A bill qualifying natural gas as green energy and allowing state agencies to lease land to develop oil and gas has passed the Ohio legislature and was awaiting a signature from Republican Gov. Mike DeWine. 

Under current Ohio law, state agencies are not automatically required to lease land for oil and gas exploration and production (E&P) activities. 

Ohio Oil and Gas Association President Rob Brundrett told NGI that “Ohio’s had the law on the books that you’re able to lease state lands for over a decade, and one of the things that was supposed to happen during this time period was the Oil and Gas Land Management Commission was to provide a rule framework for that to happen.”

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In September 2021, the legislature adopted Section 155.34 to state code, requiring the Ohio Department of Natural Resources’ Oil and Gas Land Management Commission to establish a standard lease form by which state agencies could enter into contracts with E&Ps.

The commission had not adopted a framework within the 120-day timeframe set in Section 155.34. 

“There’s been starts and stops over the last decade…The commission met last December, but then it hadn’t met again until this December,” Brundrett said.

At its latest meeting, however, the commission adopted a draft standard lease form as required by Section 155.34. The form is now available for public comment through Jan. 13. 

“This is the farthest we’ve been in this process, so we’re excited that that’s out for comment now,” Brundrett said. “There’s another meeting scheduled tentatively in February, so we’re hopeful that by the springtime we’ll have a framework that will be able to go through the rules process and get put in place in 2023.”

In the meantime, the Ohio Senate added Section 155.33 to House Bill (HB) 507, “kind of like a stopgap,” Brundrett said. HB 507 was initially introduced and later passed the state’s House as legislation solely dealing with agriculture. 

Section 155.33 alters Ohio’s Revised Code so that state agencies no longer “may,” but “shall lease, in good faith, a formation within a parcel of land” for oil and gas development. 

“The amendment (HB 507) is basically kind of like the stopgap,” Brundrett said. “…Over the last decade, there’s been issues that come up where a company is trying to put a drill package together that has partial state lands in it, and so they want to be able to try and negotiate that lease because it’s faster to do it that way…

“So this amendment sort of creates that process to do it until the rules are promulgated from the land commission. Once the Oil and Gas Land Management Commission rules are finalized, then the law will revert to those rules and the law change will basically be moot at that point,” Brundrett said. 

When asked whether measures similar to Section 155.33 may be used in other states with roadblocks to drilling on state lands, Brundrett noted that “Ohio is unique in that we did not really have much of a process for state lands leasing, whereas most other drilling states have a process…I think for us, the faster we get those rules finalized, the better off we will be as a state. 

“It will just be more clear for everybody on the proper way to make sure that we’re leasing state lands,” Brundrett said. 

Greening Gas

HB 507, if signed by DeWine, would also update the legal definition of energy generated using natural gas, qualifying it as green energy

The legislation adds a legal definition for green energy to mean any energy produced by a resource that, at a minimum, “releases reduced air pollutants thereby reducing cumulative air emissions,” and/or “is more sustainable and reliable relative to some fossil fuels.” 

In addition, HB 507 explicitly states that “‘Green energy’ includes energy generated by using natural gas as a resource.” 

This summer, the European Parliament similarly voted to accept a proposal from the European Commission to classify new natural gas and nuclear power projects as green. 

The European Union (EU) faces an “energy crisis,” according to the International Energy Agency, as it weans itself off Russian natural gas imports amid the war in Ukraine. While the EU’s green classification allowed for subsidies and low-cost loans for natural gas and nuclear projects deemed sustainable, it’s unclear what benefits, if any, Ohio would see from such a label. 

Brundrett noted that “…it’s certainly an interesting concept, and seeing what they’ve done in the EU, I don’t think this will be the only state that takes a look at labeling natural gas as a potential green energy.” 

With the exception of compressed renewable natural gas, HB 507 would also specify that the green energy generated from natural gas would not be eligible to receive renewable energy credits, according to the Ohio Legislative Service Commission’s analysis.