Preserving and perfecting lien claims against Ohio oil and gas wells

posted by Michael Fortney  |  Oct 22, 2012 1:44 PM in Construction Law

The Ohio legislature has adopted a mechanics' lien law specifically for labor, work, or materials performed on oil and gas wells and facilities.  The law states that "Every person who performs any labor or work upon or furnishes material for digging, drilling, boring, operating, completing, or repairing, any well drilled or constructed for the production of oil and gas or any injection well which furthers the production of oil and gas . . . has a lien to secure the payment thereof."

An oil and gas lien affidavit follows the same requirements as those for traditional mechanics' liens, with several notable differences.  First, an oil and gas well lien claimant is not required to serve a Notice of Furnishing to preserve lien rights.  Second, the oil and gas well lien claimant is not required to identify the first date that labor, work, or material was furnished to the improvement.  Third, the an oil and gas well lien claimant has 120-days from the last supply of labor, work, or materials to record a lien.  The recording and service requirements remain the same as those for traditional mechanics' liens.

Once perfected, the lien attaches to:  1) the oil and gas lease or leasehold estate or, in the absence of a lease, to the mineral estate, 2) the oil or gas produced from the property and the oil and gas proceeds, and 3) upon all material located at the well site or used in connection thereof. 

In addition to these lien rights, an unpaid oil and gas well claimant may serve the well owner or lessee  with a statutory notice of amounts due from an original contractor.  The service of a notice of amount due gives the owner/lessee the right to issue payment by a joint check or to require the original contractor to obtain lien waivers prior to making payment to the original contractor.  The statutory notice must contain the following information:

            (a)       a description of the nature of the work performed, 

(b)       a description of the materials furnished, 

(c)       statement of amount due, 

(d)       the identity of the person the claimant contracted with, 

(e)       the identity of the well, 

(f)        the permit number, and 

(g)       the county where such work or materials was performed. 

This statutory notice of amounts due may also be served prior to the performance of work or the supply of materials much in the same fashion as a Notice of Furnishing.  While no Notice of Furnishing and no statutory notice of amounts due are required by law, the oil and gas well lien law does afford an owner or lessee a defense in the event that the improvement contract is paid in full prior to the receipt of notice of an amount due a lien claimant or perspective lien claimant. 

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