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Ohio House Passes Unitization Bill to Benefit Landowners, Oil/Gas Companies

The Ohio House of Representatives has unanimously passed legislation that would both protect landowners and help oil and gas companies more easily form drilling units by allowing them to unitize state-owned land such as roads, universities and wildlife areas.

HB 8 passed the chamber 96-0 on Wednesday and will now be considered by the state Senate.

Under current law, the Ohio Department of Natural Resources (ODNR), which regulates the state's oil and gas industry, does not have to decide on unitization requests within a certain time frame, which has left landowners waiting for such decisions for nearly two years, according to the bill's Republican sponsors. The legislation would require ODNR to hold hearings on requests within 45 days of receiving them and issue final decisions within 30 days after the hearings.

Unitization, similar to pooling, allows operators to gather landowners into a unit, in which they proportionately share royalties based on acreage they own within it. The law was passed in 1965 and unit requests have spiked in recent years with the rapid development of the Utica Shale. While the process has been controversial, its proponents say it reduces surface disruption and prevents a small minority of landowners, who may be opposed to drilling, from preventing the majority from capitalizing on their mineral rights.

HB 8 would also clear the way for operators to unitize state-owned land, which lawmakers have said is becoming a hurdle for development of some acreage in the state (see Shale Daily, Nov. 17, 2014). For example, the law would allow operators subsurface access to roads owned and operated by the Ohio Department of Transportation.

The bill excludes state parks and has protections for state-owned forests, as well.

Ohio API, the state arm of the American Petroleum Institute, has worked closely with lawmakers on the bill. Executive Director Chris Zeigler told NGI's Shale Daily last week that without the legislation some property in the state might never be developed if drillers can't form units with state-owned land.

The state budget bill, HB 64, is also currently under consideration. An amendment included in it would make it easier for oil and gas companies to expand the size of their drilling units without having to renegotiate leases that restrict expansion (see Shale Daily, March 11). The amendment, though, is facing more resistance than HB 8 has.

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