The Ohio Supreme Court has finally put to rest a long-standing debate about whether Ohio’s Marketable Title Act (MTA), Dormant Mineral Act (DMA), or both, may be applied to reunite severed mineral interests with the overlying surface estate. In a majority opinion decided Dec. 2, 2020, the court held that both acts may be independently applied to mineral estates. The court held, “The Marketable Title Act and the Dormant Mineral Act afford independent procedures, either of which may be used to effect the termination of a severed mineral interest, depending on the circumstances of the case and the time that has elapsed.” West v. Bode, 2020-Ohio-5473, ¶ 44.
The West decision is consistent with recent precedent from Ohio’s Seventh and Fifth Appellate Districts, which have held that the MTA and DMA offer independent ways to analyze severed mineral interests. It is also consistent with the Supreme Court’s own decisions in recent years that have treated the MTA and DMA as separate and distinct statutes, including its decision in Corban v. Chesapeake Exploration, L.L.C., 149 Ohio St.3d 512, 2016-Ohio-5796, 76 N.E.3d 1089 (emphasizing the difference between “abandonment” under the DMA versus “extinguishment” under the MTA) and Blackstone v. Moore, 155 Ohio St.3d 448, 2018-Ohio-4959, 122 N.E.3d 132 (holding that a reserved royalty interest was not extinguished under the MTA due to a specific reference in the root of title).
But despite those prior holdings, much ink has been spilled in recent years by litigants and legal scholars analyzing conflicts between the MTA and DMA and whether the two statutes can (or should) be independently applied. Indeed, the question of whether the statutes can be harmonized, or whether they are in irreconcilable conflict, was the crux of the debate. Under Ohio law, if there is an “irreconcilable conflict” between a specific statute (such as the DMA) and a general statute (such as the MTA), the specific statute prevails. But, importantly, courts are also required to give effect to all statutes whenever “possible,” including in situations where a conflict exists but can be reconciled.
With that mandate in mind, the Supreme Court analyzed the different look-back periods and the different results created by each statute – namely “abandonment” after 20 years under the DMA versus “extinguishment” after roughly 40 years under the MTA – before finding that “while differences indisputably exist, they do not demonstrate an irreconcilable conflict… The differences between the acts do not create any obstacle to giving effect to both, which is what R.C. 1.51 directs us to do.” West at ¶¶ 27 and 32. The court reasoned that “the legislature intended the [DMA] to provide surface owners an additional mechanism to accomplish reunification of dormant mineral interests with the surface estate in order to promote the use of natural resources when those interests could not be extinguished under the [MTA].” Id at ¶ 40 (emphasis original).
Yet, the potential for this ruling to create confusion among surface and severed mineral owners (and oil and gas operators) does not appear to be lost on the Court. The court expressly acknowledged that under certain circumstances a severed mineral interest could be terminated under the DMA but not under the MTA, or vice versa. This is true not only because of the different look-back periods under the MTA and DMA, but also because of the different kinds of savings events specified in each statute, and the fact that not all of the savings events under the DMA must be memorialized in record title.
As Justices Sharon Kennedy and John Donnelly point out in their dissenting opinion, after the West decision, a severed oil and gas interest that is currently in production, or that is being used for gas storage, could be automatically extinguished by operation of law under the MTA if that severed oil and gas interest is not preserved by a specific reference in the chain of title to the surface estate. Of course, by contrast, under the DMA current production and/or gas storage is a savings event. Nonetheless, because the West decision holds that the DMA and MTA are independent statutes, the Court acknowledged that “a mineral interest extinguished [under the MTA] no longer exists to be saved under the [DMA], and it cannot be revived.” Id at ¶ 31.
Overall, the West decision may be perceived as a boon to surface owners who own property subject to reserved oil and gas interests because they now have a second means by which those severed interests may be terminated and reunited with their surface estate – through the automatic operation of the MTA. On the other hand, the West decision could prove to be a headache for operators, and severed oil and gas owners who now must remain vigilant to ensure that any severed oil and gas rights they own are adequately preserved under the different savings events in the MTA and DMA.
Porter Wright’s dedicated team of oil and gas attorneys regularly advises oil and gas clients on day-to-day operational and transactional matters. Our litigators also represent oil and gas clients in state and federal courts, and in regulatory matters before the ODNR – Division of Oil and Gas Resources Management. If you have questions about Ohio’s oil and gas laws and regulations, including the DMA or MTA, we would love to hear from you. Also, please review our blog post here for more information about two additional pending Ohio Supreme Court cases that may impact claims between surface owners and mineral owners.