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November 6th, 2015
A few months ago, I wrote about how the application of Ohio’s Dormant Mineral Act should soon gain more certainty. That was because the Ohio Supreme Court had before it several cases which should clarify the more contentious disputes surrounding the application of the law. One step towards that certainty was taken in the recent Slip Opinion issued in Chesapeake Exploration, LLC et. al., v. Buell et al. case. The decision came out on November 5, 2015. The case actually came to the Supreme Court on certified questions of law from the United States District Court for the Southern District of Ohio. Even though the case was pending in Federal Court, the issues involved are Ohio substantive state law issues. As such, the Federal Court is required to interpret and apply Ohio law. Often times, when the answer to a question is not clear under state law or a new issue has been brought up, Federal Courts can certify specific questions of law to state supreme courts to have the highest court in the state determine the issue and tell the Federal Court what the law is. That is what happened in this case.
The important questions that the Ohio Supreme Court was asked to resolve for the Federal Court were:
1. Is the recorded lease of a severed subsurface mineral estate a title transaction under the ODMA, Ohio Revised Code 5301.56(B)(3)(a)?
2. Is the expiration of a recorded lease and the reversion of the rights granted under that lease a title transaction that restarts the twenty-year forfeiture clock under the ODMA at the time of reversion?
The Court was asked to decide, therefore, whether the recordation of an oil and gas lease executed by a severed mineral owner is a “savings event” that would prohibit the abandonment of oil and gas rights under the ODMA. It was also asked to decide if the expiration of such a lease, which results in the reversion of any rights provided under a lease back to the Grantor, is a “savings event.”
The decision was not unanimous on the various points, but the holding of the Court is that oil and gas leases which have been recorded in the Recorder’s office are, in fact, title transactions. Those leases then qualify as “savings events” which prohibit abandonment under the ODMA. Two dissenting judges would have found that a lease by itself is not a “savings event” as a specific “savings event” is already applicable for the actual production or withdrawal of minerals. The Court ruled, however, that the unrecorded expiration of one of those recorded lease agreements is not a title transaction and does not preclude abandonment under the ODMA. The Court was unanimous on that point.
Interestingly, the Court may have telegraphed its thinking on another issue soon pending before it. The Court stated that “the unrecorded expiration of an oil and gas lease does not constitute a saving event under R.C. 5301.56(B)(3)(a) that would restart the 20-year clock.” (Italics added.) Do the words “restart the 20-year clock” mean that the Court would be inclined to find a rolling 20 year look back period rather than one specific 20 year window as some argue under the 1989 version of the act? The Court will hopefully resolve that issue soon as arguments in the Eisenbarth v. Ruesser matter are set for November 17, 2015. One of the issues in that case is whether a fixed or rolling 20 year abandonment period is to be applied under the 1989 version of the Ohio Dormant Mineral Act.
We will continue to keep you updated as the Ohio Supreme Court continues to resolve the myriad of questions involving the Ohio Dormant Mineral Act. If you have questions about your rights under the Ohio Dormant Mineral act, don’t hesitate to give us a call for a free consultation.
