Ohio Legal Update – Dormant Mineral Act

Ohio’s Dormant Mineral Act (“DMA”) has been a consistent source of frustration for oil and gas operators in Ohio as they plan their leasing and drilling campaigns.  Knowledge of its operation is imperative as operators continue their operations in the Utica Shale.

First enacted in 1989, the original statute, Ohio Rev. Code § 5301.56, provided that a mineral interest held by any person other than the surface owner was deemed abandoned and automatically vested with the surface estate absent a savings event within the preceding 20 years.  A mineral interest holder could preclude the abandonment of his or her interest by recording a notice claiming their mineral interest, subject to other conditions.  In 2006, a new version of the DMA was enacted, which changed the DMA’s self-executing nature by requiring the surface owner to give notice to the dormant mineral interest holder before the severed mineral estate would be reunited with the surface estate.  However, depending on the timing of the specific DMA issue, either version of the statute may apply.  Under both versions of the statute one of the savings events that would stop the merger of the mineral estate with the surface estate is if the mineral interest was “the subject of a title transaction recorded in the county where the minerals are located.” Ohio Rev. Code § 5301.56.

On September 23, 2013, the Seventh District of the Court of Appeals of Ohio, Harrison County, Ohio issued its opinion in Dodd v. Croskey, Ohio Ct. App. 2013-Ohio-4257, 2013 Ohio App. LEXIS 4475, examining, among other issues, the meaning of “subject of a title transaction” under the Dormant Mineral Act.  In 2009, Appellants (“the Dodds”) acquired 127.8387 acres of land in Harrison County, Ohio from James Coffelt, which deed was subject to two reservations: (i) excepting and reserving unto Samuel A. Porter and Blanche Long Porter all of the oil and gas reserved by Warranty Deed (121/381 DR); and (ii) excepting a one-third interest in the oil and gas to Emma A. Croskey.  Shortly after acquiring the surface rights, the Dodds were approached by a party seeking to purchase their mineral rights to said tract.  The Dodds sought to reunite the surface and mineral estates and published a notice of intent to claim abandonment of the mineral estate.  In response, the heirs of the Porters and Croskeys filed an Affidavit Preserving Minerals.  The Dodds filed an action to quiet title on the mineral estate and sought to have the mineral estate deemed abandoned under the DMA.

The Seventh District examined the issue of whether the 2009 deed conveying the surface of the tract was a savings event that saved the mineral interest from abandonment.  The Seventh District noted that there was no case law in Ohio discussing what “subject of a title transaction” meant and concluded that the phrase must be given its plain, common, ordinary meaning and was to be construed “according to the rules of grammar and common usage.”  Id. at 23 (citing Smith v. Landfair, 135 Ohio St.3d 89, 2012-Ohio-5692, 984 N.E.2d 1016, at ¶18).  The Court concluded that in order for a mineral interest to be the “subject of” the title transaction the grantor must be convey the mineral interest or retain the mineral interest.  In Dodd, the mineral interest was not conveyed or retained by Coffelt, the party that sold the property to appellants.  Accordingly, the exception language in the deed to the Dodds did not operate as a savings event under the DMA.

The Seventh District also examined two other substantive issues in Dodd: (i) whether appellants satisfied the notice requirement in Ohio Rev. Code § 5301.56; and (ii) whether the affidavit filed by appellee John William Croskey, which was filed after the notice of intent to claim abandonment of mineral interests was published in the local newspaper, was a savings event under Ohio Rev. Code § 5301.56(H).  We have not discussed these two issues for this brief summary of the Dodd decision because those issues may not be substantive curative measures that would need to be addressed in an examination of title.  Importantly, the Dodd decision is consistent with our approach and interpretation of the DMA.  If, however, you would like to discuss the Dodd decision or issues relating to the DMA in greater detail in the context of your operations, then, please feel free to contact us.