By: Shana M. Smith, Esq.
On September 15, 2016, the Supreme Court of Ohio issued opinions on three cases addressing the Ohio Dormant Mineral Act, O.R.C. 5301.56 (“ODMA”) and subsequently applied the decisions to dispense with ten additional cases. Of particular importance is the Court’s ruling in Corban v. Chesapeake Exploration, L.L.C., Slip Opinion No. 2016-Ohio-5796, that the 1989 version of the ODMA was not self-executing.
Corban v. Chesapeake Exploration, L.L.C., Slip Opinion No. 2016-Ohio-5796.
In Corban v. Chesapeake Exploration, L.L.C., Slip Opinion No. 2016-Ohio-5796, the Supreme Court of Ohio decided two issues of first impression regarding the ODMA. Corban came to the Supreme Court of Ohio as two certified questions from the United States District Court for the Southern District of Ohio, being:
- Does the 2006 version or the 1989 version of the [Dormant Mineral Act] apply to claims asserted after 2006 alleging that the rights to oil, gas, and other minerals automatically vested in the surface land holder prior to the 2006 amendments as a result of abandonment, and
- Is the payment of a delay rental during the primary term of an oil and gas lease a title transaction and “savings event” under the [Dormant Mineral Act]?
The ODMA, which was originally enacted in 1989 (“1989 ODMA”), and amended in 2006 (“2006 ODMA”), provides that a severed oil and gas interest shall be deemed abandoned and vested in the surface owner if certain saving events, enumerated at O.R.C. 5301.56(B)(3), have not occurred within a twenty (20) year look-back period.
In its analysis of the first question presented, the Court focused on the meaning and effect of the phrase “deemed abandoned,” as it is used in that portion of the ODMA which provides that mineral interests “shall be deemed abandoned and vested in the owner of the surface.” After examining numerous Ohio cases, the Court concluded that by using the phrase “deemed abandoned,” the 1989 ODMA created a conclusive presumption that the mineral interest had been abandoned if action had not been taken to preserve it, which could then be used as evidence to extinguish the severed mineral interest in a quiet title action. The Court held that “the 1989 Dormant Mineral Act was not self-executing and did not automatically transfer ownership of dormant mineral rights by operation of law.”
The Court also held that because the 2006 ODMA only added a method for a surface owner to obtain marketable title to abandoned mineral interests without pursuing litigation, the 2006 ODMA applies to all claims asserted after its effective date, including those that arose prior to that date.
As to the second question presented, the Court quickly concluded that payment of a delay rental is not a title transaction or saving event under the ODMA because it does not affect title to land, is not part of the chain of title, and is not recorded in the office of the county recorder.
Justice Kennedy filed an opinion concurring in judgment only as to the first certified question and concurring as to the second certified question.
Justice Pfeifer filed an opinion dissenting as to the first certified question and concurring as to the second certified question, which was joined by Justice O’Neill.
Walker v. Shondrick-Nau, Slip Opinion No. 2016-Ohio-5793.
The Court applied its holding in Corban to the issues presented in Walker v. Shondrick-Nau, Slip Opinion No. 2016-Ohio-5793, which came to the Court on appeal from the Seventh District Court of Appeals.
In Walker, the mineral estate was severed in 1965 when John Noon conveyed the surface estate and reserved the oil, gas, and other minerals. Jon D. Walker, Jr., appellee, acquired the property in 2009. In November 2011, Walker sent a Notice of Abandonment of Mineral Interest to Noon and filed an Affidavit of Abandonment of Mineral Interest in the county recorder’s office in January 2012. Thereafter, Noon filed an Affidavit to Claim and Preserve Mineral Interests in the county recorder’s office. Walker filed a declaratory judgment action in April 2012 to quiet title to the mineral interest. The trial court granted summary judgment in favor of Walker, who argued that the 1989 ODMA was self-executing and the surface and mineral estates had already merged in 1992 – prior to the Claim to Preserve Mineral Interests filed by Noon in 2012. The Seventh District Court of Appeals affirmed.
The Court applied its holding in Corban that the 1989 ODMA was not self-executing and the 2006 ODMA applies to all claims asserted after its effective date, including those which allege that a mineral interest had automatically vested in the surface owner prior to the 2006 ODMA. The Court reasoned that there is no evidence of actions by any party to have the mineral interest judicially ruled abandoned under the 1989 ODMA, and therefore, the 2006 ODMA was applicable as the claim was asserted subsequent to its effective date. Thus, by filing the claim to preserve in the county recorder’s office pursuant to the 2006 ODMA, Noon prevented the mineral estate from being deemed abandoned.
Justice Pfeifer and Justice O’Neill each filed a dissenting opinion.
Albanese v. Batman, Slip Opinion No. 2016-Ohio-5814.
The Court also applied its holding in Corban to the issues presented in Albanese v. Batman, Slip Opinion No. 2016-Ohio-5814, which came to the Court on appeal from the Seventh District Court of Appeals.
The basic circumstances at issue in Albanese are similar to Walker, in that it was argued that the 1989 ODMA was self-executing and actions to have the mineral interest deemed abandoned or preserved did not occur until after the effective date of the 2006 ODMA. The Court again applied its ruling in Corban and held that the 2006 ODMA applies to all complaints filed after June 30, 2006.
Justice Pfeifer, joined by Justice O’Neill, filed an opinion concurring in judgment only.
The Supreme Court has finally settled an issue that has plagued oil and gas operators in Ohio for years. However, the ramifications of the Court’s holding that the 1989 ODMA was not self-executing will have detrimental effects on many leaseholds in Ohio. Should you now be in a position that requires you to reevaluate your current leaseholds and leasing practices, Leech Tishman can assist you with navigating the effects of the Court’s holding.
If you have any questions about your leasehold, leasing practices, or implications following the Court’s holding, please contact Shana Smith at 412.261.1600, or by email at firstname.lastname@example.org. Shana is an associate in the Energy and Environmental Health & Safety Practice Groups, and is based in Leech Tishman’s Pittsburgh office.
Leech Tishman’s Facebook Page: https://www.facebook.com/leechtishman
Leech Tishman’s Energy Group Twitter: https://twitter.com/LTEnergyGroup
Leech Tishman’s Company Page on LinkedIn: https://www.linkedin.com/company/leech-tishman
Leech Tishman Fuscaldo & Lampl is a full-service law firm dedicated to assisting individuals, businesses, and institutions. Leech Tishman offers legal services in alternative dispute resolution, bankruptcy & creditors’ rights, construction, corporate, employee benefits, employment, energy, environmental health & safety, estates & trusts, family law, government relations, immigration, insurance coverage & corporate risk mitigation, intellectual property, internal investigations, international legal matters, litigation, real estate, and taxation. Headquartered in Pittsburgh, PA, Leech Tishman also has offices in Chicago, Los Angeles, New York and Wilmington, DE. For more information call 412.261.1600 or visit us at www.leechtishman.com.