OU legal and financial officials told members of the Board of Trustees Thursday that while the university is trying to stake out a position that it can veto any attempt to drill for oil and gas on its land, they don't know for sure whether state regulators will read a new law that way.
Ohio Substitute House Bill 133, which changed the rules on drilling for oil and gas on state-owned lands, is "very vague," Nicolette Dioguardi, OU associate director of legal affairs, told the board.
She said that based on the wording of the law, university officials believe they will have the last word on whether to allow drilling on OU-owned land, and they plan to assert that position. Whether the state will agree with that stance or not, however, remains to be seen, she suggested.
State regulators have interpreted a similar law, H.B. 278, as barring local governments from regulating oil and gas drilling operations in municipal or county limits in any way.
Stephen Golding, OU's vice president for finance and administration, however, echoed Dioguardi's assessment, saying the university will act on the assumption that it can say no to drilling if it so chooses.
"I would say that we are taking that position," Golding said, though he, like Dioguardi, said it's still unclear how the state will interpret the dictates of the new law.
"We're trying to do a delicate balancing act, if you will," he explained. "There are no rules… We are staking out a position. The question is, will that position be upheld?"
Dioguardi added that the board has a "window of opportunity" prior to June 30, to enter into leases under the terms it wants with any drilling companies. After that, the new commission process will kick in.
The state of Ohio is currently being eyed by the oil-and-gas industry for possible widespread drilling for oil and/or natural gas in deep underground shale beds, using the controversial "horizontal hydraulic fracturing" technique. It's popularly known as "fracking."
recent maps released by the Ohio Department of Natural Resources showing the
prime Utica shale prospects in Ohio exclude Athens County from that area.
Experts, though, seem to agree that nobody will know the local oil and gas
resources until someone drills one or more exploratory wells. No permit
applications for any such wells have been filed for Athens County.
IN RESPONSE TO THE POTENTIAL drilling boom, the Ohio General Assembly last year passed H.B. 133. The law established a new Oil and Gas Leasing Commission to oversee leasing of any lands owned or controlled by state agencies – including public universities – for oil-and-gas exploration or drilling. (It does exempt nature preserves.)
It also required OU, like other state agencies, to inventory all its land holdings, and classify each parcel under one of four different categories, based on such factors as deed restrictions and the size of the property. (Horizontal fracking requires large tracts of land, and often, individual properties must be "pooled" to make drilling feasible.)
As written, the law appears to allow any owner of mineral rights to apply with the Commission for a drilling lease. The commission will rule on the lease "nomination," basing its decision on factors including potential economic benefits; whether the drilling project is compatible with the current uses of the land; environmental impact; objections by the state agency that owns the land and by members of the public; and any other factors it deems relevant.
In an analysis of the new law, the Ohio Legislative Service Commission has stated that Sub. H.B. 133 "generally requires the state agency that owns or controls the parcel of land… to enter into a lease" with the highest bidder, as chosen by the commission.
According to the officials who spoke to the Board of Trustees on Thursday, the oil-and-gas industry has already expressed an interest in OU's Eastern campus in Belmont County – though they noted that the nearby Dysart Woods, an old-growth forest that OU uses as a land lab, is lease-protected from drilling.
Reportedly, the university has been approached by both Chesapeake Energy and Exxon-Mobil about possible leasing on the Eastern campus. Belmont County is near the heart of ongoing deep-shale drilling in Ohio.
Officials also noted that OU, Ohio State University and Kent State University appear to be the only state colleges with significant land holdings in the Utica or Marcellus shale plays in Ohio, and therefore the only ones likely to face leasing issues.
Trustee Kevin B. Lake asked whether land holdings in the name of the OU Foundation would be exempted from the legislation.
"We cannot find anything in the statute (about that)," Dioguardi responded. "There is nothing in the statute that makes that clear."
OU faculty experts told the board that at the moment, the biggest concern is that there simply isn't enough solid information available about the risks versus the benefits of deep-shale drilling.
"We just really don't know," said David Bayless, director of the Ohio Coal Research Center at OU.
The Trustees also were presented with a draft report on the possible benefits and dangers of drilling on university land, which got wide input from faculty, administrators and students. It suggested that while there are many concerns about fracking impacts, a drilling boom could also represent an opportunity for OU, not only to make money from leasing, but to become a leader in research into this type of drilling.
The report also listed potential concerns about the impacts of a drilling boom, which included "the impacts of new-found wealth… in a region not used to such inputs – sort of a lottery effect," as well as increases in divorce rates, crime and violence.
Inclusion of these concerns raised the ire of Trustee N. Victor Goodman, who said he found them inappropriate.
"I would like to disassociate myself from these comments," Goodman said. "I don't know who's done the research on (such issues)… I find it offensive. With no disrespect to the committee members, (this material) in effect, I think, disparages the people who live in this area."
Golding stressed that the report is a draft, and that it was aimed at collecting as wide a variety of differing inputs on the fracking issue as possible.
Board Chair C. Robert Kidder asked OU Sustainability Director Annie Cadmus for her take on deep-shale drilling. Cadmus echoed the concerns of other officials, that too much remains unknown.
"Right now… we just don't have the research and the background," she said. "There's a great concern that we need to protect ourselves."