Oil & Gas News

Ohio Court must consider two state laws on oil and gas rights

Ohio, Oil and gas, Mineral Rights

By: The Highland County Press – The Ohio Marketable Title Act (MTA) and the Ohio Dormant Mineral Act (DMA) provide separate procedures, either of which may be used by surface property owners to terminate claims of oil and natural gas rights, depending on the circumstances and the time that has elapsed, the Ohio Supreme Court ruled recently.

In a 4-3 decision, the Supreme Court stated that while the laws establish different methods for terminating mineral rights over different time-periods and through different procedures, they are not in “irreconcilable conflict.” The Court affirmed a Seventh District Court of Appeals ruling that found the more recent DMA, last amended by state lawmakers in 2006, did not supersede the older MTA.

Writing for the Court majority, Justice Judith L. French acknowledged the concerns expressed by natural-gas and oil-exploration companies that following both laws “brings about the unintended consequences of complicating determinations” of mineral rights ownership. However, the Court concluded that it must apply the laws as the General Assembly wrote them: as alternative methods for reuniting severed mineral interests with the surface property rights.

Chief Justice Maureen O’Connor and Justices R. Patrick DeWine and Melody J. Stewart joined Justice French’s opinion.

In a dissenting opinion, Justice Sharon L. Kennedy wrote that state lawmakers enacted the DMA to supersede the MTA and to be the sole mechanism for surface owners to regain mineral rights. She noted that the DMA provides stronger protections to mineral rights owners to protect them against the loss of their property rights as well as different saving events that preserve mineral interests when the MTA would not. Justice Michael P. Donnelly joined her dissent.

Justice Patrick F. Fischer dissented without a written opinion.

The Court’s decision remanded to the Monroe County Common Pleas Court a dispute between surface property owners and heirs to mineral rights severed more than a century ago.

In 1996, Wayne West acquired about 68 acres of land in Monroe County from his family. In 2002, he transferred five acres of land to Rusty West. In 2017, Wayne and Rusty West filed a lawsuit in Monroe County Common Pleas Court seeking a declaratory judgment that any severed oil and gas royalty interests in their land had expired under the MTA.

The Wests did not know the identities of any potential current mineral rights owners. They published notifications of their lawsuit, but no one answered.

Court records indicated that in 1902, George and Charlotte Parks sold a one-half royalty interest in the oil and gas underneath their 66-acre property in Monroe County to C.J. Bode and George Nalley. ?
George Parks then sold the surface property to Lettie West in 1929, indicating that Bode and Nalley had an oil and gas royalty interest. When the property was transferred to George West in 1959, upon Lettie West’s death, the recorded certificate of transfer did not mention the oil and gas interest. When the land was transferred to Wayne West and then, in part, to Rusty West, the deeds did not identify the severed royalty interest.

The royalty interest took a separate path. By 1916, through several transactions, Bode and Nalley sold the rights to three individuals in transactions that were recorded in Monroe County.

Katherine Haselberger, Charlotte McCoy, and John Christman became aware of the Wests’ lawsuit and asked the common pleas court for permission to join the proceedings. They sought to stop the Wests from terminating the oil and gas rights.

The three maintained they are the heirs of Nova Christman, who acquired title to one-sixteenth of the oil and gas royalty interests to the land below the Wests’ surface property in 1944. The 1944 deed identified the royalty interest was for oil and gas underneath Lettie West’s property and noted that West received the property from the Parks. Nova Christman had filed a “notice of claim” with the Monroe County Recorder’s Office in 1977, indicating he owned the mineral royalty rights.

The Christman heirs maintained that under the DMA, R.C. 5301.56, the royalty interest was properly preserved. The Wests maintained that under the MTA, R.C. 5301.47 through R.C. 5301.56, the severed royalty interest was extinguished in 1999 because Nova Christman did not record anything in the surface property’s “chain of title,” documented at the county recorder’s office.

Both sides requested summary judgment, and the trial court sided with the Christman heirs. The court stated that only the DMA applied to the termination of oil and gas rights. The Wests appealed to the Seventh District.

The Seventh District ruled the MTA applies to the “extinguishment” of mineral rights, and the DMA applies to the “abandonment” of mineral rights, noting the Ohio Supreme Court explained the difference in its 2016 Corban v. Chesapeake Exploration LLC decision. The Seventh District ruled that the MTA and the DMA were not in conflict and instructed the trial court to analyze the case using the MTA.

The Christman heirs appealed the Seventh District’s decision to the Ohio Supreme Court, which agreed to hear the case to decide whether the DMA supersedes the MTA with respect to severed mineral interests.

Justice French explained that the Christman heirs, and the oil and gas companies who filed amicus curiae briefs in support of their position, maintain that, under the rules for interpreting Ohio laws in R.C. 1.51, the DMA is the sole means for extinguishing severed mineral rights. R.C. 1.51 states that if a general provision of state law conflicts with a “special or local” provision, a court should attempt to give effect to both laws. But if the provisions are irreconcilable, the special or local provision prevails, unless the general provision was adopted later or the General Assembly made clear that the general provision prevails.

The heirs asserted that the DMA, enacted in Ohio in 1989 and amended in 2006, conflicts with and supersedes the MTA, which was enacted in 1961 and amended in 1973. They claim the DMA is a special provision adopted later than the more general MTA and with no indication from the legislature that the MTA was to prevail over the DMA if there were a conflict.

The Court majority agreed with the Seventh District’s view, explaining that the MTA pertains to the “extinguishment” of mineral rights, which happens automatically after a certain amount of time elapses without any use of the mineral rights.

The DMA offers surface property owners a way to terminate and reclaim mineral rights that have been “abandoned,” the Court stated. That process does not happen automatically. Rather, the surface owner must ask a court to order that all rights belong to the surface owner. As amended in 2006, the DMA imposed a requirement of notification to any known or unknown mineral rights owner, and it gave those owners a chance to preserve their rights, the opinion stated.

The majority opinion stated that before the DMA could supersede and control over the MTA, R.C. 1.51 would require an irreconcilable conflict between the two laws, not simply different means for severing mineral interests.

“While differences indisputably exist, they do not demonstrate an irreconcilable conflict,” the opinion stated.

The Court wrote there is nothing in the two laws that prevent a mineral-interest holder from taking actions to ensure compliance with both laws.

“Each statute sets out simple actions that a holder of a mineral interest may take to perpetually preserve that interest. 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,” the opinion stated.

Justice Kennedy wrote in her dissent that the MTA was enacted by state lawmakers for the purpose of simplifying and facilitating land transactions by allowing buyers and sellers to rely on the record chain of title. It protected the landowners against claims to property that were not recorded in county records with the title.

The dissent explained that the legislature crafted the DMA in reaction to the Court’s 1983 Heifner v. Bradford decision. That ruling allowed a claim of a mineral right to remain valid even though it was recorded in a separate chain of title than the surface property’s chain of title. After Heifner, it became apparent that the Ohio Marketable Title Act would not be an effective mechanism for clearing title to ancient mineral claims.

Justice Kennedy wrote that the DMA was enacted to encourage the development of mineral resources by allowing parties to rely on the record chain of title for ownership interests.

The dissent pointed to R.C. 1.52(B), which instructs courts on how to interpret amendments to state law. That statute also requires an attempt to give effect to separate amendments regarding the same law, but if there is substantial conflict, then the latest adopted amendment prevails.

The dissent stated that the DMA was the latest adopted amendment and that it was irreconcilable with the MTA:  “By using ‘abandoned’ rather than ‘extinguished,’ by creating distinct saving events under the [MTA] and the [DMA], and by enacting a notice provision to protect the mineral-interest holder’s property rights, the General Assembly created a specific statutory mechanism to terminate dormant mineral interests that conflicts with and therefore must supersede the [MTA].”

Because the DMA’s saving events preserve mineral rights when the MTA would extinguish them, the dissent maintained that applying the MTA could lead to attempts to circumvent protections granted to mineral rights owners in the DMA and “can create needless confusion among mineral-interest holders and surface owners alike regarding who retains the oil and gas rights.”

To Top
Lease or Sell Your Minerals Rights in Oklahoma or Texas ➡️(405) 492-6277

Have your oil & gas questions answered by industry experts.