In part 2 of this series, we reviewed the application of the Marketable Title Act (MTA) in a 1982 case involving a severed mineral interest and two independent chains of title. The Ohio courts appeared to struggle with the application of the MTA to the facts of that case. Courts and legislatures in neighboring states also struggled with how to handle dormant severed minerals. Those states’ case law and statutes played a role in the formulation of the Ohio Dormant Minerals Act, which was enacted in 1989 as part of the MTA. Examples of such influential laws and cases from Illinois and Indiana follow.

Illinois DMA held unconstitutional in 19801

In Illinois, at common law, once a mineral estate has been severed from the surface estate, it cannot be terminated by mere nonuse or abandonment. Uphoff v Trustees of Tufts College, 351 Ill 146, 155, 184 NE 213, 216 (Ill 1932). Thus, mineral interests can lie dormant, even through several transfers of title. This situation, over time, can result in missing or unknown owners. The difficulty in ascertaining and locating severed mineral owners had a substantial deterrent effect on would-be gas and oil developers.

The Illinois legislature responded by enacting the Dormant Mineral Interests Act in 1969. The act was intended to facilitate development of dormant oil and gas interests by permitting consolidation of mineral ownership in one person in instances where it had formerly been diffused among many unknown or missing persons. The act provided that unless an individual duly recorded his interest, his failure to actually produce oil or gas in any 25-year period created a presumption of abandonment. There was great uncertainty among oil and gas title examiners regarding the act’s validity because, at common law, abandonment required both intent to abandon and an affirmative act of relinquishment. Furthermore, the act did not require entities who sought a ruling of abandonment to give unknown mineral owners notice or an opportunity to be heard.
Continue Reading The Ohio Dormant Minerals Act: Part 3

In a case involving the assignment of oil and gas leases from one company to another, an Ohio appellate court enforced an anti-assignment provision in the original lease. Harding v. Viking Internatl. Resources Co., Inc., 4th Dist. Washington No. 13CA13, 2013-Ohio-5236.

The facts

The Hardings owned property in Washington County that was subject to three oil and gas leases signed by the prior property owners, their parents. All of the leases contained the following anti-assignment clause:

The rights of the Lessor may be assigned in whole or in part and shall be binding upon their heirs, executors and assigns. The rights and responsibilities of the Lessee may not be assigned without the mutual agreement of the parties in writing.

The original lessee, Carlton Oil Corporation, assigned the leases to Viking in 2011. Though the assignment was recorded, the Hardings were not parties nor did they provide written consent to the assignment. However, after the assignment, the Hardings completed and returned a W-9 form that Viking mailed to them and they accepted and cashed royalty checks from Viking for eight months before they objected to the assignment and filed suit against Viking to have the court declare the leases void and forfeited because of the violation of the assignment provision.
Continue Reading Anti-assignment clause in oil and gas lease enforced

In the first part of this series, we reviewed a 2010 Licking County case, which held that Ohio’s Marketable Title Act (MTA) extinguished an adjoining landowner’s claim against former railroad property. This article discusses how the MTA was used to reconcile competing claims to a severed mineral interest before Ohio’s Dormant Minerals Act was passed.

The Marketable Title Act and severed minerals: coal excepted, but not oil and gas

When the MTA was first enacted in 1961, it expressly excepted all mineral interests . But in 1973 the Ohio Legislature amended the mineral interest exception so that only coal was excepted from the operation of the MTA. That amendment set the stage for Heifner v. Bradford, 5th Dist. Muskingum No. CA-81-10, 1982 Ohio App. LEXIS 14859 (Jan. 29, 1982), overruled by Heifner v. Bradford, 4 Ohio St. 3d 49; 446 N.E.2d 440 (1983).
Continue Reading The Ohio Dormant Minerals Act: Part 2

We are in the process of posting a series of articles on the Ohio Dormant Minerals Act (DMA), in which we’ll provide analysis about Dahlgren-v-Brown, Carroll C.P., 13CVH27445, (Nov. 5, 2013). However, today we wanted to share news about this Carroll County opinion and what it may portend for future cases.

The facts

Leora Dahlgren owned severed minerals pursuant to a reservation in a deed to Walter Dunlap in 1949. When Leora passed away in 1977, her estate was probated and a Certificate of Transfer conveying the minerals to her heirs was issued and recorded — at the Probate Court rather than the Recorder’s Office — in 1978.1 More than 30 years later, in 2009, the mineral owners leased their oil and gas. During that same period of time, the surface had become owned by successors to Dunlap pursuant to deeds reciting the reservation in the 1949 deed. The surface owners filed a DMA notice of abandonment in March 2012. Within the following 60-day period, the Dahlgren mineral heirs filed their notice of claim and, in 2013, sued to quiet title.
Continue Reading Carroll County dormant minerals interest case — decision favors mineral owners

This is the first in a series of articles delving into the history and influence of the Ohio Dormant Minerals Act since it was enacted in 1989.

The oil boom at the turn of the last century led property owners selling their land to reserve from the sale, for themselves, “the oil and gas and other minerals” — thus creating severed mineral interests. During the next 40 to 50 years there were two world wars, divorces, deaths and myriad other family-changing events. In many cases, the ownership of severed mineral interests became clouded. Through the years, legislatures in the Midwest have worked to address the situation through mineral lapse acts or dormant minerals acts, whereby the severed interest is reunited with the surface.

With the advent of horizontal wells, consternation around determining who owns the minerals has become exacerbated. Horizontal wells and fracking have made severed interests, even small ones, a matter of animated debate. Furthermore, any time the legislature tries to decide who wins, the loser is bound to argue that the Constitution requires restitution. As Justice Oliver Wendell Holmes Jr. said in one of his famous dissents, “Great cases, like hard cases, make bad law.” Northern Securities Co. v. United States, 193 U.S. 197 (1904). The severed mineral interest issue pits two fundamental principles against each other: the certainty title to land vs. the need to extinguish dormant claims so that development can proceed.

The objective of this series of articles is to trace the history and evolution of Ohio’s Dormant Minerals Act (DMA), and to examine current issues related to its implementation.

The DMA was enacted in 1989 as part of the Ohio Marketable Title Act (MTA), which itself became law in 1961. The MTA is best understood not in the abstract, but (at least for this writer) in the context of actual facts. A recent case from Licking County is illustrative.
Continue Reading The Ohio Dormant Minerals Act: Part 1

Siblings at odds before the North Dakota Supreme Court

Reservations of mineral interests in deeds is tricky business. A particular case in North Dakota was resolved only after five years of litigation — including a trial and an appeal to the state supreme court. As we have written previously, whether in Ohio or North Dakota, shale source rock and horizontal drilling seem to make mineral interests worth fighting for — even between siblings.

Background

George Tank and his wife owned property in McKenzie County, North Dakota. After his wife had passed away, George executed a quitclaim deed conveying his interest in part of his property to one of his five children — his son, Greggory Tank, who had stayed on the farm to work with his parents.

George’s quitclaim deed was captioned “(Life Estate Reserved)” and contained the following reservation clauses:
Continue Reading Is a reservation of oil and gas ambiguous?

An essential function of the law is to provide predictability as questions arise. When legal questions arise in the oil field regarding ownership rights, a consensus in the law — especially in the common law — is crucial. With that consensus, the attributes of conveyances related to those hydrocarbons (rights) can be examined. Specifically, what are the landowner’s rights with regard to the hydrocarbons under a piece of land in Ohio? Does he or she actually own them, or do they just have the right to capture them? If he or she would grant a lease to an oil company, what does the oil company own — is it an interest in real estate or is it simply a right to search? And, if found, what is the nature of the interest owned by the oil company pursuant to the lease? These fundamental questions have not been answered clearly in Ohio despite the fact that courts have struggled with them for over a century.

This ambiguity in the law puts federal courts in a potentially difficult position. Absent a clear indication of state law, federal judges deciding these issues under Ohio law are required to consider how the Ohio Supreme Court would decide the issue. Recently, a federal judge weighed in on the nature of an oil and gas lease in the case of Wellington Resource Group LLC v. Beck Energy Corporation, Case No. 2:12-CC-104 in the United States District Court for the Southern District of Ohio, Eastern Division, Sept. 20, 2013.

Whether the interest granted in the lease is an interest in real estate, or is something other than that, has implications in a variety of laws and contexts. Does the lease need to be in writing? Does the lease need to be recorded? Is a mechanics’ lien able to attach to it? How is the lease characterized in a bankruptcy context? (Read more in previously published articles about bankruptcy and mechanics’ liens.)
Continue Reading What is an oil and gas lease? A federal court in Ohio predicts Ohio law

In our previous two segments on Section 16 lands — Part 1 and Part 2 — we examined the dedication, by Congress, of one section in each Ohio township, usually Section 16, for the support of public education. Initially, while retaining title to such lands in trust, Ohio vested administrative control in township trustees. However, the allocation of authority to the townships did not go well and in 1914 and 1917 the legislature reallocated responsibility to the Auditor of State as administrator of school lands remaining in state hands.

From 1827 to 1917, when the township trustees were authorized to sell or lease school land to private individuals, mineral title typically passed with the fee simple title. However, this practice ended in 1917 when the auditor assumed authority.

The 1917 legislation, known as the Garver Act, was enacted to provide for better administration of school lands. H.B. No. 192, 107 Ohio Laws 357, G.C. 3203. One of the issues was confusion about the status and ownership of leases of Section 16 parcels granted by township trustees. Section 23 of the Garver Act —provided procedure by which someone claiming title could file a claim with the state supervisor who, after public notice and if satisfied that the claim was valid, would execute a new lease. The Garver Act also provided a mechanism whereby a lessee could surrender his lease and obtain a fee simple title.
Continue Reading Part 3: Who owns the minerals under Ohio Township Section 16?