Shale-related development is bringing Ohio more than $12 billion in economic development projects, according to a recent report cited in Columbus Business First—and that’s just the tip of the iceberg. None of this development would be possible if landowners were not leasing their oil and gas mineral rights. The oil and gas lease defines the rights of the landowners and the oil and gas company. Here are some issues landowners and developers alike should keep in mind regarding oil and gas leasing issues.

Q:        Do I automatically own the rights to oil and gas that may exist beneath my property?

A:        No; it is possible for you to own the surface of a piece of land without owning the mineral rights underneath it. That’s because the mineral rights can be severed from the surface rights. Usually, this happens when the property owner sells the surface rights to someone else, but keeps (or “reserves”) some or all of the mineral rights. This is called a mineral rights reservation.

Q:        How do I know who owns the rights to oil and gas under my property?

A:        The best way to figure out who owns what interests in the land is to have a reputable, experienced mineral rights title abstractor conduct a search of the public records in the county where the land is located.

Q:        What does an oil and gas lease actually do, and how would I, the landowner, get paid?

A:        An oil and gas lease gives a developer (the “lessee”) the legal right to develop oil and gas from your property. In return, you likely would receive a per-acre “bonus payment” and, if a well is drilled, a royalty payment based on a percentage of the oil and gas sold.

Q:        What issues can come up when negotiating the granting clause?

A:        The granting clause contains important language setting out the parties’ rights under an oil and gas lease. Common issues include whether:

·         the lease includes all minerals underlying the property, or just oil and gas;

·         roads, driveways, fences, and pipelines can be constructed on the property;

·         Class II underground injection control wells can be located on the property;

·         the developer can use water, oil, or gas from the property free of charge;

·         all geologic formations are being leased; and

·         the developer can store gas under the property.

Q:        What issues can come up when negotiating the term of the gas and oil lease?

A:        The habendum clause in an oil and gas lease establishes the duration of the lease. The habendum clause includes two terms: the primary term and the secondary term.  The primary term generally lasts for a fixed amount of time—commonly, five years—and establishes the oil and gas company’s deadline for drilling a well on the property (or including the property in a drilling unit). In addition to negotiating the length of the primary term, one must consider whether to include an extension or renewal option and the amount of any payment associated with the extension or renewal payment. The secondary term is triggered by oil and gas drilling on the leased property. In the vast majority of oil and gas leases, the secondary term will continue as long as oil or gas “is produced in paying quantities” or operations are conducted on the leased property. Defining the terms “operations,”  “production,” and “production in paying quantities” can be very important.

Q:        I’ve heard a lot about lawsuits over calculation of royalty payments. How can I avoid that?

A:        Leases typically provide that a landowner will receive a continuing royalty payment based on a percentage of the oil and gas sold. Although royalty disputes may be difficult to avoid, defining the types of post-production costs and expenses that can be deducted prior to paying royalties could minimize the risk. In addition, a landowner should consider adding an audit provision that allows for annual audits of production and royalty records.

This “Law You Can Use” column was provided by the Ohio State Bar Association. It was prepared by attorney Dan Gerken, a litigation associate at Bricker & Eckler LLP in Columbus, and member of the firm's Shale Task Force. This article offers broad, general information about the law. It is not legal advice. Seek an attorney’s advice before applying this information to a specific legal issue.

Q:        What is a payday loan?
A:        A payday loan is a small loan, often between $300 and $500, which is based on your income and requires evidence of a job (paystub). A postdated check is generally required as collateral for the loan, but even without one, you may be able to get a smaller loan. The payback date is based on when you are paid, so it may be one week, two weeks, 15 days or one month from the date of the loan.

Q:        Who provides payday loans?

A:        Payday lenders are for-profit businesses found in every neighborhood. They are in business to make money for their owners and/or shareholders (as opposed to nonprofit organizations, which operate under a mission to benefit the “greater good” and cannot use their funds for anything else).  

Q:        What are the advantages of getting a payday loan?
A:        A payday loan can get you cash quickly, without the credit checks required for other types of loans. Generally, you must provide a postdated check and some verification of income, as well as a phone bill in your name.

Q:        What are some disadvantages?
A:        Payday loans carry an extremely high interest rate, generally more than 300 percent. For example, you might borrow $200 on February 1, and write a $225 check postdated for February 15.  This may not seem like a lot to pay when you are desperate, but the interest rate you are paying is very high for two weeks’ worth of borrowing. If you cannot make good on the postdated check, then the loan might be rolled over, which means you will be paying interest on the original interest amount you owed.

            Also, if you use a postdated check to secure a loan, you may incur an additional “NSF bank” (insufficient funds) charge of $35 if there is not enough money in your checking account to cover your check on the loan’s due date. Payday lenders sometimes submit postdated checks more than once over several days, generating multiple NSF fees and increasing your overall cost.

Q:        Can I pay off a payday loan in installments?
A:        No. These loans are designed to be paid back in a single payment.

Q:        What happens if my payday loan is rolled over and I still can’t pay it off?

A:        The loan will remain an outstanding debt, which means that the payday lender can sue you in court to get the money you owe. It is wise not to roll over your loan, since it increases the amount of money you owe.

Q:        If I’m willing to keep adding interest to my loan, how long can I keep the payday loan money before I have to pay it off completely?

A:        You can roll over a payday loan at least four times, which would give you approximately two to three months to pay the loan off completely.

           

Q:        If I decide that a payday loan costs too much in interest or is too risky, what are my alternatives when I need money on an immediate, short-term basis?

A:        For a less costly alternative, try getting a loan from a bank, a credit union, a finance company, a friend or relative, or asking for an advance from your employer. You might also consider using a pawn shop. Some people have been using auto title loans as an alternative, but the interest rate for an auto title loan is likely to be at least as high as for a payday loan, and you would also be putting up the title to your vehicle as collateral for the loan (meaning that you could lose your car if you don’t pay off your loan).   To get help so that you can avoid this type of problem in the future, you may want to consider getting financial counseling from a nonprofit debt counseling service.  

Q:        I just took out a payday loan. The lender said it would be a criminal offense if I didn’t have sufficient funds in my account on the due date. Is that true?

A:        Because your check was postdated, the lender would NOT expect you to have sufficient funds on the same date you gave the lender your check, and if you don’t have sufficient funds on the due date, the lender could roll over your loan. You would not be committing a criminal offense unless you gave the lender a check knowing you would have no funds to cover it on the due date and you clearly intended to defraud the lender.

This “Law You Can Use” column was provided by the Ohio State Bar Association. It was prepared by Akron attorney Terry Zimmerman of Kaffen & Zimmerman. Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.

Q:        I’ve heard I might be able to get a special tax credit because I contributed to my retirement account in 2013. Is that true?
A:        It’s true, if you qualify.  Workers with low- to moderate-income can earn a special federal “saver’s” tax credit, which helps promote retirement savings. Begun in 2002 as a temporary provision, the saver’s credit was made a permanent part of the tax code in legislation enacted in 2006. To help preserve the value of the credit, income limits are now adjusted annually to keep pace with inflation.

Q:        How does the saver’s credit work?
A:        The saver’s credit, also known as the retirement savings contribution credit, helps offset part of the first $2,000 that you voluntarily contribute to an IRA, a 401(k) plan or a similar workplace retirement program. You can get this tax credit in addition to any other tax savings that may apply to you.

Q:        Can I make retirement contributions and get the saver’s credit to use for my 2014 tax return?
A:        Yes. You should schedule your 2014 contributions now so your employer can begin withholding your contributions as soon as possible. To qualify for the saver’s credit on your 2014 tax return, you must contribute by Dec. 31, 2014 to a qualified retirement plan. Qualified plans include a 401(k) plan or similar workplace program such as a 403(b) plan for employees of public schools and certain tax-exempt organizations, a governmental 457 plan for state or local government employees, and the Thrift Savings Plan for federal employees.

Q:        Who qualifies for the saver’s credit?
A:        The saver’s credit can be claimed by:

• married couples filing jointly with incomes up to $59,000 in 2013 or $60,000 in 2014;
• heads of household with incomes up to $44,250 in 2013 or $45,000 in 2014; and
• married individuals filing separately and singles with incomes up to $29,500 in 2013 or $30,000 in 2014.

      You cannot take the credit if you are under 18 years of age, if you are claimed as a dependent on someone else’s return, or if you were a full-time student during any part of five calendar months during the tax year.

Q:        If I qualify for the saver’s credit, does that mean I get a bigger refund at tax time?
A:        Not necessarily. Like other tax credits, the saver’s credit can reduce your overall tax liability. It could either increase your refund, or reduce the additional tax you owe. The maximum saver’s credit is $1,000 for an individual and $2,000 for married couples, but any other deductions and credits you claim may reduce the saver’s credit amount quite a bit. In fact, taxpayers who have already reduced their tax bill substantially with other deductions and credits may not benefit from the saver’s credit.

Q:        How does the IRS determine the amount of my saver’s tax credit?
A:        Your credit amount is based on your filing status, your adjusted gross income, your tax liability and the amount you contributed to qualifying retirement programs. You should use Form 8880 to claim the saver’s credit. The form’s instructions will help you figure your credit.

Q:        If I take the saver’s credit, can I still deduct my IRA contributions?
A:        Generally, yes. The saver’s credit supplements other tax benefits available to people who set money aside for retirement. Most workers may deduct their contributions to a traditional IRA. Although you cannot deduct your Roth IRA contributions, qualifying withdrawals from your Roth IRA, usually after retirement, are tax-free. Normally, contributions to a 401(k) or similar workplace plan are not taxed until you withdraw them.

Q:        Where can I get more information about the saver’s credit?
A:        For more information about the credit, visit IRS.gov.

The information for this “Law You Can Use” column was provided by the Internal Revenue Service. It was prepared by the Ohio State Bar Association. Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.

Q:        I’ve asked a local government agency for public records, and I’m not getting what I want. What can I do about it?

A:        Ohio’s long-standing public records law generally gives the public access to public records. You don’t have to be a member of the media to seek public records; they are open to everyone. Also, you don’t have say who you are or why you want the record. Even so, disputes often arise about the “what, when and how” of the records you seek. Ohio law says a public record is any record kept by a public office, but not every document a governmental body has in its possession is a public record. Knowing what records the law allows you to access and how you can access them will help you avoid a dispute.

            A public record may take the form of a paper or electronic document, email, video, a map, a blueprint, a photograph or even a voicemail message. A “public office” is any state or local government office or agency, as well as any public school district office. Even a private entity may be considered a public office if it functions as one. The Ohio Attorney General’s Office has guidelines to help citizens seeking records and more information about public records at www.OhioAttorneyGeneral.gov/YellowBook.

           

Q:        What happens when there’s a dispute about public records?

A:        Disputes arise over what constitutes a public record, and there are differences of opinion about what records should be provided to the public and what records should be kept private. (For instance, information in a prosecutor’s file for an upcoming trial is “exempt” from the public records law, but information about the outcome of a concluded trial is a public record.) Disputes also arise over when and how the government must provide a record, and what period of time is “reasonable” for the public body to respond to a records request.

            When disputes arise between government bodies and citizens requesting public records, Ohio law allows citizens to go to court to compel the government to turn over the records.

Q:        I’ve heard there’s a public records mediation program. What is this and why was it created?

A:        The Ohio Attorney General’s Public Records Unit discovered that many disputes about record requests at the local level (such as a county or city government office or a school board) can be settled outside of court. For example, a dispute may arise because the office in question is not the keeper of the record requested, or the records request went to the wrong person, or the office found the request unclear. To minimize the time and expense and time of resolving disputes through the courts, the Attorney General’s Office has set up a voluntary mediation program. Mediations are free of charge, private and confidential. The program is designed to speed resolution of disputes and improve communication between parties by actively involving both sides in discussion.

Q:        How do I request mediation for my public records dispute?

A:        You can submit an online intake form at www.OhioAttorneyGeneral.gov/PublicRecordsMediation or contact the Public Records Unit of the Ohio Attorney General’s Office toll free at 1-888-958-5088 to request mediation.

            Currently, the mediation program is only open to disputes between local and county government agencies and the public. Because the Ohio Attorney General represents state offices, his attorneys do not mediate disputes between state agencies and the public. However, the Ohio Attorney General’s Office works closely with its state agency clients to fully educate them about their responsibilities under the Public Records Act. Contact the Ohio Attorney General if your public records issue involves a State of Ohio agency or office-holder.

Q:        What happens after I request mediation for a dispute with a local agency?

A:        The Public Records Unit will find out if the other party is willing to engage in the mediation process, and will make every effort to let you know whether it will mediate your dispute within 10 business days. If both parties consent, the Public Records Unit will schedule the mediation and will notify you about the date and time. Most mediation discussions are conducted through telephone conference calls so you do not need to travel to attempt to resolve the dispute.

Q:        Where can I get more information about Ohio’s public records laws?

A:        To learn more about Ohio’s public records laws, review the Ohio Sunshine Laws manual at www.OhioAttorneyGeneral.gov/YellowBook.

This “Law You Can Use” column was provided by the Ohio State Bar Association. It was prepared by Columbus attorney Dan Trevas. Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.