Type: Client Alerts
On September 15, 2016 the Ohio Supreme Court issued three opinions providing long-awaited clarity to Ohio’s Dormant Mineral Act (“ODMA” or “Act”). Most notably, the court ruled that the 1989 ODMA did not automatically allow mineral interests to be deemed abandoned and vested in the surface owner. Instead, a surface owner seeking to merge a severed mineral interest with the surface under the 1989 Act was required to commence a quiet title action. Additionally, surface owners asserting claims after June 30, 2006 must follow the notice and recording procedures contained in the 2006 Amendment to the ODMA.
Corban v. Chesapeake Exploration, L.L.C.
In Corban, the surface owner argued that the severed mineral interest automatically vested in him under the 1989 ODMA before the 2006 amendments, and therefore the notice requirements do not apply to his claim. The severed mineral owner and its lessees, including Chesapeake Exploration, L.L.C., countered that the 2006 amendments to the ODMA should apply because they were in effect at the time the surface owner brought suit in 2013. The mineral interest owner and its lessees also argued that the payment of delay rentals restarted the 20-year abandonment period by precluding reversion of the mineral estate during the primary term of the lease, as it would be nonsensical to hold that a mineral owner has begun to abandon a mineral estate while collecting rent for that estate. The United States District Court for the Southern District of Ohio certified two questions to the Supreme Court of Ohio, which agreed to hear both: (1) If the 2006 version or the 1989 version of the ODMA applies to claims asserted after 2006 alleging that the rights to oil, gas, and other minerals automatically vested in the surface landholder prior to the 2006 amendments as a result of abandonment, and (2) If the payment of a delay rental during the primary term of an oil and gas lease is a title transaction and “savings event” under the ODMA.
Reed Smith represented the oil and gas lessees, which prevailed in their argument that the 1989 ODMA did not automatically allow mineral interests to be deemed abandoned and vested in the surface owner, and that 2006 notice requirements apply to ODMA claims asserted after June 30, 2006.
Justice O’Donnell penned a plurality opinion holding that in enacting the 1989 law, and using the phrase “deemed abandoned and vested,” the Ohio General Assembly created a “conclusive presumption” by establishing that a mineral rights holder had abandoned a severed mineral interest if the 20 year period passed without a saving event. The plurality opinion found that the statute remedied the difficulties faced by a surface owner seeking to quiet title to a dormant mineral interest, an action that at common law would have required proof that the mineral rights holder, who may not be locatable or identifiable from land records, had abandoned and relinquished that interest. However, because the conclusive presumption of abandonment was only an evidentiary device that applied to an action to quiet title to a dormant mineral interest, the ODMA did not automatically transfer the interest from the mineral rights holder to the surface owner by operation of law.
The plurality opinion found it apparent in analyzing the “sequential legislation” on the issue that the Ohio General Assembly did not intend title to dormant mineral interests to pass automatically and outside the record chain of title. Instead, a surface holder seeking to merge a severed mineral interest with the surface under the 1989 Act was required to commence a quiet title action. Turning its attention to the 2006 Amendment to the ODMA, the court found that the notice and recording requirements included in the amendment did not violate the Retroactivity Clause of the Ohio Constitution. The court held that the statute did not divest the surface holder of a right to abandoned mineral interests that accrued prior to the effective date of amendment, but rather, it modified only the method and procedure by which the right is recognized and protected. As a result, surface owners bringing claims after June 30, 2006 must follow the notice and recording procedures contained in the 2006 Amendment to the ODMA.
Finally, the Court unanimously held that a delay rental payment was not a title transaction or a saving event for purposes of the ODMA because it was not filed or recorded in the office of the county recorder.
Two justices joined in Justice O’Donnell’s opinion with two additional justices concurring in the judgment on the first certified question and two justices dissenting as to that question. In a dissenting opinion, Justice Pfeifer accused the majority of “judicial modification under the guise of interpretation.” All of the justices concurred in the opinion as to the second certified question.
Walker v. Shondrick-Nau
In Walker, the surface owner had initially attempted to use the notice provisions under the 2006 Amendments to the ODMA to declare the mineral interests under his property abandoned. When the mineral interest owner filed an affidavit to preserve the estate, the surface owner filed a quiet title action in 2012, asserting that under the 1989 ODMA, the mineral rights had merged with the surface when the grace period under the 1989 Act ended in 1992. Applying the holding of Corban, the Court held that that the 2006 Amendments applied to the surface owner’s claim to the mineral rights. Under the 2006 Amendments, the mineral owner’s claim to preserve his rights operated as a “saving event” sufficient to prevent the surface owner from declaring the mineral rights abandoned.
Albanese v. Batman
The primary issue in Albanese v. Batman was whether the filing of a will with the probate court and the county recorder’s office was a saving event sufficient to prevent the subject mineral estate from being deemed abandoned under the 1989 Act. In applying Corban, the Court held that there was no automatic abandonment and vesting of the mineral interest in the surface owner under the 1989 Act. Because the surface owners had not followed the notice requirements under the 2006 Amendments, the mineral owners retained their interests.
Applying the holding in Corban, the Court also decided Carney v. Shockley, Dahlgren v. Brown Farm Prop. LLC, Eisenbarth v. Reusser, Farnsworth v Burkhart, Swartz v. Householder, Shannon v. Householder, Taylor v. Crosby, Thompson v. Custer, Tribett v. Shepherd, and Wendt v. Dickerson.
Client Alert 2016-249