February 7, 2013

Ohio Supreme Court: State Oil & Gas Commission Not Authorized to Review Drilling Permits
Based on the Ohio Supreme Court’s recent ruling in Chesapeake Exploration, L.L.C. v. Oil & Gas Comm ., Ohio property owners cannot appeal the issuance of oil and gas drilling permits by the Ohio Division of Mineral and Gas Resources Management (the “Division”) to the Ohio Oil and Gas Commission (the “Commission”). The court’s ruling renders uncertain what recourse, aside from litigation, is available to property owners adversely affected by drilling permits issued to “fracking” companies. Chesapeake Exploration arose when the Chief of the Division issued an oil and gas drilling permit to Chesapeake Exploration in March 2012. The owner of the property, Summitcrest, Inc., subsequently filed an appeal with the Commission, a five-member advisory council appointed by the Governor, challenging the drilling permit. In response, the Division filed a motion to dismiss. Chesapeake intervened and joined the motion.
Rafael P. McLaughlin

On July 12, 2012, the Commission denied the motion to dismiss and proceeded to review the merits of the appeal. Chesapeake then filed an action in the Ohio Supreme Court seeking a writ of prohibition to prevent the Commission from exercising further jurisdiction. Before the Supreme Court took any action, however, the Commission decided the merits of Summitcrest’s appeal and affirmed the issuance of the drilling permit. The Commission then filed a motion in the Supreme Court asking the court to dismiss Chesapeake’s prohibition, claiming the action was moot since it had affirmed Chesapeake’s drilling permit. The court denied the motion and took the matter under consideration. The issue before the Court was whether Ohio Revised Code Section 1509, which governs oil and gas regulation in Ohio, gives the Commission the authority to decide appeals of drilling permits issued by the Division. Section 1509.36 confers general authority on the Commission to hear appeals of all “orders” of the Chief of the Division: “[a]ny person adversely affected by an order by the chief of the division … may appeal to the oil and gas commission for an order vacating or modifying the order.” Section 1509.06(F), however, states that “the issuance of a permit shall not be considered an order of the chief.” Accordingly, the court ruled that because the Chief’s issuance of a drilling permit to Chesapeake did not constitute an “order,” the Commission “patently and unambiguously lack[ed] jurisdiction” to review the Chief’s decision.

Brian P. Nally

Consistent with the increase in shale drilling in eastern Ohio, permit challenges have also been on the rise. The court’s ruling in Chesapeake Exploration, however, leaves uncertain what recourse is available to property owners who face the prospect of unwanted “fracking” on their property or adjoining land. Absent an amendment to Ohio Revised Code Chapter 1509 by the General Assembly, landowners may have no choice but to undertake litigation in county courts, a potentially costly and prolonged process. If you have any questions concerning Chesapeake Exploration, L.L.C. v. Oil & Gas Comm., or have any questions with respect to oil or natural gas exploration, leasing or other property rights, please contact a member of our Oil, Natural Gas & Utilities Practice Group.
Cleveland Rafael McLaughlin rmclaughlin@reminger.com 101 W. Prospect Avenue Suite 1400 Cleveland, OH 44115 Phone: 216-430-2171 Fax: 216-687-1841 Cleveland Brian P. Nally bnally@reminger.com 101 W. Prospect Avenue Suite 1400 Cleveland, OH 44115 Phone: 216-430-2106 Fax: 216-687-1841 Columbus Gregory D. Brunton gbrunton@reminger.com 65 East State St., 4th Floor Capitol Square Columbus, OH 43215 Phone: 614-232-2632 Fax: 614-232-2410 Cincinnati Vince Antaki vantaki@reminger.com 525 Vine Street, Suite 1700 Cincinnati, OH 45202 Phone: 513-455-4031 Fax: 513-721-2553

Sandusky James E. Peters jpeters@reminger.com 237 W. Washington Row Second Floor Sandusky, OH 44870 Phone: 419-609-4235 Fax: 419-626-4805

Toledo David Hudson dhudson@reminger.com One Seagate Suite 1600 Toledo, OH 43604 Phone: 419-245-3753 Fax: 419-243-7830 THIS IS AN ADVERTISEMENT

Youngstown Robert S. Yallech ryallech@reminger.com 11 Federal Plaza Central Suite 300 Youngstown, OH 44503 Phone: 330-742-6003 Fax: 330-744-7500

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