Oklahoma City’s Gulfport Energy finds itself in the middle of a legal battle in Ohio where it was sued over its fracking operations in the Utica Shale. At stake are judgments totaling millions of dollars.
The shale is where Gulfport has focused many of its drilling efforts and the company was sued by a landowner after it implemented fracking in an area near the Ohio-West Virginia border. Reports indicate the closely-watched case centers on eight words in the drilling contract are interpreted. The eight words are “the formation commonly known as the Utica Shale” and this week attorneys on both sides made their arguments before the Ohio State Supreme Court.
Gulfport and another firm, Rice Drilling D, LLC were sued and accused of good faith/bad faith trespass and mineral trespass and earlier this year, the Seventh District Court of Appeals in Ohio, in a 2-1 decision, upheld the trial court’s summary judgment in favor of the landowner, TERA LLC. The Court affirmed the trial court’s summary judgment decision that the defendants had trespassed and that they had done so in bad faith.
The trial court jury awarded $40,129,357 in damages to TERA. It included $23,171,457 in compensatory damages and $18,958,462 in consequential damages. The total was reduced by $2,000,559 for royalties previously paid.
At the heart of the matter is a dispute over Gulfport’s drilling in the Marcellus Shale and the Utica Shale and on the 271 acres owned by TERA LLC. As reported, the leasets reserved to the lessor “all formations below the bas of the Utica Shale.” When Gulfport Energy acquired an interest in the leases, several units and horizontal wells were drilled and began producing.
However, as the lower courts pointed out, each of the six wells were drilled beyond the Utica Shale formation and were producing oil and gas from the Point Pleasant formation which is located below the base of the Utica formation. It sparked the lawsuit by TERA which accused the firm of conversion and trespass.