Oil and Gas
State lawmakers have been busy crafting new legislation since the 133rd General Assembly took shape in January. As promised, here are some highlights and summaries of the pending bills that relate to agriculture in Ohio:
- Senate Bill 57, titled “Decriminalize hemp and license hemp cultivation.” The Ohio Senate Agriculture and Natural Resources Committee held a second hearing about the bill on March 13th, and numerous farm organizations spoke in support of the bill. As of now the language of the bill has not changed since we last discussed Ohio’s hemp bill in a blog post, but some changes could be made when the bill is sent out of the committee. Click HERE for more information about the bill, and HERE for the current official bill analysis.
- Senate Bill 2, titled “Create state watershed planning structure.” The one sentence bill expresses the General Assembly’s intent “to create and fund a comprehensive statewide watershed planning structure to be implemented at the local soil and water conservation district level.” It further expresses the intent “to provide authorization and conditions for the operation of watershed programs implemented by local soil and water conservation districts.” Click HERE for more information about the bill.
- House Bill 24, titled “Revise humane society law.” The bill would make various changes to Ohio’s Humane Society Law, including changes to enforcement powers, appointment and removal procedures, training, and criminal law applicability. One of the significant changes would expand to all animals the seizure and impoundment provisions that currently apply only to companion animals. This change would allow an officer to seize and impound any animal that the officer has probable cause to believe is the subject of a violation of Ohio’s domestic animal law. At the same time, the bill would remove certain provisions from current law that pertain to harm to people, thereby focusing the new law solely on the protection of animals. Click HERE for more information about the bill, and HERE for the current official bill analysis.
- House Bill 124, titled “Allow small livestock on residential property.” Under this bill, counties and townships would no longer be allowed to restrict via zoning certain noncommercial agricultural activities on residential property conducted for an individual’s personal use and enjoyment. Instead, owners of residential property that is not generally agricultural would be allowed to keep, harbor, breed, and maintain small livestock on their property. Small livestock includes goats, chickens and similar fowl, rabbits, and similar small animals. Roosters are explicitly excluded from this definition. However, the owner would lose his or her rights to keep small livestock if the small livestock create a nuisance, are kept in a manner that causes noxious odors or unsanitary conditions, are kept in a building that is unsafe as defined under the statute, or if the number of animals exceeds a certain ratio of animals to acres as defined under the statute. The ratio may be modified by the local jurisdiction to allow for more animals per acre. Click HERE for more information about the bill.
- House Bill 55, titled “Require oil and gas royalty statements.” Owners of oil and gas wells would have to provide mandatory reports to holders of royalty interests under this bill. Current law only requires disclosure of the information upon request, but this bill would make the disclosure mandatory. The bill would expand the types of information that the reports must include, and allows the holder of royalty interests to sue to enforce the new rights. Click HERE for more information about the bill, and HERE for the current official bill analysis.
- House Bill 94, titled “Ban taking oil or natural gas from bed of Lake Erie.” The Ohio Department of Natural Resources handles oil and gas permitting in Ohio, and this bill would bar the agency from issuing permits or making leases “to take or remove oil or natural gas from and under the bed of Lake Erie.” Click HERE for more information about the bill.
- House Bill 95, titled “Revise Oil and Gas Law about brine and well conversions.” The bill would ban the use of brine in secondary oil and gas recovery operations. It would also ban putting brine, crude oil, natural gas, and other fluids associated with oil and gas exploration in ground or surface waters, on the ground, or in the land. This restriction would apply even if the fluid received treatment in a public water system or other treatment process. Further, brine disposal permits would not be allowed to utilize underground injection or disposal on the land or in surface or ground water. Click HERE for more information about the bill.
- House Bill 100, titled “Revise requirements governing abandoned mineral rights.” Ohio has a statute that governs when a surface owner can take the mineral rights held or claimed by another by operation of law, essentially because of the passage of time. The bill would require a surface owner to attempt to give notice to a holder of mineral rights by personal service, certified mail, or if those are unsuccessful then by publication. Currently, if a holder of mineral rights believes that his or her interest remains valid, he or she may file an affidavit that complies with Ohio Revised Code (ORC) § 5301.56(H)(1) in the county property records. If the holder of mineral rights fails to file an affidavit, the surface owner may then file an affidavit under ORC § 5301.56(H)(2) that effectively vests the mineral rights in the surface owner. The new law would allow the surface owner to challenge a holder of mineral rights’ ORC § 5301.56(H)(1) affidavit. This process would require the surface owner to obtain a court determination that the affidavit is invalid. Then the surface owner would be able to file the new ORC § 5301.56(H)(3) affidavit to obtain the mineral rights. Click HERE for more information about the bill.
There are also some bills that could have some indirect implications in the agricultural and natural resources sectors. These indirect effects make this next set of bills noteworthy, or at least interesting.
- Senate Bill 1, titled “Reduce number of regulatory restrictions.” The bill would require each state agency to count its total number of regulatory restrictions, and then reduce the number of restrictions based on that baseline by 30% by 2022. Once an agency meets its reduction target, it would not be able to increase the number of regulatory restrictions without making additional cuts elsewhere. The bill would target agency rules that require or prohibit specific acts. Click HERE for more information about the bill, and HERE for the current official bill analysis.
- Senate Bill 21, titled “Allow corporation to become benefit corporation.” Much like the LLC merged the principles of a corporation and a partnership, the benefit corporation merges the principles of a corporation and a non-profit. A benefit corporation must follow the formalities of a corporation, but the articles of incorporation can designate a social purpose for the business to pursue, such as promoting the environment through sustainable practices. One of the unique traits of benefit corporations is that benefit corporations cannot be held liable for damages for failing to seek, achieve, or comply with their beneficial purpose, or even obtain a profit; however, certain individuals may seek a court ordered injunction to force the company to pursue those interests. In a sense, the benefit corporation reduces the traditional fiduciary duties expected in general corporations. The bill purports to maintain the traditional fiduciary duties, but by allowing a social purpose other than profit to guide decisions, the traditional fiduciary duties are in effect modified. Click HERE for more information about the bill, and HERE for the current official bill analysis.
- House Bill 33, titled “Establish animal abuse reporting requirements.” Under the bill, veterinarians and social service professionals would have to report their knowledge of abuse, cruelty, or abandonment toward a companion animal. Social service professionals would include licensed counselors, social workers, and marriage or family therapists acting in their professional capacity. Companion animals include non-wild animals kept in a residential dwelling, along with any cats and dogs kept anywhere. These individuals would be required to report the neglect to law enforcement, agents of the county humane society, dog wardens, or other animal control officers. Further, dog wardens, deputy dog wardens, and animal control officers would become mandatory reporters of child abuse. Lastly, the bill explains the information that must be reported, the timing, and the penalties for failure to comply. Click HERE for more information about the bill, and HERE for the current official bill analysis.
- House Bill 48, titled “Create local government road improvement fund.” The bill proposes to deposit into a new local government road improvement fund some of the surplus funds generated when the state spends less than it appropriates in the general revenue fund. Under current law, this surplus is split between the budget stabilization fund, also known as the “rainy day fund,” and the income tax reduction fund, which would redistribute remaining surplus to taxpayers. Click HERE for more information about the bill.
- House Bill 54, titled “Increase tax revenue allocated to the local government fund.” The bill would increase the proportion of state tax revenue allocated to the Local Government Fund from 1.66% to 3.53%. Click HERE for more information about the bill.
- House Bill 74, titled “Prohibit leaving junk watercraft or motor uncovered on property.” The bill would allow a sheriff, chief of police, highway patrol officer, or township trustee to send notice to a landowner to remove a junk vessel or outboard motor within 10 days. The prohibition applies to junk vessels, including watercraft, and outboard motors that are three years or older, apparently inoperable, and with a fair market value of $1,500 or less. Failure to cover, house, or remove the item in ten days could result in conviction of a misdemeanor. Click HERE for more information about the bill, and HERE for the current official bill analysis.
As more bills are introduced, and as these bills move along, stay tuned to the Ag Law Blog for updates.
We are full steam ahead in 2019, and so far we have held to our new year’s resolutions. However, we want to take a quick look in the rearview mirror. Ohio legislators passed a number of bills in 2018 that affect Ohio agriculture. They range from multi-parcel auction laws to broadband grants, and oil & gas tax exemptions to hunting licenses. Here are some highlights of bills that the Ohio General Assembly passed and former Governor Kasich signed in 2018.
- House Bill 500, titled “Change township law.” As mentioned in a previous blog post, the Ohio General Assembly made a number of generally minor changes to Ohio’s township laws with House Bill 500. The changes included, among other things, requiring a board of township trustees to select a chairperson annually, modifying how vacating township roads and name changes are carried out, allowing fees for appealing a zoning board decision, clarifying how a board can suspend a member of a zoning commission or board of appeals, and removing the requirement for limited home rule townships to submit a zoning amendment or resolution to a planning commission. To learn about more of the changes that were made, visit the Ohio General Assembly’s H.B. 500 webpage here.
- House Bill 480, titled “Establish requirements for multi-parcel auctions.” The Ohio Department of Agriculture regulates auctions, and H.B. 480 gave ODA authority to regulate a new classification of auctions: the multi-parcel auction. Revised Code § 4707.01(Q) will define these as “any auction of real or personal property in which multiple parcels or lots are offered for sale in various amalgamations, including as individual parcels or lots, combinations of parcels or lots, and all parcels or lots as a whole.” For more information, visit the Ohio General Assembly’s H.B. 480 webpage here.
- House Bill 522, titled “Allow outdoor refreshment area to include F permit holders.” A municipality or township may create a “designated outdoor refreshment area” where people may walk around the area with their opened beer or liquor. Previously, only holders of certain D-class permits (bars, restaurants, and clubs) and A-class permits (alcohol manufacturers) could allow their patrons to partake in a designated open area. H.B. 522 will allow holders of an F-class liquor permit to also allow their patrons to roam in the designated area with an open container. F-class liquor permits are for festival-type events of a short duration. However, holders of either permits D-6 (allowing Sunday sales) or D-8 (allowing sales of growlers of beer or of tasting samples) will no longer be eligible for the open container exception. For more information, visit the Ohio General Assembly’s H.B. 522 webpage, here.
- Senate Bill 51, titled “Facilitate Lake Erie shoreline improvement.” As mentioned in a previous blog post, the primary purpose of Senate Bill 51 was to add projects for Lake Erie shoreline improvement to the list of public improvements that may be financed by a special improvement district. S.B. 51 also instructed the Ohio Department of Agriculture (“ODA”) to establish programs to assist in phosphorous reduction in the Western Lake Erie Basin. This adds to the previous instructions given to ODA in S.B. 299 regarding the Soil and Water Phosphorous Program. S.B. 51 further provided funding for a number of projects, ranging from flood mitigation to MLS stadium construction. For more information, visit the Ohio General Assembly’s S.B. 51 webpage here.
- Senate Bill 299, titled “Finance projects for protection of Lake Erie and its basin.” Largely an appropriations bill to fund projects, S.B. 299 primarily targeted water quality projects and research. ODA received an additional $3.5 million to support county soil and water conservation districts in the Western Lake Erie Basin, plus $20 million to establish water quality programs under a Soil and Water Phosphorous Program. Further, the Ohio Department of Natural Resources (“ODNR”) received an additional $10 million to support projects that divert dredging materials from Lake Erie. Stone Laboratory, a sea grant research program, received an additional $2.65 million. The bill also created a mentorship program called OhioCorps, and set aside money for grants to promote broadband internet access. For more information, visit the Ohio General Assembly’s S.B. 299 webpage here.
- Senate Bill 257, titled “Changes to hunting and fishing laws.” ODNR may now offer multi-year and lifetime hunting and fishing licenses to Ohio residents under S.B. 257. Further, the bill creates a resident apprentice senior hunting license and an apprentice senior fur taker permit, and removes the statutory limits on the number of these permits a person may purchase. The bill also creates a permit for a Lake Erie Sport Fishing District, which may be issued to nonresidents to fish in the portions of Lake Erie and connected waters under Ohio’s control. For more information, visit the Ohio General Assembly’s S.B. 257 webpage here.
- House Bill 225, titled “Regards plugging idle or orphaned wells.” H.B. 225 creates a reporting system where a landowner may notify ODNR’s Division of Oil and Gas Resources about idle and orphaned oil or gas wells. Upon notification, the Division must inspect the well within 30 days. After the inspection, the Division must determine the priority for plugging the well, and may contract with a third party to plug the well. To fund this, the bill increases appropriations to the Oil and Gas Well Fund, and increases the portion of the fund that must go to plugging oil and gas wells. For more information, visit the Ohio General Assembly’s H.B. 225 webpage here.
- House Bill 430, titled “Expand sales tax exemption for oil and gas production property.” Certain goods and services directly used for oil and gas production have been exempted from sales and use taxes, and H.B. 430 clarifies what does and does not qualify for the exemption. Additionally, property used to control water pollution may qualify for the property, sales, and use tax exemptions if approved by ODNR as a qualifying property. H.B. 430 also extends the moratorium on licenses and transfers of licenses for fireworks manufacturers and wholesalers. For more information, visit the Ohio General Assembly’s H.B. 430 webpage here.
- Senate Bill 229, titled “Modify Board of Pharmacy and controlled substances laws.” The Farm Bill’s opening the door for industrial hemp at the federal level has led to a lot of conversations about controlled substances, which we addressed in a previous blog post. Once its changes take effect, Ohio’s S.B. 229 will remove the controlled substances schedules from the Ohio Revised Code, which involve the well-known numbering system of schedules I, II, III, IV, and V. Instead, the Ohio Board of Pharmacy will have rulemaking authority to create schedules and classify drugs and compounds. Prior to the removal of the schedules from the Revised Code, the Board of Pharmacy must create the new schedules by rule. S.B. 229 also mentions cannabidiols, and lists them as schedule V under the current system if the specific cannabidiol drug has approval from the Food and Drug Administration. For more information, visit the Ohio General Assembly’s S.B. 229 webpage here.
The end of 2018 effectively marked the end of the 132nd Ohio General Assembly, and 2019 marks the start of the 133rd Ohio General Assembly. Any pending bills from the 132nd General Assembly that were not passed will have to be reintroduced if legislators wish to proceed with those bills. Stay tuned to the Ag Law Blog for legal updates affecting agriculture from the Ohio General Assembly.
The Ohio House of Representatives unanimously passed a bill today that should make it easier to plug unused oil and gas wells in Ohio. The legislation also proposes a significant increase in the amount of funds available for doing so, from 14% to 45% of the state’s Oil and Gas Well Fund.
Under the proposed law, a landowner would be able to report an idle and orphaned well to the Chief of the Division of Oil and Gas Resources, who must inspect the well within 30 days and classify the well as distressed high priority, moderate medium priority or maintenance low priority for purposes of sealing the well or restoring the land surface at the well site. The legislation also lightens several procedures the Chief currently must follow before plugging a well, such as determining ownership and legal interests in the well, the oil and gas lease related to the well, and any equipment at the well. The Chief would not be required to search beyond 40 years to determine ownership and legal interests. Several procedures regarding the contracts entered into for restoration or plugging of a well would also change.
House Bill 225, proposed by Rep. Andy Thompson (R-Marietta) now goes to the Ohio Senate for consideration. Read more about the bill here.
Longstanding complaints against Rover Pipeline's environmental practices while constructing an interstate natural gas pipeline across Ohio recently culminated in a lawsuit against the company. Attorney General Mike Dewine filed the suit in Stark County on behalf of the Ohio EPA, alleging that Rover illegally discharged drilling fluids, sediment-laden storm water and several million gallons of drilling fluids into Ohio waters, including wetlands in Stark County. The state seeks a court order requiring Rover to apply for state permits, comply with environmental plans approved and ordered by the Ohio EPA, and pay civil penalties of $10,000 per day for each violation.
To read more about the state's claims visit this post by our partner, the National Agricultural Law Center.
Written by Chris Hogan, Law Fellow, OSU Agricultural & Resource Law Program
Several pipeline projects are crisscrossing the state. While some landowners are just seeing equipment and workers show up on their property, others are seeing pipelines be buried and the land being reclaimed. Some Ohio landowners question whether pipelines on their property and reclamation of the land are being carried out properly.
Safety Issues Related to Construction of Pipelines
In certain circumstances, landowners with completed pipelines on their property can contact the Public Utilities Commission of Ohio (PUCO) with their concerns. PUCO has the authority to oversee safety issues on completed pipelines in Ohio. If a landowner is concerned that an existing pipeline on their property has a legitimate safety issue, that landowner should contact PUCO to report suspected safety issues. PUCO inspectors may issue a noncompliance letter to pipeline companies, if a violation is discovered.
If the landowner specifically suspects that the pipeline company is not following recommended standards and construction specifications, local Soil and Water Conservation Districts or the Ohio Department of Agriculture (ODA) may be able to assist. By law ODA must cooperate with other agencies to protect the agricultural status of rural lands adjacent to projects such as pipelines. ODA publishes model pipeline standard and construction specifications intended to limit the impact of construction of a pipeline on agricultural productivity.
Contract Disagreement Issues (Non-Safety Issues)
If a landowner has an issue that is not related to safety, that issue may be addressed in the easement agreement between the landowner and the pipeline company. A pipeline easement is a contract. Both parties agree to uphold their obligations under the contract. Essentially, the landowner agrees to provide subsurface land and access rights to a pipeline company in return for monetary compensation.
Of course, an easement is much more complicated than that. As part of this contractual relationship, a landowner has the right to request that the pipeline company uphold their duties under the contract. If a landowner doesn’t believe that a pipeline company is following the terms of an easement, the landowner has the right to enforce the agreement. While the landowner may seek an attorney to do this, it may be best to work with the pipeline company first.
Landowners should consider keeping detailed notes of issues as they arise. For example, a landowner may wish to take written notes on and photographs of the property after noticing a construction issue. This may be helpful in presenting the issue to the pipeline company. It may be cheaper and faster to raise the issue with the pipeline company first, before speaking with an attorney. However, if a landowner’s complaints aren’t resolved in a timely manner after speaking with the company, the landowner will want to speak with an attorney to enforce the contract.
What to Remember When Speaking with a Pipeline Company Representative
As a practical note, it is important for a landowner to realize that the workers on a pipeline might not be from the pipeline company itself. For example, if a landowner has an issue with the way that the easement is re-soiled and re-planted, it could be a third party that did the work. Landowner’s should re-read their easement to ensure that sub-contracting is allowed. When a landowner calls a company, he or she should realize that the company may not have done the work, but rather a subcontractor completed the work. Therefore, the landowner should fully describe the issue to the pipeline company so that the company understands the issue. Any evidence, such as photographs or written notes may be very helpful in resolving an issue with the pipeline company.
It is always best to identify potential issues early. Landowners may want to check the progress of pipeline construction on their property as it occurs. If there is an issue, landowners should promptly contact the company. Landowners should check their easement agreement to see if the easement outlines a process to dispute terms of the agreement.
If the contract does not outline a process to dispute terms of the agreement, it would be best for landowners to speak with the construction foreman first, then moving up the management chain if the company doesn’t react favorably. If the company and the landowner can’t come to a resolution, the landowner may need an attorney at some point.
Reclamation of the Land
After a pipeline is buried, the soil and the surface of the land is ideally placed back in its original condition. This process is sometimes referred to as reclamation. The pipeline easement agreement between a landowner and a pipeline company usually discusses how this process will be completed. Landowners and pipeline companies often agree beforehand how the land will be reclaimed after the pipeline is constructed. Pipelines may disturb trees, soil, and waterways during the construction process. These disturbances may impact crop yields and grazing habits in future years. For this reason, landowners may wish to carefully monitor the reclamation process and enforce the terms of the easement.
Living with a Pipeline Easement
When landowners have concerns or questions regarding a pipeline on their property, the best place to start is the pipeline easement. Landowners may have recently signed an easement, or landowners may be subject to a pre-existing easement signed by a previous owner of the property. Current landowners are subject to pre-existing easements, because easements “run with the land.” Old easements don’t typically expire, unless the original easement language provides for extinguishment of the easement under certain circumstances (for example, abandonment the easement).
Pipelines are a common tool for the transportation of natural resources. Many Ohio landowners have pipelines crisscrossing their property. Landowners should raise any pipeline safety or construction issues with the appropriate state agency, and any contractual issues should be brought to the pipeline company. As always, a landowner should pay careful attention to the language of the pipeline easement in determining how to approach a potential problem.
More information on pipeline easements is here.
Written by: Chris Hogan, Law Fellow, OSU Agricultural & Resource Law Program
The Ohio House of Representatives is considering a bill that would affect farmers and rural landowners by requiring the Ohio Department of Natural Resources Division of Oil and Gas Resources Management (ODNR) to plug abandoned oil and gas wells within 60 days, under certain circumstances. Introduced by Rep. Andy Thompson (R-Marietta), House Bill 225 would permit a landowner to report an idle or abandoned well to ODNR, who then must inspect the well and plug it if it’s deemed “distressed-high priority.”
Inspection of Idle or Abandoned Wells
Under HB 225, ODNR would be required to inspect an idle or abandoned well within 30 days after a landowner reports the existence of such a well on their property. No later than 60 days after the inspection, ODNR would be required to provide the landowner with a report concerning the idle or abandoned well that categorizes the well as one of the following:
- Distressed-high priority;
- Moderate-medium priority; and
- Maintenance-low priority.
HB 225 would require ODNR to adopt rules to define these three categories. In adopting these rules, ODNR must include a description of the criteria for an idle or abandoned well to fit within a particular category.
Plugging an Idle or Abandoned Well
If a well is categorized as distressed-high priority, it must be plugged by ODNR within six months after the report. Perhaps most interesting for Ohio landowners, HB 225 could increase the amount of funding available for landowners who choose to plug a well on their property themselves. Currently, landowners may arrange to have the well plugged by a third party. Under current Ohio Revised Code 1509.071(D), a landowner may be reimbursed for plugging costs; however, wells are plugged on a priority basis until the funds for the program are depleted. ODNR administers this law, otherwise known as the Orphan Well Program. More information on the current program is here.
Under HB 225, landowners would be permitted to take an income tax deduction for compensation paid by ODNR to reimburse landowners’ costs to plug an abandoned or improperly plugged oil or gas well. Current law requires ODNR to approve an application for reimbursement by a landowner. A landowner’s application must comply with oil and gas plugging laws and regulations for safety and environmental reasons.
Proposed Increase in Funding Under the Oil and Gas Well Fund
HB 225 would likely increase the funds available to Ohio landowners for plugging idle or abandoned wells. Ohio law currently requires that 14% of the current Oil and Gas Well Fund be dedicated to plugging idle and abandoned wells. HB 225 would require ODNR to dedicate 45% of the fund to plug idle and abandoned wells. ODNR would also be required to issue quarterly reports regarding expenditures associated with plugging wells. ODNR may therefore offer more funding to landowners to plug wells, because of the increase in funding and the requirement to show expenditures on the plugging of wells.
However, the proposed increase in funding may lead to an increase in ODNR’s expenditures on plugging wells. The proposed increase could also drive the number of wells that the state plugs. Under the strict timeline requirements that HB 225 proposes, ODNR may subsequently plug more wells after a landowner notifies ODNR of abandoned wells on their property.
The Future of HB 225
At a committee hearing earlier this month, witnesses testified that there are likely hundreds of wells that haven’t been discovered because they’ve been farmed over and covered by urban development. According to Rep. Thompson, most of the orphan wells that have been identified emit methane gas in addition to often contributing to the runoff of oil and brine into the soil. Rep. Thompson also noted that it is estimated that the current program for plugging abandoned wells in Ohio would take 20 years or more to plug the more than 600 known orphan wells in the state. Members of the Ohio Oil and Gas Association voiced support for HB 225, noting that the taxes levied on oil and gas production should be used to correct problems that have arisen from the early days of the industry.
Written by: Chris Hogan, Law Fellow, OSU Agricultural & Resource Law Program
Several major pipeline projects, which plan to crisscross the state, are in the final stages of preparation. As part of the planning process for a project, pipeline builders plot the path that the pipeline will travel across the state. That path inevitably crosses private landowners’ property. Some landowners may feel overwhelmed trying to understand the rights of private pipeline companies to cross private property in Ohio. The frequently asked questions discussed below should help answer some of the common questions about pipeline projects in Ohio.
Can a pipeline company come on to my property to conduct a survey?
Yes. Prior to building a pipeline, pipeline companies must select a route where the pipeline is to be constructed. A pipeline project usually crosses private property along a proposed route. When a pipeline must cross private property along the project’s route, the pipeline company will ask the landowner for an easement that allows for pipeline construction on the property. However, even before signing an easement, a survey of the property may be necessary to determine the feasibility of constructing a pipeline on the property. Therefore, a pipeline company may need to enter a landowner’s private property to conduct a survey.
In Ohio, the law allows private companies that are organized “for transporting natural or artificial gas, petroleum, coal or its derivatives . . . through tubing, pipes or conduits” to enter upon private land to examine or survey for pipelines. This means that a pipeline company organized for these specific purposes does have the right in Ohio to enter onto a landowner’s property to conduct a private survey for the purpose of pipeline construction.
A pipeline company is telling me that they might use Eminent Domain to acquire my property. Is that legal?
Most likely, yes. A pipeline company may negotiate an easement with landowners which compensates landowners in exchange for the right to build a pipeline. However, landowners may not want to give a pipeline company the right to cross their property. In that scenario, pipeline companies have the option of crossing a landowner’s property by using eminent domain. Eminent domain is the taking of private property for public purposes with compensation.
In Ohio, the same law that allows for companies that are organized “for transporting natural or artificial gas, petroleum, coal or its derivatives . . . through tubing, pipes or conduits” to enter upon private land for survey also allows those same companies to use eminent domain to take private land. The law states that a company organized for the above purpose “may appropriate so much of such land, or any right or interest [to the land], as is deemed necessary for the laying down or building of pipes . . .” This suggests that pipeline companies have the power of eminent domain in Ohio.
Some argue that the law only grants eminent domain rights for transporting gas, and does not extend the right of eminent domain for the transport of gas derivatives such as ethane. While there is not strong legal support for this argument, it is under litigation in Ohio courts.
To use eminent domain, the pipeline company must prove that the landowner and the company were not able to reach an agreement about granting a pipeline easement and that the taking of the pipeline easement is “necessary.” A pipeline company must establish that the taking of property will serve a “public use.” Ohio courts have noted that the term public use is flexible. Accordingly, Ohio courts have held that private pipelines are a public use if those pipelines provide an economic benefit to Ohio. After establishing necessity and public use, the pipeline company must follow the procedures for eminent domain in Ohio Revised Code Chapter 163.
For an interstate pipeline that runs between Ohio and another state, federal law could allow a company to use eminent domain to obtain land from unwilling landowners. Federal law states that a company may acquire property rights for a gas pipeline if the company has obtained a Certificate of Public Convenience and Necessity from the Federal Energy Regulatory Commission and the company and landowner have not been able to agree on compensation for the pipeline easement. See 15 USC §717(F).
What about the pipeline cases that are in court right now, do those affect my rights?
Ohio landowners have probably heard about several high-profile pipeline projects that are planning to cut across the state. Some landowners have challenged the construction of these pipeline projects on their property. These landowners are challenging the right of the pipeline companies to use eminent domain to acquire an easement on their property. Two pipeline projects in Ohio are of particular interest: Kinder Morgan’s Utopia Project and Rover Pipeline LLC.
A court in Wood County, Ohio decided in 2016 that Kinder Morgan’s Utopia Project, which plans to run across Ohio and into Canada, did not have eminent domain authority. The court concluded that the pipeline did not “serve the public of the State of Ohio or any public in the United States.” The court based its conclusion on the fact that Utopia did not provide a benefit to Ohio. However, Kinder Morgan quickly appealed that case to Ohio’s Sixth Circuit Court of Appeals. Therefore, this opinion is on hold while a higher court decides whether it agrees with the lower court’s interpretation of the eminent domain law.
A second high-profile pipeline case involves the right of Rover Pipeline LLC to use eminent domain for an interstate pipeline project. The Federal Energy Regulatory Commission issued this pipeline project a certificate of public convenience and necessity on February 2, 2017. As a result, Rover Pipeline LLC is moving forward with construction on landowners’ property, because a federal court found that the pipeline company has eminent domain authority.
So how do these court cases affect landowners? First, landowners should be aware that other pipeline projects in Ohio likely have eminent domain authority, if they meet the requirements for eminent domain described by Ohio law. Second, landowners should be aware that that the pipeline case that began in Wood County and is currently being appealed is still pending. It is important to note that this case is reviewing the Utopia Project’s right to use eminent domain in Ohio. Therefore, this does not mean that all pipeline companies in Ohio no longer have the right to use eminent domain to acquire private property in Ohio. Instead, this case will determine the fate of that particular pipeline project and whether or not that project has the right to use eminent domain to acquire an easement. In the meantime, pipeline companies continue to have the right to use eminent domain in Ohio.
More information on pipelines in Ohio and resources for landowners considering signing an easement is available here.
Confusion at Federal Level Leaves Farmers Unsure of SPCC Rule Compliance
Peggy Hall, Asst. Professor, OSU Extension Agricultural and Resource Law Program
A common joke among attorneys is that the answer to every legal question is "maybe," and that answer is appropriate when asking whether farms will be exempted from complying with the Oil Spill Prevention, Containment and Countermeasure (SPCC) rule.
May 10, 2013 was the compliance deadline for the EPA rule requiring SPCC plans for farms storing above a threshold amount of oil. But several legislators have spoken out against the regulation and intend to exempt most farms from its requirements. As we reported in an earlier post, legislators successfully delayed EPA's ability to enforce the SPCC rule against farms until September 23, 2013, and also drafted the legislation to exempt many farms from the SPCC rule. But while the Senate and House have each passed proposals with SPCC exemption language, they've used two different bills to do so--the Senate's Water Resources Development Act and the House's Farm Bill. Neither bill has passed both chambers and the SPCC exemption remains in limbo today, the date after which the EPA may begin enforcing the rule.
In mid-August, two sponsors of the exemption, Senators Inhofe (R-OK) and Pryor (R-AR), sent a letter to EPA Administrator Gina McCarthy regarding SPCC enforcement. The letter clarified that Congress plans to exempt most farms from the rule and suggested that the EPA should not attempt to retroactively enforce the rule back to the original compliance date of May 10, 2013. Time will tell whether the senators' letter will prevent EPA from penalizing farms that did not have an SPCC plan by May 10 but had an oil spill anytime after the May 10 compliance deadline.
What Should Farmers do about SPCC Plans now?
Farmers who have been waiting to see if Congress would exempt them from the SPCC rule have to make a decision: comply now or risk penalties for non-compliance. A few considerations may help the decision-making process:
- Operating without an SPCC plan carries financial risk. If a farm that is subject to the SPCC rule does not have a plan but does have an oil spill that discharges into a waterway, the farm will incur additional penalties for failing to have and implement an SPCC plan. These penalties vary depending upon the size of the facility and the severity of the spill; our research revealed recent fines ranging from $1,500 to over $55,000. Our research also shows the cost of an SPCC plan from a certified engineer or consulting firm to begin at around $1,000, with higher costs for larger farms.
- Only certain farms must comply with SPCC. Farms that store less than 1,320 gallons of diesel, gasoline, hydraulic oil, lube oil, crop oil or vegetable oil aboveground or less than 42,000 gallons below ground do not need an SPCC plan. All other farms might need an SPCC plan if it's possible that spilled oil could discharge into a waterway. To learn more about whether a farm is subject to the SPCC plan rule, visit here.
- Smaller, lower-risk farms can "self-certify" their SPCC plan. The SPCC rule allows farms with smaller oil storage and no history of significant oil spills ("Tier I farms") to create and implement an SPCC plan; other farms require certification by an engineer. The EPA provides a model template for Tier I farms on their website. Be aware, however, that preparing the plan requires some work: a thorough assessment of the farm's oil storage, selection and installation of appropriate containment measures and proper training and response practices. For those who don't want to prepare their own plan, consider a consultant. Consulting companies offer services such as assessment, consultation, plan development, certification and future inspections.
- A farm may be able to seek a compliance deadline extension. The SPCC rule allows a farm that couldn't meet the compliance deadline to submit a written request for an extension to the EPA regional administrator for the state where the farm is located. There are several reasons EPA may grant an extension: because a Professional Engineer (PE) isn’t available to create and certify a plan, if the farm is located in an area impacted by floods, or because facility modifications could not be completed before the deadline. For more on seeking an extension, visit this link.
- Insurance coverage may be at risk. Non-compliance with the law can negate insurance coverage; most insurers would likely deem the failure to have an SPCC plan after September 23, 2013 as "non-compliant."
- Oil storage containment is good risk management. Even without the SPCC rule, assessing and managing oil storage and handling practices on the farm can pay off. Consider the recent case of an Ohio farm with a leaking oil tank that polluted a nearby waterway; the farm paid over $15,000 in fines and cleanup costs.
While "maybe" is a good answer to whether Congress will exempt many farms from the SPCC rule, it isn't a good answer to whether farmers should ignore the SPCC regulation because of the confusion in Congress. For more on SPCC and agriculture, visit the EPA's web page.
Informing landowners who are dealing with shale development is the goal of a day-long workshop offered in Mahoning County by OSU Extension. "Shale and You: A Workshop for Landowners" will take place on Saturday, February 23, 2013 at the Mill Creek MetroParks Farm, 7574 Columbiana-Canfield Road, Canfield, Ohio. OSU Extension's Agricultural and Resource Law Program is sponsoring the workshop with grant assistance from the USDA's North Central Risk Management Education Center and host support from OSU Extension Mahoning County.
Educators in OSU Extension's Shale Education Program will provide an update on shale development in Ohio and address the topics of taxation of shale development income, wealth management, pipeline construction, oil and gas leasing issues and water testing. In addition to presentations on each topic, the team will also provide information displays and the opportunity to speak individually with educators. A discussion with a family who recently experienced shale development on their farm will conclude the workshop.
Registration is $15. Materials and refreshments are guaranteed to those who register by February 18. Session and speaker listings, a registration form and other details are available at http://serc.osu.edu/events/shale-and-you-workshop-landowners. For shale development resources, visit the OSU Extension Shale Education Program website at http://shalegas.osu.edu.