Unclear Ownership of Mineral Rights May Hurt Ohio's Revenue Hopes

Unclear Ownership of Mineral Rights May Hurt Ohio's Revenue Hopes

Monday, May 09, 2011
The Columbus Dispatch, Ohio
by Spencer Hunt

Plans to make millions of dollars by opening up state parks to drilling could be limited by the relatively small amount of natural-gas rights Ohio actually owns.

Of the 115,300 acres of state parks, the Ohio Department of Natural Resources estimates that it owns the gas rights for 34,590 acres. That's less than one-third of the state park land that could be opened to drilling if lawmakers approve one of several proposals.

In many cases, the state doesn't know who owns the natural-gas rights, said Gene Wells, real-estate administrator for the Ohio Department of Natural Resources. Access to natural gas is covered by mineral rights.

"Some of these lands were purchased in the 1920s," Wells said. "It was not an issue back then to clearly identify what our mineral interests were."

It's definitely an issue now.

Eager to tap natural gas in the deeply buried Marcellus and Utica shale deposits in Ohio, energy companies are offering landowners as much as $1,500 an acre for the mineral rights. Gov. John Kasich and Natural Resources officials say that the proceeds from drilling would help whittle down a $560 million maintenance backlog at state parks.

Landowners lease access to the mineral rights and collect royalty payments from any gas the wells produce.

But if the state doesn't own the rights, it can't make any money.

In many cases, there are old leases that give companies "surface access." This could force the state to allow drilling despite having no mineral rights or chance of royalties.

Wells and Thomas Stewart, executive vice president of the Ohio Oil and Gas Association, said leaseholders could argue that they have the legal rights to drill in some of the state's parks right now.

"It's always been the case that that possibility existed," Stewart said.

Environmental advocates who oppose such drilling say that fact raises a red flag.

"Drilling in state parks is going to make more headaches than money for the state," said Jennifer Miller, spokeswoman for the Ohio chapter of the Sierra Club. "It's just a plain bad idea."

Some of the mineral-rights owners are well-known. Wells said the Army Corps of Engineers holds the rights to thousands of acres, mostly for parks centered on reservoirs, including Alum Creek State Park in central Ohio.

Wells said the federal agency has told him it will not allow drilling. Corps officials did not return calls for comment.

Columbia Gas Transmission Corp. holds leases on much of the mineral rights beneath Mohican, Malabar Farm and Hocking Hills state parks. The company currently uses old wells in the parks as storage sites for natural gas, Wells said.

In an email, the company said it has not subleased rights to drill into the Utica shale beneath any of its storage sites at state parks. The company wrote that it has subleased mineral rights beneath natural-gas storage areas across the United States to oil and gas companies.

In many cases, Wells said, Natural Resources doesn't know who holds the mineral rights or what lease agreements might still apply to sites. To find out, the state would have to perform title searches in county recorder offices statewide.

For example, the state owns the surface rights to 627.5 acres in Tar Hollow State Park, but it has no idea who holds the mineral rights.

"On a case-by-case basis, we'd have to look at the (ownership) history and go from there on what we would allow," Wells said.

Most of the mineral rights that state parks officials have confirmed are concentrated in Salt Fork State Park in Guernsey County. The 20,756-acre state park is surrounded by oil and gas wells.

It's unclear how much money the state could make if it opened state parks to drilling, but Stewart said the income would be substantial.

"It is 34,000 acres," he said. "That's a lot of acreage."

Sen. Keith Faber, a Celina Republican who co-sponsored one of the bills that would allow drilling on public lands, said he would support drilling no matter how much the state stands to make.

"Just because the state doesn't get the money, you shouldn't limit the drilling," said Faber, the second-highest-ranking Republican in the state Senate. "Ohio still benefits from a vibrant oil and gas industry and from the jobs that are created."

Jack Shaner, a lobbyist with the Ohio Environmental Council, said the risks of pollution and ecological harm outweigh the potential economic benefits.

"I think most Ohioans would be outraged to learn that the state may not be able to control what goes on in our parks," Shaner said.

"Instead of figuring ways to allow the industry to scheme their way into our parks, the door should be firmly closed."

Copyright (c) 2011, The Columbus Dispatch, Ohio. Distributed by McClatchy-Tribune Information Services.

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