. His process now turns plastic waste into useful building products. It can help to create a circular economy.

He is using his common sense to develop a solution to the plastic waste problem that allows people to enjoy the benefits of plastic, creates useful products, jobs and can clean up the environment globally.

Unfortunately, common sense isn’t common. We have all been guilty of poor judgement or making a bad decision especially when we are growing up. The difference is, if we have common sense we can learn from our mistakes and failures. We can think for ourselves before we act. We can educate ourselves. We can think of others first. We can be leaders instead of blind followers.

We have an incredible nation. Freedom isn’t free.

We need to develop and use common sense to keep it free. Hope you had a Happy Independence Day! © 2020 Shale Crescent USA Greg Kozera, gkozera@shalecrescentusa.com is the Director of Marketing and Sales for Shale Crescent USA. He is a professional engineer with a Masters in Environmental Engineering who has over 40 years’ experience in the energy industry. Greg is a leadership expert and the author of four books and numerous published articles.

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Ohio Oil and Gas Energy Education Program Announces New Executive Director

John Schlichter, a former State Representative and State Department of Agriculture leader to lead natural gas and oil program KENNEDY COPELAND | Ohio Oil and Gas Energy Education Program The Ohio Oil and Gas Energy Eduright person to nurture important cation Program (OOGEEP) is proud relationships and guide OOGEEP to announce John Schlichter has into its bright future,” stated David been named Executive Director of Hill, chairman of the OOGEEP Board the nonprofit that has been dedicatof Directors. “The organization has ed to energy education and public many opportunities for growth right outreach for more than 20 years. now, and we need a leader who unJohn comes to OOGEEP with over derstands the state of the indus40 years of management and orgatry and the organization’s role as a nizational experience as a part of statewide educator – and John is exSchlichter Farms, Bluegrass Farms actly that.” of Ohio, Inc., and as Deputy Director for the Ohio Department of Agriculture. In addition, John served as a The Ohio Oil and Gas Energy Edmember of the Ohio House of Repreucation Program (OOGEEP) is a sentatives, serving the 85th District non-profit statewide education and John Schlichter for six years, and previously served public outreach program. Created Executive Director Ohio Oil and Gas as a Fayette County Commissioner in 1998, OOGEEP provides a variety Energy Education Program for four years. of programs throughout the State “I am honored and humbled to be of Ohio on behalf of Ohio’s natua part of the nationally renowned and award-winning ral gas and crude oil producers. The primary goal of Ohio Oil and Gas Energy Education Program and these programs is to educate Ohio’s general public serve on behalf of Ohio’s natural gas and oil produc- by focusing on industry research, teacher workshops, ers,” Schlichter said. “It is more important than ever scholarships, science fair, firefighter training, career to be out telling the story about the efforts of the and workforce development, landowner and guest producers in their quest to produce the energy and speaker programs. Engage with us via oogeep.org, products that are essential to every Ohioan.” like us on Facebook and follow us on Twitter and InSchlichter’s hiring comes as the program imple- stagram. ments a plan of strategic growth in outreach to the general public. Ohio is the nation’s sixth largest natural gas producer and has played a major role in making the United States a net energy exporter for the first time in nearly 70 years.

As recent voter surveys indicate, Ohioans recognize the importance of safe, responsible energy development to communities, economic growth, and continued environmental progress. Under Schlichter’s leadership, OOGEEP will continue to advance that narrative through its fact-based, educational programming for the public, industry leaders and landowners, first-responders, teachers, regulators, and elected officials.

“John’s experience and background makes him the

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AUGUST 2020

U.S. Crude Oil and Natural Gas Production in April had Biggest Monthly Decreases in Years U.S. Energy Information Administration

Source: U.S. Energy Information Administration, Monthly Crude Oil and Natural Gas Production Report

Production of crude oil and natural gas decreased in the United States in April 2020 by 670,000 barrels per day (b/d) and 2.6 billion cubic feet per day (Bcf/d), respectively, according to the U.S. Energy Information Administration’s (EIA) Monthly Crude Oil and Natural Gas Production Report. Production declines of that magnitude usually arise only in natural disasters such as hurricanes: the drop in U.S. crude oil production in April was the largest since September 2008 when Hurricanes Gustav and Ike caused production to fall by 1.03 million b/d. The April 2020 decline in natural gas production was the largest monthly decrease since Hurricane Isaac-related shut-ins in August 2012.

April was the first full month to be affected by the low crude oil and natural gas prices related to the sudden drop in petroleum demand associated with coronavirus (COVID-19) mitigation efforts. The declining market led oil and natural gas operators to shut-in wells and limit the number of wells brought online, lowering the output for the major oil- and natural gas-producing regions.

AUGUST 2020

Source: U.S. Energy Information Administration, Monthly Crude Oil and Natural Gas Production Report

U.S. crude oil production decreased by 5.3% in April, and several states and regions reported declines. Texas saw the largest crude oil production decrease of 234,000 b/d (-4.3%) from March to April 2020. More crude oil is produced in Texas than in any other state or region of the United States, accounting for 41% of the national total in 2019.

Decrease continued on page 10

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Decrease continued from page 9

Source: U.S. Energy Information Administration, Monthly Crude Oil and Natural Gas Production Report

North Dakota saw the second-largest decrease, 195,000 b/d, or 13.8%. Both Texas and North Dakota noted their largest recorded monthly decreases. Of the top six crude oil-producing states, Colorado was the only state to record an increase in April as a result of more new wells coming online than were shut-in.

The U.S. Energy Information Administration (EIA) expects U.S. crude oil production to fall in 2020 as efforts to mitigate the spread of COVID-19 continue to result in a steep drop in demand for petroleum products and lower oil prices. EIA expects crude oil prices will average $40 per barrel (b) for the first half of 2020 and will average $39/b in the second half of 2020. In its July Short-Term Energy Outlook (STEO), EIA forecasts that U.S. crude oil production will average 11.6 million barrels per day (b/d) in 2020. These levels would be 0.6 million b/d lower than the 2019 average of 12.2 million b/d.

U.S. natural gas production decreased by a lesser percentage than crude oil production in April, down only 2.3%. Texas also saw the largest monthly decrease for natural gas production in April, decreasing by 1.2 Bcf/d, or 4%. Oklahoma had the second-largest decrease at 0.5 Bcf/d, or 6%. Louisiana and Pennsylvania recorded production increases for April.

EIA forecasts that U.S. marketed natural gas production—which it defines as gross withdrawals of natural gas less natural gas used for repressuring reservoirs, quantities vented or flared, and nonhydrocarbon gases removed in treating or processing operations—will continue to decline for the remainder of 2020. EIA forecasts that U.S. marketed natural gas production

will average 96 Bcf/d in 2020, down from 99 Bcf/d in 2019.

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AUGUST 2020

OOGEEP First Quarter

Shale Production Analysis June 25, 2020

Ohio shale natural gas production slowed in the first quarter reflecting broader commodity market downturn and pandemic-related demand pullback. Uptick in permitting activity and improving commodity price market indicates second-half growth opportunities.

Ohio Oil and Gas Energy Education Program

Quarterly Results  Production & Permitting Ohio natural gas and oil operators produced 581.6 bcf of natural gas and 5.9 million barrels of oil from shale formations in the first quarter of the year, Ohio Department of Natural Resources DATA details. Led

by Belmont Co., which accounts for nearly half of the production total, 97 percent of horizontal shale wells (2,509) reported natural gas and oil production during the quarter.

Belmont, Jefferson, Monroe, Harrison, and Carroll Counties, respectively, led the state in natural gas pro-

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duction, accounting for 532.9 bcf or 92 percent of the natural gas produced in the state. Guernsey, Harrison, Carroll, Belmont, and Monroe Counties accounted for 98 percent of oil production, or 5.8 million barrels.

Ascent Resources produced one-third, 190 bcf, of the quarter’s total natural gas output, primarily from Belmont and Jefferson Counties. Gulfport Energy produced 92 bcf mostly from its Belmont and Monroe Co. acreage, while Encino Energy accounted for nearly 80 bcf through its production in Harrison, Carroll and JefOOGEEP continued on page 12 OhioGas&Oil 11

OOGEEP continued from page 11

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ferson Cos. Ascent Resources also led in oil production, with Encino Energy and Montage Resources completing the top three with 1.9 million and 1.2 million barrels produced.

The softness in initial 2020 natural gas production comes off a year in which Ohio produced record natural gas and oil volumes, but saw quarterly production slow in the back half, increasing just half percent Q3Q4 as the HENRY HUB spot natural gas price weakened. The national benchmark finished the year nearly 29 percent lower than the start ($3.11 vs. $2.22) and averaged 18.5 percent lower than 2018. That trend has continued through 2020 Q1, with HENRY HUB prices averaging $1.84 through the first five months of 2020.

While production and drilling activity is a function of many factors, the commodity price environment is a key driver of activity. Reflecting the broader market commodity price decline coupled with COIVD-19 related economic shutdowns, operators have taken action to adjust 2020 capital expenditures and production guidance downward. Fewer horizontal rigs were running the first quarter of 2020 compared to the prior year, averaging 11 through March of this year and 16 the previous, according to BAKER HUGHES TRACKING. Permitting, an indicator of future drilling activity, was down in the first quarter, with 59 permits issued com-

12 OhioGas&Oil

pared to 105 from first-quarter 2019. Like rig counts, the pullback in permitting reflects the broader commodity market headwinds and pandemic-caused demand reduction. Weekly data through June 19, however, indicates an uptick in permitting, with 55 issued for the second quarter that ends June 30, compared to 67 the year prior.

The stronger second quarter permitting comes amid improving crude and natural gas liquids commodity prices and increasing consumer demand as various sectors of the economy reopen from pandemic-related shutdowns. As in 2019, Ascent Resources (47), Encino Energy (39), and Gulfport Energy (13) have been issued the most permits to-date.

Industry Trends Nationally and globally, the U.S. remains the world’s top natural gas producer, accounting for 89.1 bcf/d, according to U.S. ENERGY DEPARTMENT DATA. Appalachia, consisting of Ohio, Pennsylvania, and West Virginia, accounts 36 percent of U.S. production and is the world’s third-largest natural gas producer, behind the U.S. and Russia.

Based on 2019 production, Ohio ranks 6th in the nation for natural gas production, one spot ahead of West Virginia, and 12th in the world, according to U.S. DOE DATA. These continued strong production trends are against a backdrop of pre-pandemic rising U.S. and global natural gas demand. According to BP’S 2020 STATISTICAL REVIEW OF WORLD ENERGY, U.S. and global natural gas demand increased 3.3 percent and 2 percent, respectively, in 2019, with the share of natural gas in the global energy mix rising to a record high of 24.2 percent.

While it’s too early to predict the impact of pandemic shutdowns on global energy demand, the fact remains that natural gas continues to grow in domestic and global market share, particularly in electricity generation and industrial use.

AUGUST 2020

OHIO APPELLATE COURT

Rules In Another DMA Notice Dispute David J. Wigham | Attorney On June 1, 2020, Ohio’s Seventh District Court of Appeals ruled in Fonzi v. Brown, 2020-Ohio-3631, that a surface owner’s failure to conduct a search in a place where the mineral owner’s heirs are known to reside is per se unreasonable. As a result, the Court held that the surface owner failed to comply with the notice requirements of Ohio’s Dormant Mineral Act found at R.C. 5301.56, (the “DMA”).

This case involved an appeal from the Monroe County Common Pleas Court, which had previously granted summary judgment in favor of the surface owner, holding, among other things, that the surface owner took “reasonable efforts to locate potential heirs of the original heirs of the mineral holder who originally reserved the oil and gas interest in dispute.”

The fact pattern in Fonzi v. Brown is similar to hundreds of DMA disputes between surface owners and mineral owners across Eastern Ohio. In 1952, Elizabeth Fonzi inherited real estate in Monroe County, Ohio, and later that year, along with her husband, sold the property, reserving a one-half royalty interest. The deed she signed indicated that she lived in Washington County, Pennsylvania. The Fonzis thereafter divorced, were remarried and then died in Washington County, with two children from their marriage.

In 2006, the property was transferred to the Browns, who took title subject to the one-half royalty interest originally reserved by Fonzi and then signed an oil and gas lease with Eclipse Resources in 2012.

Thereafter, the Browns, through their attorney, atDMA Notice continued on page 14

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DMA Notice continued from page 13

tempted to abandon the Fonzi interest pursuant to the DMA by publishing a Notice of Abandonment in a newspaper of general circulation in Monroe County, and then subsequently recording an Affidavit of Abandonment. However, under the DMA, a surface owner seeking to abandon severed mineral interests must first serve its notice of intent to abandon the minerals via certified mail. Only if the heirs of the mineral owner cannot be located may the surface owner then skip the step of certified mail service and—as a last resort—publish a Notice of Abandonment in the local newspaper. Thus, one of the primary issues in Fonzi v. Brown was whether the Browns used reasonable diligence in attempting to locate the heirs of the Fonzis before publishing their abandonment notice in Monroe County.

Notably, prior to the Fonzi decision, the Seventh District Court of Appeals issued at least three recent rulings that outline the circumstances when a surface owner may publish its notice of abandonment, rather than first serving it via certified mail. In Shilts v. Beardmore, 2018-Ohio-863, the Court of Appeals held that surface owners must use “reasonable diligence” in attempting to locate heirs before they can skip the certified mail requirement and serve by publication. And then in Sharp v. Miller, 2018-Ohio-4740, the Court ruled that there is no “bright-line rule” as to what efforts constitute “reasonable due diligence,” rather, a surface owner’s reasonable diligence must be determined on a case-by-case basis. Id. at ¶ 17. Finally, in Miller v. Mellott, 2019-Ohio-504, the Seventh District found the burden of proof is on the surface owner to demonstrate compliance with the DMA. Turning back to Fonzi, Browns’ attorney testified that he limited his search to Monroe County, despite having knowledge, via Elizabeth Fonzi’s deed, that she lived in Washington County, Pennsylvania. The Fonzis argued that, had the Browns’ attorney searched the records of Washington County, Elizabeth Fonzi’s heir would have been easily discovered. Conversely, the Browns argued that they were not required to search outside of Monroe County, Ohio.

The Court of Appeals observed that: “Requiring a party to prove that a search would have revealed the specific heirs is contrary to the spirit of the law, which focuses on the reasonableness of the opposing party’s search process.” Id. at ¶ 25. Since a surface owner may only publish its notice of abandonment after a search fails to reveal heirs, the surface owner must use “due diligence” in its search and “the search itself [must be] reasonable.” Id. Because the Browns’ attorney learned early in his search that that the Fonzis lived in Washington County, Pennsylvania, but did not conduct a search there, the Court concluded that “any reasonable researcher” would have been led “to extend the search into Washington County” and that the “failure to conduct any search into the 14 OhioGas&Oil

Washington County public records after learning that this is where the Fonzis resided is per se unreasonable based on the facts of the case.” Id. at ¶ 32-33.

As a result, the Browns’ notice of abandonment was defective, the original judgment of the trial court was reversed, and judgment was entered in favor of the Fonzis awarding them ownership of the royalty interest at issue.

Fonzi v. Brown illustrates the legal hurdles that surface owners and severed mineral owners in Ohio continue to face when seeking to terminate or preserve ownership of valuable oil and gas interests. Ohio law in this important area is in a state of flux; it evolves seemingly every day. This uncertainty in the law highlights the importance of retaining an experienced oil and gas attorney for advice regarding the extinguishment, preservation, and ownership of severed oil and gas interests.

David J. Wigham is a second-generation oil and gas attorney at the firm of Roetzel & Andress, with more than 28 years of experience in the industry. He maintains offices in Akron and Wooster, Ohio, and can be reached at 330-762-7969 or dwigham@ralaw.com.

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