On September 15, 2016, the Ohio Supreme Court issued decisions in twelve cases concerning the proper interpretation of the Dormant Mineral Act of 1989 (the “1989 Act”).
The most important of these decisions was Corban v. Chesapeake Exploration, L.L.C. where the Court ruled that the 1989 Act was not self-executing and that surface owners wishing to take advantage of the provisions in the 1989 Act were therefore obligated to file a quiet title action prior to June 30, 2006, when the Dormant Mineral Act of 2006 (the “2006 Act”) went into effect and significantly altered the requirements for obtaining an abandonment pursuant to Ohio’s Dormant Mineral Act.
The 1989 Act provided that: “Any mineral interest held by any person, other than the owner of the surface of the lands subject to the interest, shall be deemed abandoned and vested in the owner of the surface” unless the mineral interest involved coal; the interest was held by the United States, the State of Ohio, or certain other governmental entities identified in the statute; or one of six savings events identified in the statute had occurred during the preceding 20 years. Three intermediary courts of appeals had interpreted this language as meaning the 1989 Act was self-executing, i.e., the mineral rights would automatically vest in the surface owner without any action being required by that surface owner to accomplish an abandonment.
The Supreme Court overruled these lower courts, holding that the quoted language only created a conclusive evidentiary presumption that the minerals had been abandoned. In order to take advantage of that evidentiary presumption, a surface owner would need to bring a quiet title action to have a court declare that the severed mineral interest had been deemed abandoned. In other words, if the surface owner brought a lawsuit the severed mineral interest owner would lose if it could not prove that the mineral interest involved coal, was owned by one of the listed public entities, or that a savings event had occurred during the preceding 20 years. However, if a lawsuit was not filed, then the severed mineral interest owner would continue to own the minerals.
The Court further held that any lawsuits brought after June 30, 2006, would have to comply with new requirements imposed by the 2006 Act. Specifically, the 2006 Act established a way for surface owners to establish that they owned marketable record title of the minerals without a quiet title action. In order to take advantage of this new provision, however, the landowner would need to provide notice of its intent to seek an abandonment to the severed mineral interest owner. The severed mineral interest owner then would have 60 days to preserve their rights to the minerals by either filing an affidavit pointing out a savings event which had occurred during the 20 years preceding the notice or by recording a claim stating that the severed mineral interest had not been abandoned. The Supreme Court held that this change in the law did not affect a vested property right because it merely changed the method and procedure for achieving a deemed abandonment under the Dormant Mineral Act.
Like Corban, all the other cases pending before the Supreme Court were originally filed after June 30, 2006. Thus, the Supreme Court decided all of these other cases based upon the reasoning of Corban, declining to offer its opinion as to the intricacies of how the 1989 Act had operated because any currently pending cases would be decided based upon the provisions in the revised 2006 Act.
The Corban decision makes it significantly more difficult for surface owners to successfully work an abandonment of severed mineral interests. Under the 2006 Act, the surface owner arguably must locate the current owners of the severed mineral interest and provide them with actual notice of the surface owner’s intent to seek an abandonment of the minerals. Part of the rationale for adopting a dormant mineral act is because the severed mineral interest owners are often difficult (if not impossible) to locate decades or centuries after the minerals were first reserved. Further, if the surface owner does manage to locate the current severed mineral interest owners, those mineral owners can then avoid any abandonment by simply recording a claim announcing that they have not abandoned the mineral interest.
The difficulty of locating the severed mineral interest owners, combined with such owners’ ability to preserve their interests after obtaining notice even though they have not actually exploited their mineral interests for two decades or more, will make it extremely difficult for surface owners to successfully obtain the unexploited minerals underlying their property using Ohio’s Dormant Mineral Act. However, there are many unanswered questions regarding how the 2006 Act operates, and litigation regarding the proper interpretation of the 2006 Act will likely play out over the next several years. Surface owners may yet prevail on some of those statutory interpretation issues.
Tagged In:Mineral InterestMineral RightsOhio Supreme CourtOil & Gas