Watch the video: Gateway Royalty co-founder and president Chris Oldham discusses how Ohio House Bill 152 will hurt mineral owners.

 

Less royalties, fewer protections for mineral owners

A forced-pooling bill before the Ohio House Energy and National Resources Committee will have devastating effects on Eastern Ohio landowners.
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How does HB152 hurt landowners?

House Bill 152 aims to revise the state law governing how mineral owners are forced into pooled units by oil and gas companies. If this bill passes, the results would give more power to oil and gas companies, enabling them to force Ohio landowners to hand over their minerals for less than fair market value.

Based on recent versions of the bill, key negatives for mineral owners include:

1

Loopholes for companies

Does not account for clever tactics operators can use to pay mineral owners less in royalties by deducting costs, such as selling oil and gas to a marketing affiliate or adding a “market enhancement” clause to a gross proceeds lease.
2

No bonus payments

Mineral owners will not be paid a bonus when they are force pooled into a unit.
3

Low royalty rate

Sets a royalty rate of 12.5% for all forced-pool unleased mineral owners. The norm in recent years is in the range of 16-20%.
4

More forced pooling

Allows an oil and gas producer to submit an application for unit operation when only 65% of the acres in the proposed unit are under lease. That means 35% of acres can be forced into the unit.

Tipping the scales of power

In its current form, this bill is designed to ensure oil and gas companies get more money and mineral owners get less. This bill weakens the negotiating position of all unleased mineral owners in Ohio, and will diminish the value of their mineral estate for generations to come.
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What needs to change in HB 152?

Here’s how Gateway Royalty suggests changing this bill to better protect Ohio landowners:
1
Add a bulletproof provision to prevent deductions

The only way a mineral owner can be sure no costs will be deducted from their royalties is for the lease to say royalties will be on “gross proceeds paid by the first unaffiliated third-party buyer in an arms-length transaction with no deduction of any costs.”

This one-sentence royalty provision prevents operators from taking costs through affiliate sales and market enhancements.

2
Make bonus payments fair

Make the bonus amount the average bonus for all acreage in the unit, excluding acreage held by production.

This would put the forced-pooled mineral owner on the same footing as the other mineral owners in the unit, large and small

3
Base royalty rate rises on leased owners

Make the royalty percentage for force-pooled mineral owners the average of the rates leased owners in the unit are receiving.

This would treat forced-pooled mineral owners, both large and small, the same as their neighbors.

4
Require a higher percentage to pool

Instead of 65%, the oil and gas producer should be required to have at least 85% of the acreage under lease to submit an application for unit operation.

This will require the oil and gas producer to negotiate with more mineral owners and create a more accurate market value for calculating the royalty percentage and bonus amount.

A lower percentage just allows producers to threaten holdouts with forced pooling if they don’t accept the bad terms demanded by the operator.

Take action for change

Are you an Ohio mineral owner? Contact your state representative today and let them know you stand against this bill in its current form. Tell them what you would like to see changed in order for it to move forward. Make your voice heard!
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Updates from Gateway Royalty on HB 152