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Harrington Hoppe Builds Gas Practice Pipelines
YOUNGSTOWN, Ohio -- Alan Wenger, an experienced attorney with a focus on real estate law with Harrington, Hoppe & Mitchell Ltd., began to take notice in 2009 of the complex developments emerging in Pennsylvania related to oil and gas exploration there.
As giant energy companies descended on the central and southwestern parts of the commonwealth to tap the Marcellus shale, Wenger held the suspicion that some of this activity would move into northeastern Ohio.
He was right. By the next year, his firm started to get phone calls from landowners asking its legal team to review lease agreements for new oil and gas exploration in Columbiana and southern Mahoning counties. Most were offers from smaller land companies that saw an opportunity to move in and acquire acreage and then sell their positions to larger concerns.
"We tried to study the issues that were different with horizontal drilling and the leases that were being signed in Pennsylvania and New York," Wenger says. Attorneys from the firm attended meetings and seminars in Pennsylvania that proved very informative, he recalls, just as the office started to be deluged with requests about oil and gas leases.
"It hit with a vengeance in 2010," Wenger says. This time, however, energy behemoths such as Chesapeake Energy Corp. moved in to stake their positions for drilling opportunities in the Utica shale, strata of rock that lie beneath the thinner Marcellus formation in Ohio.
As the appetite for oil and gas leases grew, so too did demand for legal counsel and the desire to make sure landowner's rights were protected. As such, Harrington Hoppe moved to expand its focus on oil and gas, added two attorneys with backgrounds in title research, real estate and the energy industry, and created an oil and gas division within its company.
And, some of the firm's seasoned attorneys have adapted their skills and knowledge to accommodate the oil and gas as the market, Wenger says. "Some of our lawyers have come up to speed and are very active in the field," he adds.
Gina Strickland, the most recent addition to the firm, has a background in records and title research for a land broker for Chesapeake Energy. "We traced property back looking to prior mineral reservations, prior oil and gas leases," she says. "When I walked into here, it was essentially the same kind of work I was doing, just more so, learning the oil and gas laws in the state of Ohio."
About a year and a half ago, the firm hired Stephen Kocon, who applied his education in real estate law to the oil and gas industry. “It seemed like a tremendous opportunity, and applies the same basic skill set,” he says.
Tom Carey, a longtime attorney at the firm, says that Harrington Hoppe had a real need to recruit some "hands-on people who were familiar with researching the records and familiar with the various procedures and the various county courthouses.”
In many cases, those who signed leases with an energy company might still have problems because they may not hold free and clear title to the mineral rights on that property, Carey adds.
BP for example, signed a bulk agreement with the Associated Landowners of the Ohio Valley, or ALOV, that included more than a thousand landowners in Trumbull County last year, encompassing more than 80,000 acres. However, BP also retained the right to inspect the leases to ascertain whether the landowner held clear title to the mineral rights.
"Many of them did not," Carey says. "So, we're doing a lot of work trying to clean up these titles."
Most often, Carey says, titles are clouded because of past leases on land that has, over the years, been subdivided. Say, for example, a landowner leased 100 acres 50 or 60 years ago to a gas company and over the years, that 100 acre-plot is sold off in five-acre sections. The new owners may not be aware of that old lease, he says.
"When they research your title, they’re going back to the early 1800s," Strickland says. "You're pulling tax maps, and making sure you're tracing back the right property."
That could cause problems between the landowner and those who say they may hold title to the lease, Carey adds.
It’s also up to the energy company on whether the property's title is clean enough to be considered as part of a larger drilling unit, Carey says.
Usually, if the mineral reservation dates to the turn of the 20th century and a well hasn't been drilled since, the energy company would probably move forward with drilling and production, Kocon says. “It's when you get a little closer,” he explains, “and there was a well plugged and abandoned, they want the record officially released.”
The oil and gas division's clientele stretches across the Utica shale basin, from the Mahoning Valley to Belmont County in the southeastern portion of the state, Wenger says.
Initially, the rush to acquire leasehold agreements drove bonus prices through the roof – some topping $6,000 an acre by 2011, Wenger says. That has tapered off somewhat, and the average price per acre has fallen to around $3,000. Much of Wenger's legal work pertained to examining these leases on behalf of landowner groups such as ALOV.
Now, Wenger reports, most of the legal work is turning toward royalty and infrastructure issues as some of these new wells begin production. “I’m assuming there’ll be thousands of those in the coming years," he says.
Many landowners are less than happy with the early stages of development and production. That’s mostly because Ohio lacks the pipeline network needed to bring those wells already drilled into production, Wenger says.
The most important aspect of the oil and gas division is ensuring that landowners are protected, the attorney emphasizes.
"We've been on the landowner side almost exclusively from the beginning," he continues. Although the law practice is well-known for its corporate work, in this instance Harrington Hoppe has carved out a market by representing smaller landholders instead of the large energy corporations.
Big energy companies have deep pockets and have the means to draw out litigation where smaller landowners simply lack these resources, Wenger says.
"It's been challenging because most landowners gulp pretty hard when they see what legal fees can be in any sort of lengthy negotiation," he says. It's therefore beneficial for the clients to combine their interests with neighbors who likely face the same issues. It is equally important that groups such as ALOV stay together so they can collectively address future issues related to gas and oil exploration that arise.
“Landowners are getting their wallets out and trying to figure out how to protect their rights,” he says. “It's very much a David versus Goliath scenario.”
Copyright 2012 The Business Journal, Youngstown, Ohio.
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