What happens when those worthless mineral rights that grandma and grandpa carved off all of those years ago suddenly and dramatically increase in value? People fight over them. In Ohio, this ownership fight often centers on application of the Ohio Dormant Mineral Act (ODMA), which, under certain circumstances, can vest severed mineral interests in the surface owner.
On Aug. 20, 2014, the Ohio Supreme Court heard oral arguments for two cases regarding interpretation of the ODMA: Dodd v. Croskey and Chesapeake v. Buell. Specifically, these cases seek a decision from the state high court about what constitutes a “savings event” (an event that prevents a severed mineral interest from vesting in the surface owner) under the ODMA.
In Dodd, the primary question before the court is whether the appellee-mineral holder did enough to retain the severed mineral interest after receiving notice that the appellant-surface owner intended to declare the mineral interest abandoned. The ODMA provides that after a notice to abandon is served or published, the holder must record “one of the following” to preserve: 1) a claim to preserve; 2) an affidavit that identifies a savings event.
In Dodd, after the abandonment notice was published, the holder only recorded the former. The lower courts, in essence, held that complying with either preservation technique is enough to preserve a severed mineral interest. The surface owner, however, contended that a claim to preserve only avails if it is recorded prior to the abandonment notice, and – once notice has been served or published – in order to preserve, the holder must record an affidavit that identifies a savings event. In support of this interpretation, the surface owner argued that the use-it-or-lose-it policy behind the ODMA would be rendered moot if a holder could simply record a claim to preserve.
At Dodd’s oral argument, the court’s questions focused on the consequences of the surface owner’s more restrictive interpretation of the ODMA, versus the mineral holder’s broader interpretation. Unfortunately, the court did not reveal its tendency to find one way or the other.
In Buell, the court was asked to determine whether the execution (and recording) of an oil and gas lease by a mineral holder and/or the expiration of a mineral holder’s oil and gas lease constitutes a “title transaction” (and, therefore, a savings event) under the ODMA.
The surface owner took a technical position, arguing that neither of these events constitute a title transaction because the ODMA does not specifically say they do. Moreover, because the state legislature included “the actual production or withdrawal of minerals by the holders” as a savings event, it did not intend for either the granting or expiration of a lease to constitute a savings event.
The mineral holder, unsurprisingly, argued that an oil and gas lease very much “affects” title, and, therefore, must constitute a title transaction. Furthermore, with regard to the second question, the holder argued that because the expiration of a lease is a reversion back to the mineral holder, it affects title similar to the granting of a lease, only in reverse, and therefore is also a title transaction.
At oral argument, the court’s questions seemed to be critical of the position that a recorded oil and gas lease is not a title transaction, with the justices asking why it would not be if it acts as an encumbrance on title for every other purpose. On the other hand, the court appeared more ambivalent with regard to the second question, expressing dismay at the proposition that the expiration of a lease, without a separate recording (e.g., a release of lease), could constitute a title transaction.
The oral arguments underscore the confusion caused by the ODMA, and, more broadly, showcase the problems an inartfully drafted statute can cause – often more than it intends to solve. Hopefully, the court takes this opportunity to establish a clear framework for interpreting and applying the ODMA, providing Ohio landowners and the oil and gas industry with what has been lacking thus far: