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EL fires back on county gas lease

April 6, 2012

LISBON - Not so fast, Columbiana County commissioners.

That was the city of East Liverpool's response to a motion filed by commissioners asking a judge to dismiss East Liverpool's lawsuit seeking money the county may receive from a proposed shale gas lease.

Last month, a motion was filed on behalf of commissioners asking county Common Pleas Court Judge Scott Washam to dismiss the lawsuit because the proposed agreement expired without commissioners ever signing any lease.

East Liverpool's attorney, Thomas W. Connors, filed a response that contends the letter of intent (LOI) commissioners approved to lease 568 acres of county land to Chesapeake Energy and their subsequent actions constitute a legally binding agreement.

The LOI approved last August called for commissioners to be paid $1.5 million, plus 17.5 percent royalties. Commissioners maintain the terms in the letter were only good for 120 days and they let the agreement expire without ever signing a formal lease.

Connors, in his motion, noted the LOI clearly states that it would be binding upon execution, and commissioners signed the letter, which he considers execution of the agreement.

To support his argument, Connors also cited prior court rulings where LOIs have been interpreted as having the same authority as a contract, especially if the parties have formed a "requisite intent to render the subject a binding agreement," which he believes has occurred between commissioners and DPS-Penn, which negotiated the lease for Chesapeake.

He also wants to question commissioners, in part because of action they took in late February to bestow upon board chairman Mike Halleck the authority to negotiate and sign all leases on their behalf.

"It sure looks like the parties to the Aug. 3, 2011, agreement intended to be bound by its terms, but in order to respond to defendant's motion for summary judgment (for dismissal), plaintiff will need to obtain discovery on the issue," Connors wrote.

Assistant County Prosecutor Tad Herold disagrees the LOI created "any vested interest in any contract right or asset," saying the proof of such was the LOI provision stating the terms of the lease were only good for 120 days.

Herold said the law cited by Connors referred to a case where the LOI was a much more detailed document than the one-page letter agreement commissioners signed. He said official mineral rights leases are much longer and detailed.

Herold also pointed out the LOI requires "the lease be prepared on a form mutually agreeable to the parties," which is a clear indication a formal lease was to follow.

The case is scheduled for trial Oct. 10.

East Liverpool is seeking the county's lease money to help satisfy a $4.8 million judgment the city won in its successful breach-of-contract lawsuit against the Buckeye Water District. The BWD has balked at paying the judgment, which also applies to commissioners since the county once operated the water district that later became the BWD in the 1990s.



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