iStock_000013201412XSmall (4)If an energy company offers you money to drill for oil or gas on your property, you would probably think that they would show up and start drilling sometime during the start of the lease. You might also expect the company to abide by the original terms of any oil and gas lease. But, some energy companies have altered their traditional methods of drilling and they have altered the way that they handle the oil and gas leases with the Ohio property owners they contract with.

Chesapeake Energy Corp. has spent over $2 billion dollars on leases in Ohio obtaining mineral rights to about 5% of the state’s land. The recent discovery of an abundance of oil in the Utica Shale fields has led to an increase of leases in the area. It sounds as if Ohio land owners are cashing in and Chesapeake must be a booming company. There are problems on the horizon concerning these oil and gas leases.

Chesapeake is contacting Ohio land owners and requesting that their original oil and gas leases be re-negotiated. They want the leases changed to suit their own needs, because they are having cash flow problems which have led to the inability to fulfill their end of the bargain.  They apparently haven’t been able to drill enough wells fast enough to satisfy the primary period of the leases. This means Chesapeake is risking losing the coveted mineral rights to a great deal of property in Ohio.

Chesapeake has sought to combine the leases into larger units which include more property owners. The problem with bundling leases is that the property owners end up with smaller shares of any oil proceeds, though they could end up with shares from more wells, but it is a gamble.

The problem with Chesapeake seeking to renegotiate leases is the way they have approached it. They have been sued over a hundred times in Ohio since 2008 for backing out of leases in which they failed to uphold their end of the bargain. They have told landowners “You will be shut out of the oil and gas boom if you do not renegotiate your lease with us.”

Ohio landowners should understand that oil and gas drilling is a complex business that can come with with legal issues if not properly handled. You must know what your lease says, what you are entitled to, and what your rights are if the lease is breached by the drilling company.

If you have any questions or concerns, please call 1-888-534-4850 for a free consultation with an experienced Ohio oil and gas lease attorney at Slater & Zurz LLP.

Excerpts taken from Wall Street Journal, Daniel Gilbert, “Chesapeake Irks Landowners As it Renegotiates Leases.” July 16, 2012.