Ohio’s first producing oil well was drilled in 1860. As production increased over time, oil and gas ownership rights became more valuable, and many historical real property owners began to sever those rights from the surface of their real property. These severed oil and gas rights were often passed down from generation to generation, by testate or intestate succession, leading to fractional ownership interests. It became increasingly difficult and burdensome for oil and gas producers throughout the state to identify the holders of these fractional oil and gas ownership interests.
To deal with this issue, Ohio’s General Assembly passed the Ohio Dormant Mineral Act (ODMA) in 1989. While the General Assembly amended ODMA in 2006, the underlying purpose remains the same. The purpose of ODMA is to provide a mechanism for surface owners to reunite severed mineral rights with their surface ownership when those mineral rights are not being put to proper and efficient use. Under the statute, if the holder of a severed mineral interest has not engaged in certain actions, referred to as “savings events,” in the previous twenty years, then that mineral interest can be deemed abandoned and reunite with the surface interest. In general, these savings events are actions that represent the owner’s intent to use and maintain their mineral interest.
One such savings event under ODMA 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.” O.R.C. § 5301.56(B)(3)(a). To qualify as a savings event under this provision, there must be: (1) a title transaction; (2) the title transaction must be filed or recorded in the office of the county recorder; and (3) the mineral interest must be the subject of that title transaction. Recent case law has addressed whether an oil and gas interest passing through a testate or intestate estate is sufficient to qualify as a title transaction savings event, but several questions remain outstanding.
A “title transaction” is defined 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.” O.R.C. § 5301.47(F) (emphasis added). This statutory language suggests that testate or intestate transfers of oil and gas interests do qualify as title transactions, but it is unclear to what extent. In Albanese v. Batman, the Belmont County Court of Common Pleas held that a will devising an oil and gas ownership interest through a residuary clause constitutes a title transaction. On appeal, the Seventh District Court of Appeals affirmed the lower court’s ruling on other grounds, but left unanswered the question of whether such a will qualifies as a title transaction. Albanese v. Batman, 2014-Ohio-5517 (Seventh Dist. Ct. App.). Albanese currently is before the Ohio Supreme Court, but it appears unlikely the Supreme Court will address whether a will constitutes a title transaction, on appeal.
As to intestacy, in Pollock v. Mooney, the Seventh District Court of Appeals implies, without holding, that an oil and gas interest passing through intestacy to lineal descendants may constitute a title transaction. Pollock v. Mooney, 2014-Ohio-4435 (Seventh Dist. Ct. App.). However, the court notes the lack of “an affidavit or judgment entry from a probate court evidencing the transfer” prevented them from finding a title transaction under the facts presented. This suggests that an oil and gas interest passing through intestacy constitutes a title transaction and savings event only if there is an accompanying affidavit, judgment evidencing the transfer, or other sufficient evidence of the transfer available. However, it remains unclear exactly what documentation is necessary for such an intestate transfer to constitute a title transaction.
For a title transaction to be a savings event, the statute requires it to be “filed or recorded in the office of the county recorder of the county in which the lands are located.” In Pollock, though, the court held that an interest passing through probate court is a recorded title transaction because the statutory definition of “records” includes “probate and other official public records, as well as records in the office of the recorder….” O.R.C. § 5301.47(B). Thus, despite the apparent statutory requirement that the title transaction be filed “in the office of the county recorder,” it appears the recordation requirements can be satisfied by filing a title transaction in probate records, as well.
“Subject of” the Title Transaction
ODMA does not define what it means for a mineral interest to be “the subject of” the title transaction. And, the question has not been addressed as it relates to testate and intestate transfers of oil and gas. It remains unclear whether the oil and gas interest must specifically be referenced in the pertinent estate documents, or if it is sufficient that said interest is transferred through the estate.
A will can transfer oil and gas interests through a specific devise or under a residuary clause. If a testator devises an oil and gas interest through a specific devise, there is a stronger argument that said interest was the “subject of” the title transaction. Also, the specific devise is better evidence of the testator’s intent to use and maintain the oil and gas interest, which is the purpose of the “savings events” under ODMA. Alternatively, when the oil and gas interest passes under a residuary clause, it is much less clear that the interest holder intended to use and maintain said interest. Nonetheless, the Belmont Court of Common Pleas found the will in Albanese sufficient to qualify as a savings event, even where the oil and gas interest was never mentioned in the will. The fact that the interest passed via the residuary clause was sufficient for the will to constitute a savings event.
Similarly, as discussed above, it remains unclear whether a specific judgment entry is required for an intestate transfer to qualify as a savings event. However, such a probate court judgment specific to the oil and gas interest is more likely to meet this “subject of” requirement than an interest simply passing under the laws of descent and distribution. It remains unclear whether these distinctions will be addressed by the courts or Ohio’s General Assembly.
Until these outstanding issues are resolved by the courts or General Assembly, though, it will remain difficult to use ODMA for its intended purpose: to ensure the efficient and beneficial use of Ohio’s natural resources throughout the state.
For questions or concerns about this article, contact the Burns White Energy Group directly. Please continue to check this website for further updates regarding the Ohio Dormant Minerals Act.