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Paczewski v. Antero Res. Corp.

Court of Appeals of Ohio, Seventh Appellate District, Monroe County

June 19, 2019, Decided

Case No. 18 MO 0016

Opinion

D'APOLITO, J.

 [*P1]  Appellants Jeffrey and Chanda Paczewski appeal the judgment entry of the Monroe County Court of Common Pleas granting the motions to dismiss filed by Appellees, Antero Resources Corporation ("Antero"), G-R Contracting, Inc. ("G-R"), and Richard Simmers, Chief of the Division of Oil and Gas Resources ("Division") in this action for termination of an oil and gas lease and damages. Appellants also appeal the trial court's denial of their subsequent Civ.R. 60(B) motion.

 [*P2]  Appellants concede that the unitization order issued by the Division pursuant to R.C. 1509.28 ("Order") is valid, but argue [**2]  nonetheless that the Order constitutes a breach of the oil and gas lease at issue in this case, as well as an unconstitutional taking of the property and minerals subject to the lease without just compensation. For the following reasons, the judgment of the trial court is affirmed.

UNITIZATION AND R.C. 1509.28

 [*P3]  ] Under the common-law rule of capture, a landowner always has an incentive to quickly drill his own well, regardless of the waste, because if he fails to capture the resources, his neighbor will drill his own well and licitly take the minerals for himself. With each new drill site the reservoir loses pressure, leaving much of the oil unobtainable. Conflicting hydraulic fracturing operations can likewise result in unnecessary drilling with less overall output. Kerns v. Chesapeake Exploration, L.L.C., 762 Fed. Appx. 289, 2019 WL 423140 (2019 6thCir.).

 [*P4]  "Unitization" refers to the consolidation of minerals or working interests covering all or part of a common source of supply. Kramer and Martin, THE LAW OF POOLING AND UNITIZATION, § 1.02 (LexisNexis Mathew Bender 2016). Unitization avoids disorderly and wasteful production practices by allowing the reservoir's characteristics, rather than man-made property lines, to govern development. Unitization minimizes surface disturbance [**3]  and related environmental concerns. It also increases the ultimate recovery of oil and gas for all of the unit's owners, who share in the resulting production on a just and equitable basis. Champion, Forming the Unit Why Unitize? The Industry Perspective, Rocky Mtn. Min. L. Inst. 5A-1 (2006).

 [*P5]  "Pooling" is the joining together of small tracts or portions of tracts for the purpose of having sufficient acreage to receive a well drilling permit under the relevant state or local spacing laws and regulations, and for the purpose of sharing production by interest owners in the pooled unit. Kramer and Martin at § 1.02. ] Under Ohio's statutory scheme, R.C. 1509.26 authorizes voluntary pooling agreements to form drilling units which conform to the minimum acreage and distance requirements.

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2019-Ohio-2641 *; 2019 Ohio App. LEXIS 2799 **; 2019 WL 2722600

JEFFREY PACZEWSKI ET AL., Plaintiffs-Appellants, v. ANTERO RESOURCES CORPORATION ET AL., Defendants-Appellees.

Subsequent History: Discretionary appeal not allowed by Paczewski v. Antero Res. Corp., 157 Ohio St. 3d 1441, 2019-Ohio-4211, 2019 Ohio LEXIS 2140, 132 N.E.3d 703 (Ohio, Oct. 15, 2019)

Prior History:  [**1] Civil Appeal from the Court of Common Pleas of Monroe County, Ohio Case No. 2018-151.

Disposition: Affirmed.

CORE TERMS

Lease, unitization, pooling, trial court, oil, drilling, oil and gas, minerals, landowner, deletion, parties, lessee, silent, just compensation, assigned error, rights, motion to dismiss, regulation, resources, tract, correlative right, oil and gas lease, property interest, private property, breach of lease, authorizes, provisions, contracts, Courts

Energy & Utilities Law, Discovery, Exploration & Recovery, Rule of Capture, Pooling & Unitization, Compulsory Pooling, Voluntary Pooling, Civil Procedure, Appeals, Standards of Review, De Novo Review, Pleading & Practice, Pleadings, Rule Application & Interpretation, Complaints, Requirements for Complaint, Defenses, Demurrers & Objections, Motions to Dismiss, Failure to State Claim, Judgments, Relief From Judgments, Excusable Mistakes & Neglect, Abuse of Discretion, Oil, Gas & Mineral Interests, Contracts Law, Contract Interpretation, Intent, Severability, Compulsory Unitization, Voluntary Unitization, Constitutional Law, Bill of Rights, Fundamental Rights, Eminent Domain & Takings, Oil, Gas & Mineral Interests, Conveyances, Mineral Interests, Constitutional Constraints, Governments, Local Governments, Police Power, Adverse Possession & Trespass, Surface Use Interests, Regulators, Public Utility Commissions, Authorities & Powers, Real Property Law, Inverse Condemnation, Regulatory Takings