Court Opinion

ID: 4456687
Source: CourtListenerOpinion
Date Created: 2019-11-18 19:10:48.587267+00
Date Added: 2024-06-11T14:51:18.439037
License: Public Domain

[Cite as Head v. Victor McKenzie Drilling, Inc., 2019-Ohio-4728.]

                                        COURT OF APPEALS
                                       PERRY COUNTY, OHIO
                                    FIFTH APPELLATE DISTRICT

GARY HEAD, et al.                                          JUDGES:
                                                           Hon. W. Scott Gwin, P. J.
        Plaintiffs-Appellees                               Hon. John W. Wise, J.
                                                           Hon. Patricia A. Delaney, J.
-vs-
                                                           Case No. 19-CA-00002
VICTOR MCKENZIE DRILLING, INC.

        Defendant-Appellant                                OPINION

CHARACTER OF PROCEEDING:                               Civil Appeal from the Court of Common
                                                       Pleas, Case No. 18-CV-00092

JUDGMENT:                                              Reversed

DATE OF JUDGMENT ENTRY:                                November 18, 2019

APPEARANCES:

For Plaintiffs-Appellees                               For Defendant-Appellant

DERRICK E. MOOREHEAD                                   SCOTT D. EICKELBERGER
MOOREHEAD LAW OFFICE, LLC                              RYAN H. LINN
58 North Fifth Street                                  KINCAID, TAYLOR & GEYER
Zanesville, Ohio 43701                                 50 North Fourth Street, PO Box 1030
                                                       Zanesville, Ohio 43702-1030
Perry County, Case No. 19-CA-00002                                                         2

Wise, J.

       {¶1}   Defendant-Appellant Victor McKenzie Drilling, Inc. appeals the February 5,

2019, decision of the Perry County Court of Common Pleas.

       {¶2}   Appellees have not filed a brief in this matter.

                        STATEMENT OF THE FACTS AND CASE

       {¶3}   The undisputed facts as set forth by the trial court in its February 5, 2019,

are as follows:

              The Plaintiffs are owners of property in Perry County, which contain

       oil and gas lease agreements. Through the years 2001 through 2010, with

       the exception of three years, Mr. Head received payments from the oil and

       gas well. He did not receive any further payments until October 29, 2018.

       He did not return or cash the check. Mr. Dilts has owned his property since

       1999 and has never received a payment. The lease provides that the

       landowners receive $50.00 per year if the gas is not sold from the premises.

       Those payments have not been received.

              Mr. Gibson has changed the pump on the well three times. The pump

       can be pulled out and put back within two (2) days if it is already built. In

       order to fix the pump, it had to be pulled out of the well, rebuilt, and put back

       in the well to see if it pumps. Mr. Gibson was able to get the pump working

       on this well in April, 2018, which was the same month this lawsuit was filed.

       Mr. Gibson has 60 wells he works on. During the years of 2010 through

       2017, Mr. Gibson testified he was working on the well. Mr. Gibson has paid

       the electric bill and insurance on the well each month. There was a period
Perry County, Case No. 19-CA-00002                                                      3

      of time the well did not produce. He has never been ordered by the state to

      plug the well. After the time and effort to get the well working again, it

      produced 39 barrels in September, 2018. It has made another 11 barrels

      since that time. The 39 barrels produced the amount of $2,397.34. Due to

      the expenses of electric and insurance, the well will become profitable in a

      year. As of the date of the hearing, there were 21 barrels in the tank.

      According to the Defendant, the well is producing in paying quantities based

      upon his work. Mr. Gibson has been in the oil and gas business for 44 years.

             “Courts universally recognize the proposition that a mere temporary

      cessation in the production of a gas or oil well will not terminate the lease

      under a habendum clause of an oil and gas lease where the owner of the

      lease exercises reasonable diligence and good faith in attempting to resume

      production of the well.” Wagner v. Smith, 8 Ohio App. 3d 90, 92, 456 N.E.2d
523 (Fourth Dist. 1982). "A critical factor in determining the reasonableness

      of the operator's conduct is the length of time the well is out of production."

      Id., citing Jath Oil Co. v. Durbin Branch (Okl. 1971), 490 P.2d 1086. In

      addition to the length of time, the Court must consider all attendant

      circumstances. Id., citing Barrett v. Dorr (1965), 140 Ind. App. 295, 212
N.E.2d 29. Courts have ruled that the lessees have not proceeded diligently

      when the production ceases for two years or more. Id. The Appellate Court

      affirmed a termination of a lease where the well had not produced for six

      years, operations had not been maintained and shut-in royalties had not
Perry County, Case No. 19-CA-00002                                                      4

      been paid per the terms of the lease. Moore v. Adams, 2008-0hio-5953, 177

      Oil & Gas Rep. 170 (5th Dist.).

             The Defendant did not exercise reasonable diligence and good faith

      in the seven years the well was not producing in paying quantities. In the

      course of seven years, he changed the pump three times. The pump began

      working in April, 2018, which coincidentally was the same month and year

      this case was filed. In addition, he did not pay the lessors $50.00 per year

      during the years the well was not producing. Paying the electric and

      insurance on the well is not sufficient to show reasonable diligence and

      good faith in attempting to resume production of the well where it was not

      producing for such a significant amount of time.

             The lease agreement expired under its own terms due to lack of

      production of oil and gas in paying quantities. The subject lease is void and

      no longer binding upon the Plaintiffs, the real estate, and any future owners

      of the real estate. A certified copy of this Order recorded of record shall act

      as a release of the Lease Agreement filed in Volume 110, page 756 of the

      Perry County Lease Records covering 47.5 acres.

      {¶4}   The trial court then made the following order:

             Further, the Defendant is Ordered to remove and plug the oil and gas

      well associated with this Lease Agreement and remove any associated lines

      on the Plaintiffs' property.

      {¶5}   Appellant now appeals, assigning the following sole error for review:
Perry County, Case No. 19-CA-00002                                                         5

                               ASSIGNMENT OF ERROR

       {¶6}   “I. THE TRIAL COURT ERRED AS A MATTER OF LAW IN RULING THAT

THE OPERATOR PLUG THE SUBJECT OIL AND GAS WELL AS THAT AUTHORITY

RESTS SOLELY WITHIN THE EXCLUSIVE JURISDICTION OF THE CHIEF OF THE

DIVISION OF OIL AND GAS RESOURCES MANAGEMENT OF OHIO DEPARTMENT

OF NATURAL RESOURCES.”

                                             I.

       {¶7}   Appellant, in its sole assignment of error, argues that the trial court did not

have jurisdiction to order that it plug the well. We agree.

       {¶8}   We review the issue of subject-matter jurisdiction de novo. State ex rel. Post

v. Speck, 185 Ohio App. 3d 828, 2010–Ohio–105, 925 N.E.2d 1042, ¶ 10 (3d Dist.).

       {¶9}   This Court previously addressed this issue in Helms v. Whitney, Fifth Dist.

Holmes App. No. 13CA014, 2014-Ohio-2413, wherein we held:

              R.C. 1509.02 states, in relevant part, as follows: “There is hereby

       created in the department of natural resources the division of oil and gas

       resources management, which shall be administered by the chief of the

       division of oil and gas resources management. The division has sole and

       exclusive authority to regulate the permitting, location, and spacing of oil

       and gas wells and production operations within the state, ...” As noted by

       the court in State, ex rel. Morrison v. Beck Energy Corp., 9th Dist. Summit

       No. 2593, 2013–Ohio356, “R.C. Chapter 1509 thus provides a

       comprehensive regulatory scheme for oil and gas wells operations in the

       state.” Id at paragraph 17.
Perry County, Case No. 19-CA-00002                                                     6

             R.C. 1509.062, which is cited by the trial court, states, in relevant

      part, as follows: “(A)(1) The owner of a well that has not been completed, a

      well that has not produced within one year after completion, an existing well

      that is not a horizontal well and that has no reported production for two

      consecutive reporting periods as reported in accordance with section

      1509.11 of the Revised Code, or an existing horizontal well that has no

      reported production for eight consecutive reporting periods as reported in

      accordance with section 1509.11 of the Revised Code shall plug the well in

      accordance with section 1509.12 of the Revised Code, obtain temporary

      inactive well status for the well in accordance with this section, or perform

      another activity regarding the well that is approved by the chief of the

      division of oil and gas resources management.” (Emphasis added). In turn,

      R.C. 1509.12 provides, in relevant part, as follows: “(B) When the chief finds

      that a well should be plugged, the chief shall notify the owner to that effect

      by order in writing and shall specify in the order a reasonable time within

      which to comply. No owner shall fail or refuse to plug a well within the time

      specified in the order. Each day on which such a well remains unplugged

      thereafter constitutes a separate offense.” (Emphasis added).

             Moreover, R.C. 1509.13(A) states that a person plugging and

      abandoning a well must have a permit to do so issued by the chief.

             When the meaning of the statute is “clear and unambiguous,” the

      statute is to be applied “as written.” Boley v. Goodyear Tire & Rubber Co.,

      125 Ohio St. 3d 510, 2010–Ohio–2550, 929 N.E.2d 448, ¶ 20. As noted by
Perry County, Case No. 19-CA-00002                                                           7

       appellants, the above statutes clearly and unambiguously “position the

       Chief as the sole initial decider of all issues related to the plugging of Ohio

       wells.” We find, therefore, that the trial court did not have jurisdiction to order

       the well plugged.

       {¶10} Based on the foregoing and a review of R.C. §1509.13, §1509.12 and

§1509.062, we find the trial court in this matter was without jurisdiction to order the well

plugged.

       {¶11} Appellant’s sole assignment of error is sustained.

       {¶12} Accordingly, the portion of the trial court's February 5, 2019, Judgment Entry

ordering Appellant to plug the well is hereby reversed.

By: Wise, J.

Gwin, P. J., and

Delaney, J., concur.

JWW/d 1022