On November 5, 2015, the Ohio Supreme Court took its first step towards resolving the significant uncertainty surrounding the Ohio Dormant Mineral Act (ODMA). The court issued its opinion in the case of Chesapeake Exploration, LLC v. Buell, 2015-Ohio-4551. The slip opinion can be found here. While numerous ODMA cases remain pending before the Court, this opinion begins to shed light on how the court will analyze and interpret issues related to this controversial law.
As the Court noted in its opinion, ODMA provides “a mechanism to reunite abandoned mineral interests with the surface property interest in order to clear title and promote the use of the mineral rights for development and production.” Under the statute, a mineral interest can be deemed abandoned and reunite with the surface interest if the holder of a severed mineral interest has not engaged in certain actions, referred to as “savings events,” within the twenty year “look back” period. In general, these savings events are actions that evidence the mineral owner’s intent to use and maintain their interest. One such savings event occurs when “[t]he mineral interest has been the subject of a title transaction that has been filed or recorded in the office of the county recorder of the county in which the lands are located,” (emphasis added).
In Chesapeake v. Buell, two key issues were before the Court: (1) whether a recorded oil and gas lease constitutes a title transaction under ODMA; and (2) whether the unrecorded expiration of a recorded oil and gas lease constitutes a title transaction under ODMA. In the opinion penned by Chief Justice O’Connor, the court held that a recorded oil and gas lease does constitute a title transaction, but the unrecorded expiration of such a lease does not.
“Title transaction” is defined under Ohio’s Marketable Title Act as “any transaction affecting title to any interest in land, including title by will or descent, title by tax deed, or by trustee’s, assignee’s, guardian’s, executor’s, administrator’s, or sheriff’s deed, or decree of any court, as well as warranty deed, quit claim deed, or mortgage.” R.C. § 5301.47(F). While the statute does not include oil and gas leases in the enumerated transactions, the court noted that the statute does not limit the definition to those enumerated examples. Further, the court noted that an oil and gas lease does affect “the possession and custody” of both the mineral and surface estates, and, therefore, such a lease affects title to an interest in the land. Thus, the court held that an oil and gas lease does qualify as a “title transaction” for purposes of ODMA.
However, the court also held that the unrecorded expiration of such an oil and gas lease does not qualify as a separate and distinct title transaction. The court noted that oil and gas leases generally can expire or terminate under circumstances which would not be evident, of record. And, therefore, holding that an unrecorded expiration of lease qualifies as a title transaction “would not contribute to the clarity of the record of title that the Dormant Mineral Act seeks.” For similar reasons, the court held that the twenty-year “look back” period is not tolled during the life of a lease.
The court distinguished between unrecorded expirations and recorded releases or terminations of a lease, suggesting that a recorded release of lease may qualify as a title transaction and savings event. However, the opinion does not explicitly rule on this issue. Thus, while this ruling in Chesapeake v. Buell begins to provide clarity in the interpretation of ODMA, it also reminds the reader that there are many issues left to be resolved. And, the oil and gas industry will patiently await further rulings on ODMA from the Ohio Supreme Court.
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