Ohio Governor Mike DeWine signed House Bill 507 (“HB 507”) into law on January 6, 2023. Depending on where one falls on the political spectrum, this new law could be considered a boon or an overreach. Essentially, the new law mandates new oil and gas leasing by requiring state agencies to lease oil and gas interests owned or controlled by those agencies. Specifically, the text of the law provides, “…a state agency shall lease, in good faith, a formation within a parcel of land that is owned or controlled by the state agency for the exploration for and development and production of oil or natural gas.”[1] Notably, there’s no requirement that the agencies lease to the highest bidder. Additionally, the new law defines natural gas as a “green energy.” Ultimately, the result will be natural gas production from minerals underlying state parks. Unsurprisingly, this law has been met with criticism.
Critics of the new law argue that the mandate now opens drilling opportunities on prized state park lands meant for recreation and conservation. Staunch environmentalists are unhappy with this development, citing negative impacts to the water quality, air quality, and adjacent property. It is also difficult for many to conceive an interpretation of natural gas production as “green.” Others, less concerned with environmentalism, would like to see the additional requirement that leases must go to the highest bidder.
One lawsuit has already been filed against the State of Ohio and the Ohio Department of Natural Resources, which seeks an injunction and a declaratory judgment that finds HB 507 unconstitutional/void.[2] In particular, the plaintiffs allege that HB 507 violates the “one-subject rule” and “three-consideration rule” of the Ohio Constitution.[3] At this early stage, answers of both defendants have been filed with the court; and the Plaintiffs recently filed a Merit Brief to issue an injunction and to declare HB 507 unconstitutional/void. Stay tuned as this case continues forward.
While it is true the new law will propel the production of minerals underlying state parks, it’s important that Ohio residents understand the surface of these lands should see little to no impact as a result of the law. Surface permits and surface leases on agency-held lands aren’t part of the mandate, and the minerals will be accessed through horizontal wells. Moreover, it may be helpful for some to understand that nature preserves are excepted by the new law. Additionally, while natural gas is a fossil fuel, its environmental impact falls well below that of coal power generation, cattle ranching, and other common industries. New revenue will be generated for the state, and the development will also promote job growth.
While some see HB 507 as an ever-encroaching threat to environmental protection, the opposite can be said: the new law seeks to add regulation to the 2011 law that allowed the development of the oil and gas underlying state parks in the first place. The 2011 law, however, lacked the appropriate processes and rules. Moving forward, it’s likely that House Bill 507 will result in a streamlined permitting process for oil and gas operations on state lands, but operators should be prepared to follow new and changing regulations promulgated by the ODNR.
[1] Ohio Rev. Code § 155.33
[2] See, Ohio Environmental Council, et al. v. the State of Ohio, et al., Franklin County Court of Common Pleas Case No. 23CV002403
[3] See, Ohio Constitution, Article II, § 15 (C) and (D).
Andrew represents companies active in the oil and gas industry in both litigation and arbitration matters, from risk management to trial. He also advises clients on compliance and regulatory issues and handles proceedings in front of administrative agencies / governmental bodies, including the Ohio Department of Natural Resources and the Ohio Department of Commerce.
In addition to his energy practice, Andrew has broad experience in commercial and business litigation, including breach of contract / lease claims, construction disputes, non-compete / non-solicitation disputes, trade secrets, business torts, and real property-related claims. He is OSHA certified in Construction Safety and Health and has drafted and reviewed numerous construction contracts.