We Are Ready to Assist With Mineral Rights Claims in Appalachia
Our oil and gas lawyers have been active in the field since the earliest days of the Marcellus and Utica Shale Plays in West Virginia, Ohio, and Pennsylvania. In the past, our lawyers have represented major oil and gas producers and leading independents. Since 2015, we have dedicated our efforts exclusively to representing mineral owners., Appalachian Mineral Dispute Lawyers
We regularly represent mineral owners in ownership disputes, oil and gas lease breach of contract claims, mineral trespass lawsuits, and in resolving royalty payment disputes. Odds are, we have handled a situation like yours. As always, with Wagoner & Desai, PLLC, there is no cost for an initial consultation and we typically handle matters on a contingency fee. There is nothing to lose by contacting us to discuss your case. If you need our help, call or text 304-470-2056 or contact us for a free consultation. If you would like more information on oil and gas law or the type of cases we handle, read on.
Common Issues in Oil and Gas Industry
Oil and gas development in the Appalachian basin, including Pennsylvania, West Virginia, and Ohio presents its own set of unique challenges due to the long history of oil and gas development. The first oil well in the nation was drilled in Titusville, Pennsylvania in 1859. The following year, 1860, the Volcano Field was discovered and drilled near Parkersburg, West Virginia. In the 1880s, the Black Swamp region of Northwestern Ohio was the site of one of the country’s early boom cycles with production continuing through the years. Gulf Oil, Marathon, and even John D. Rockefeller’s Standard Oil got their start in the region. Thus, Appalachia experienced prodigious production long before Patillo Higgins struck oil at Spindletop in Texas.
As a result of the lengthy history of development, ownership of both the mineral fee and the leasehold interests are often fragmented or split among many owners. Also, terms in very old deeds, leases, wills or assignments, often control ownership of minerals today. The issues we most often see are:
As discussed above, oil and gas development in West Virginia, Pennsylvania, and Ohio is now in its third century. Consequently, much of the oil and gas was severed from the surface estate many, many years ago. The documents controlling the severance of the minerals and the transfer of ownership through the generations are often unartfully written, subject to delays between drafting and recording, or missing altogether. The end result is that it can be difficult to ascertain title with 100% certainty and often, ownership is a matter of interpretation. We can assist mineral owners in sorting this out.
When the oil and gas company produces or develops your oil and gas without a valid lease, they have committed trespass. Mineral companies often commit trespass when they miss deeds or assignments affecting title, misinterpret those instruments, or continue operating on an expired lease.
If a company commits trespass, you are entitled to recover damages based on the value of the oil and gas that they wrongfully produced. Pittsburgh & W. Va. Gas Co. v. Pentress Gas Co., 84 W. Va. 449, 100 S.E. 296 (1919). The exact measure of damages is determined by whether the trespass was in good faith or in bad faith. The distinction is based on what the company knew when it drilled. It can be difficult to prove bad faith, but it is extremely consequential. For a good faith trespass, the damages you recover are the value of the minerals less the costs of extracting them. In other words, the company gets credit for the expense it put into obtaining the lease, drilling, fracking, etc. If on the other hand, the company acted in bad faith and trespassed without any justification, you will receive the full value of the oil and gas produced, with no deduction for the company’s expenses. With the fragmented nature of Appalachian title and the modern reality of pooled production, this can result in a significantly larger award. As with many things in the law, the devil is in the details and the minutiae. It is important to thoroughly investigate your claims prior to accepting a settlement with the gas company. If you think you have a mineral trespass claim, call or text 304-470-2056 or contact us for a free consultation.
Expired Lease/Lease Termination
An oil and gas lease is both a conveyance and a contract. See e.g. McCullough Oil Co. v. Rezek, 176 W. Va. 638, 346 S.E.2d 788 (1986). The lease typically provides for a primary term and a secondary term. During the primary term, the oil and gas operator has a finite period of time (typically 1 to 5 years) under the contract within which to drill its wells and commence production. If the company begins production, or at least its drilling, on the lease within that time, the lease enters its secondary term, which is usually defined as continuing “for so long thereafter as oil or gas are produced in paying quantities” or similar language.
Because production has been ongoing in Appalachia for so many years, many new wells are drilled on very old leases, allegedly held by very old wells and lengthy production. It is not uncommon to find that at some point in time, production on the old wells was not “in paying quantities.” The producers will often try to cure this defect by obtaining a ratification of the prior lease. They will often offer little, if any, compensation to sign the ratification and claim that it is just a formality. If you are asked to sign a ratification, seek legal advice before doing so.
Another tactic we have seen recently is gas companies waiting until the proverbial eleventh hour, or even after time has expired, to commence actual operations. They will try to claim that their preliminary drafting or permitting operations suffice to hold the lease, but often they do not. If the oil and gas company is operating on an expired lease, their actions constitute trespass, as discussed above.
Improper Royalty Deductions
Every oil and gas lease provides for the payment of a royalty to the mineral owner. Prior to the Marcellus Shale boom in Appalachia, most leases in the area provided for a standard “one-eighth” royalty. Those older leases contained little detail as to what costs, if any, the oil and gas producer could deduct from the royalty owner’s checks. The issue has led to extensive litigation in West Virginia.
The West Virginia Supreme Court sided with landowners in the case of Tawney v. Columbia Natural Resources, LLC 219 W. Va. 266, 633 S.E.2d 22 (2006). In that case, the Court determined that in the absence of clear contractual language authorizing the deduction of post-production costs in the lease, those costs could not be deducted from the royalty owner’s share. The Court extended this reasoning to statutory minimum royalties in the case of Leggett v. EQT Prod. Co., 2016 W. Va. LEXIS 890 (2016). Unfortunately for mineral owners, Leggett 1 was decided in November of an election year. The following January, justices associated with the Republican Party took control of the West Virginia Supreme Court of Appeals. The Court redecided the case in May of 2017, and this time, sided against mineral owners, granting the gas companies license to deduct costs from royalty owners’ checks in Leggett v. EQT Prod. Co., 239 W. Va. 264, 800 S.E.2d 850 (2017). To quote Bob Dylan, the reversal “Couldn’t help but make me feel ashamed to live in a land where justice is a game.” Fortunately, the West Virginia Legislature, under pressure from royalty owner groups, reversed the Supreme Court statutorily by enacting W. Va. Code § 22-6-8.
The end result of all of this is that mineral owners’ rights stand in a precarious position in West Virginia. For the time being, the gas companies in West Virginia are still held to the terms of their leases and those terms are strictly construed. The legal landscape, coupled with declining prices in the past several years, has emboldened these companies and we are seeing more and more examples of overreaching with deductions. If your checks have been declining, call or text 304-470-2056 or contact us for a free consultation. For more legal assistance regarding oil and gas industry injury legal claims refer to our Morgantown oil and gas injury lawyers to assist you with the the legal process. Our oil and gas lawyers have
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