OHIO DORMANT MINERAL ACT. Supreme Court of Ohio

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1 OHIO DORMANT MINERAL ACT Supreme Court of Ohio R. Jeffrey Pollock Beth I. Gillin McDonald Hopkins LLC 600 Superior Avenue Cleveland, Ohio th Law of Shale Plays Conference September 10-11, 2015 Pittsburgh, Pennsylvania { :}

2 TABLE OF CONTENTS SUMMARY OF THE PRIMARY ISSUES REGARDING THE DMA BEFORE THE SUPREME COURT OF OHIO... 4 PROPOSITIONS OF LAW OF DMA CASES PENDING BEFORE THE SUPREME COURT OF OHIO... 8 SUMMARIES OF THE DMA CASES BEFORE THE SUPREME COURT OF OHIO Dodd v. Croskey Supreme Court of Ohio Slip Opinion No Ohio-2362 Chesapeake Exploration v. Buell Supreme Court of Ohio, Case no Corban v. Chesapeake Exploration Supreme Court of Ohio, Case no Walker v. Shondrick-Nau Supreme Court of Ohio, Case no Swartz v. Householder Supreme Court of Ohio, Case no Eisenbarth v. Reusser Supreme Court of Ohio, Case no Dahlgren v. Brown Farm Properties, LLC Supreme Court of Ohio, Case no Taylor v. Crosby Supreme Court of Ohio, Case no { :} 2

3 Tribett v. Shepard Supreme Court of Ohio, Case no Farnsworth v. Burkhart Supreme Court of Ohio, Case no APPENDIX 1989 Ohio Dormant Mineral Act 2006 Ohio Dormant Mineral Act { :} 3

4 SUMMARY OF THE PRIMARY ISSUES REGARDING THE DMA BEFORE THE SUPREME COURT OF OHIO Ohio R.C , included as part of Ohio s Marketable Title Act (R.C through ) and commonly referred to as the Dormant Mineral Act ( DMA ), governs the preservation and abandonment of mineral interests which have been severed from the surface lands. The DMA provides generally that mineral interests may be preserved upon the occurrence of certain events (referred to as Savings Events ) enumerated at RC (B)(3). Savings Events include: (i) the mineral interest has been the subject of a title transaction; (ii) actual production from the mineral interests or lands pooled or unitized with those interests; (iii) the usage of the mineral interests for underground storage; (iv) the issuance of a drilling permit to the holder of the mineral interests; (v) the creation of a separate tax listing for the mineral interests; and (vi) the filing of a claim by the holder of the mineral interests to preserve those interests. The DMA was originally enacted in 1989 and then substantially amended in The original 1989 statute included no explicit provision requiring that a mineral holder be given notice of a claim of abandonment by the surface owner. The 2006 amendments to the DMA (the 2006 Amendments ) adopted explicit procedures which required notice by the surface owner to a holder and clarified a specific right of and mechanism for the holder to preserve the mineral interest. The 1989 DMA preserves the interest of the mineral holder if the enumerated Savings Events have occurred within the preceding twenty (20) years. R.C (B)(1)(c). The 1989 statute then states that if none of the enumerated Savings Events has occurred within that time, the mineral interest shall be deemed abandoned and vested in the owner of the surface... R.C (B)(1). In 2006, the DMA was amended to establish a mechanism whereby the surface owner is required to give notice to the mineral holder by certified mail or, under certain circumstances, by publication of the intent to declare the mineral interest abandoned. R.C (E)(1). The mineral holder then has the right to file a claim to preserve the mineral interest or an affidavit that any of the Savings Events has occurred within the 20 years immediately preceding the date on which notice was served or published. R.C (H)(1). With the advent of the Utica shale play and the increased value of mineral interests in eastern Ohio, the DMA has spawned substantial litigation. To date, the Supreme Court of Ohio has decided only one case regarding the interpretation of this statute, Dodd v. Croskey, Ohio Nine cases regarding the DMA are still pending in the Supreme Court of Ohio, with six of those cases stayed pending the decision in one or more of the other major cases. The primary issues before the Supreme Court of Ohio are summarized as follows: 1. Is the 1989 DMA Self-Executing? { :} 4

5 Is the 1989 DMA self-executing such that the mineral interests are automatically abandoned and vested with the surface estate if none of the Savings Events occurred within the preceding 20 years. The surface owners answer that question in the affirmative, arguing the plain language of the statute. The surface owners assert that the 1989 DMA included a three year grace period within which the mineral holder could have preserved their interests, thereby providing notice and ample opportunity to preserve the mineral interest after the enactment of the statute. R.C (B)(2). The surface owners also assert that the procedural safeguards in the 2006 amendments are not applicable to protect mineral rights which had been previously abandoned under the original 1989 DMA. The mineral holders argue that the 1989 DMA contained ambiguities which were resolved by the 2006 amendments. They argue that even if there were no Savings Events within the preceding 20 years, the surface owner nonetheless was required under the 1989 DMA to initiate an action to quiet title or for declaratory judgment before the mineral rights are abandoned. They assert that the 2006 amendments clarified a procedure by which the surface owner would provide notice and the mineral holder could preserve the mineral interest, even if there had been no prior Savings Events. This is the most significant issue regarding the DMA before the Supreme Court, with the issue to be decided in Walker v. Shondrick-Nau, case no Is the 20 Year Period Fixed or Rolling? The 1989 DMA provides that the mineral rights are deemed abandoned and vested in the surface owner if none of the Savings Events have occurred within the preceding 20 years... R.C (B)(1)(c). The statutory language raises the question 20 years preceding what? The surface owners argue that it is a rolling 20 year period which requires the mineral holder to establish the Savings Event within 20 years preceding any date between the enactment of the statute, March 22, 1989 (or within the statutory three year grace period) and June 30, 2006 (the enactment of the 2006 amendments). Under this theory, a mineral holder would have to reestablish a Savings Event potentially on two different occasions the earliest being 1969 (20 years prior to enactment) and then again 20 years later in Twenty years after 1989 would take the date to 2009, three years after the enactment of the 2006 amendments. The 2006 amendments provide that the Savings Event must occur within 20 years preceding the date on which the surface owner must give notice of intent to declare the mineral interest abandoned. R.C (H)(1)(b). The mineral holders argue that the mineral interest is not abandoned if any Savings Event occurs on a one time basis within 20 years prior to the enactment of the 1989 DMA, within the three year statutory grace period, or within 20 years prior to the date a complaint is filed. 3. Whether a Severed Oil and Gas Mineral Interest is the Subject Of any Title Transaction Which Identifies the Recorded Document Creating that Interest, Even if the Severed Mineral Interest is not Actually Transferred. { :} 5

6 The most common of these Savings Events occurs if the mineral interest has been the subject of a title transaction recorded or filed with the county recorder in the county where the property is located. RC (B)(3)(a) states in pertinent part as follows: (B) Any mineral interest held by any person, other than the owner of the surface of the lands subject to the interest, shall be deemed abandoned and vested in the owner of the surface of the lands subject to the interest if the requirements established in division (E) of this section (the Notice of Intent) are satisfied and none of the following applies: (3) Within the twenty years immediately preceding the date on which notice is served or published under division (E) of this section, one or more of the following has occurred: (a) The 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. The term title transaction is defined in the Marketable Title Act to mean any transaction affecting title to any interest in land... R.C (F). When inserting that definition into the language in R.C (B)(3)(a), the Savings Event occurs when: The mineral interest has been the subject of any transaction affecting title to any interest in land. The mineral holders argue that a transfer of the surface estate which specifically references a prior severed oil and gas mineral interest constitutes a Savings Event based upon the legislative history, principals of statutory construction, and referencing R.C of the Marketable Title Act. The surface owners argue that a severed oil/gas mineral interest is not the subject of any title transaction involving only the surface estate, even if the transferring recorded document makes specific reference to a prior oil/gas reservation. The surface owners argue that a Savings Event occurs only in the event of a transfer or reservation of the oil/gas mineral interest which itself is the subject of the transfer. Many of the oil and gas producers and the State of Ohio have filed amicus briefs in the pending cases, lining up on both sides of the issues. The following parties have filed amicus briefs in support of the surface owners: State of Ohio Gulfport Energy Corporation Paloma Resources, LLC Protege Energy III, LLC Jeffco Resources, Inc. Murray Energy Corporation { :} 6

7 The following parties have filed amicus briefs in support of the mineral holders: Bedway Land & Minerals Company Ohio Oil and Gas Association Chesapeake Exploration, L.L.C. Eclipse Resources Corporation { :} 7

8 PROPOSITIONS OF LAW OF DMA CASES PENDING BEFORE THE SUPREME COURT OF OHIO Phillip Dodd et al. v. John Croskey et al. Case Number Proposition of law: Ohio Rev. Code (8)(1) requires a showing by a party claiming the preservation of a prior mineral interest of a "savings event" that occurred in the 20 years prior to the notice being served and not a "savings event" after the date of the notice being served. Question accepted sua sponte: Does a transfer of the surface that specifically references the severed mineral interest qualify as a "title transaction?" Oral arguments were held on August 20, Opinion issued June 18, Chesapeake Exploration, L.L.C. v. Kenneth Buell et al. Case Number (certified questions) Certified questions of state law: 1. Is the recorded lease of a severed subsurface mineral estate a title transaction under the Ohio Dormant Mineral Act, Ohio Rev. Code (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 20-year forfeiture clock under the ODMA at the time of the reversion? Oral arguments were held on August 20, { :} 8

9 Hans Michael Corban v. Chesapeake Exploration, L.L.C., et al. Case Number (certified questions) Certified questions of state law: 1. Does the 2006 version or the 1989 version of the ODMA apply to claims asserted after 2006 alleging that the rights to oil, gas and other minerals automatically vested in the surface land holder prior to the 2006 amendments as a result of abandonment? 2. Is the payment of a delay rental during the primary term of an oil and gas lease a title transaction and "savings event" under the ODMA? Oral arguments were held on May 6, Jon Walker, Jr. v. Patricia J. Shondrick-Nau, Executrix of the Estate of John R. Noon and Successor Trustee of the John R. Noon Trust Case Number Propositions of law: 1 The 2006 version of the DMA is the only version of the DMA to be applied after June 30, 2006, the effective date of the amendments. 2. To establish a mineral interest as "deemed abandoned" under the 1989 version of the DMA, the surface owner must have taken some action to establish abandonment prior to June 30, In all cases where a surface owner failed to take such action, only the 2006 version of the DMA can be used to obtain relief. 3. To the extent the 1989 version of the DMA remains applicable, the 20-year look-back period shall be calculated starting on the date a complaint is filed which first raises a claim under the 1989 version of the DMA. 4. For purposes of Ohio Rev. Code (B)(3), a severed oil and gas mineral interest is the "subject of" any title transaction which specifically identifies the recorded document creating that interest by volume and page number, regardless of whether the severed mineral interest is actually transferred or reserved. 5. Irrespective of the savings events in Ohio Rev. Code (B)(3), the limitations in Ohio Rev. Code can separately bar a claim under the DMA. 6. The 2006 version of the DMA applies retroactively to severed mineral interests created prior to its effective date. Oral arguments were held June 23, { :} 9

10 Dan Swartz, et al. v. Jay Householder, et al. Case Number Propositions of law: 1. The 1989 version of the Dormant Mineral Act does not apply after the effective date of the 2006 version of the Dorman Mineral Act. 2. In order for a mineral interest to vest under the 1989 version of the Dormant Mineral Act, the surface owner must take some action in order to establish abandonment prior to the effective date of the 2006 Dormant Mineral Act. 3. The 2006 DMA operates retrospectively and applies to severed mineral interests created before its effective date. Leland Eisenbarth, et al. v. Dean Reusser, et al. Case Number Propositions of law: 1. The 1989 version of DMA was prospective in nature and operated to have a severed oil and gas interest "deemed abandoned and vested in the owner of the surface" if none of the savings events enumerated in Ohio Rev. Code (B) occurred in the 20-year period immediately preceding any date in which the 1989 DMA was in effect. 2. Assuming, arguendo, that the 1989 DMA operated on a "fixed" 20-year look-back period from the date of enactment, an oil and gas lease is not a "title transaction" within the meaning of Ohio Rev. Code (F) and Appellees' interest has nonetheless been abandoned. Ronald Dahlgren, et al. v. Brown Farm Properties LLC, et al. Case Number Propositions of law: 1. The 2006 amendment of Ohio's "dormant mineral" statute was remedial in nature and intended to apply to facts occurring before its enactment. In suits filed after June 30, 2006 (the effective date of the amendment), courts should apply the new version of the statute, rather than the old version. 2. Under the 1989 version of Ohio's "dormant mineral" statute, the 20-year dormancy period is measured from the date suit was commenced to determine title to the minerals. { :} 10

11 Benjamin Taylor, et al. v. Donald Crosby, et al. Case Number Proposition of law: 1. The 1989 DMA is prospective in nature and operates using a rolling application of the phrase, preceding twenty years. Vernon Tribett, et al. v. Barbara Shepherd, et al. Case Number Propositions of law: 1. The 2006 version of the DMA is the only version of the DMA to be applied after June 30, 2006 (the effective date of said statute) because the 1989 version of the DMA was not selfexecuting. 2. To establish a mineral interest as "deemed abandoned" under the 1989 version of the DMA, the surface owner must have taken some action to establish abandonment prior to June 30, In all cases where a surface owner failed to take such action, only the 2006 version of the DMA can be used to obtain relief. 3. Interpreting the 1989 version of the DMA as "self-executing" violates the Ohio Constitution. a. The 2006 version of the DMA is the only version of the DMA to be applied after June 30, 2006, the effective date of said statute. b. Interpreting the 1989 version of the DMA as "self-executing" violates the Ohio Constitution. 4. A severed oil and gas mineral interest is the "subject of" any title transaction which specifically identifies the recorded document creating that interest by volume and page number. 5. Irrespective of the savings events in Ohio Rev. Code (B)(3), the limitations in Ohio Rev. Code can independently bar a claim under the DMA. 6. If a Court applies the 1989 version of the DMA in a lawsuit filed after June 30, 2006, the 20-year look-back period shall be calculated starting on the date a complaint is filed which first raises a claim under the 1989 version of the DMA. 7. A claim brought under the 1989 version of the DMA must have been filed within 21 years of March 22, 1989 (or, at the very latest, March 22, 1992), or such claim is barred by the statute of limitations in Ohio Rev. Code { :} 11

12 Virgil Farnsworth, et al. v. James Burkhart, et al. Case Number Propositions of law: 1. The 1989 version of the Ohio Rev. Code , the Ohio Dormant Minerals Act ("Former DMA"), was prospective in nature, division (B} applies to any 20-year period that elapses while the Former DMA was in effect. 2. A Claim to Preserve filed and recorded under division H(l)(A) of the current version of Ohio Rev. Code ("Current DMA") does not have the same effect as a claim filed and recorded under division B(3)(e) of the Current DMA. { :} 12

13 SUMMARIES OF THE DMA CASES BEFORE THE SUPREME COURT OF OHIO Dodd v. Croskey Supreme Court of Ohio Slip Opinion No Ohio-2362 This opinion was issued by the Supreme Court of Ohio on June 18, It is the first and only case regarding the Ohio DMA decided to date by the Supreme Court. This case was on appeal from the Seventh District Court of Appeals. Plaintiffs/Appellants are the surface owners and Defendants/Appellees are the mineral holders. In 1947, Samuel and Blanche Porter conveyed the property at issue in Harrison County, Ohio to Consolidated Fuel Company and reserved all of the oil and gas mineral interest. As part of the same transaction, the Porters also conveyed their undivided one-third interest in separate tracts of land to Consolidated Fuel Company. The Warranty Deed conveying this one-third interest contains the same reservation regarding the mineral interest. This reservation was also contained in the deeds of all subsequent transfers of the surface rights, including the transfer to the surface owner Plaintiffs/Appellants Phillip Dodd and Julie Bologna in August The surface owners gave notice by publication on November 27, 2010 of their intent to declare the mineral interest owned by Defendants/Appellees, the heirs of the Porters, abandoned. On December 23, 2010 Defendant/Appellee John William Croskey timely filed a document entitled Affidavit Preserving Minerals with the Harrison County Recorder in response to the Dodd notice. Notwithstanding this affidavit, the surface owners filed an Affidavit of Abandonment on December 27, 2010 with the Harrison County Recorder claiming that the mineral interest owned by Defendants/Appellees had been abandoned. In a unanimous decision, the Supreme Court ruled that under the 2006 amendments to the statute, after an owner of surface land gives notice of his or her intent to declare the mineral interest abandoned, the holder of the mineral rights can preserve their rights by timely filing an affidavit with the county recorder. The affidavit must state the nature of the mineral interest, the recording information upon which the claim is based, and that the mineral holder intends to preserve the mineral interest. McDonald Hopkins represented a group of the mineral holders in this case. Most significantly, the Supreme Court determined that at least under the 2006 amendments to the DMA, the mineral holder can preserve his or her mineral interest upon the timely filing of the affidavit even if there had been no prior Savings Events that would otherwise have been required to preserve the mineral interest. The Supreme Court ruled that the affidavit did not have to refer to a prior Savings Event, nor did the affidavit itself have to be filed in the 20 years preceding notice by the surface owner. The Supreme Court specifically noted that it was not ruling on the issue of when to apply the 1989 original version of the DMA and when to apply the 2006 version. These issues will be determined in subsequent cases still pending before the Court. { :} 13

14 The 2006 amendments to the DMA established a procedural mechanism whereby the surface owner must give notice by certified mail or by publication if service cannot be completed, of the owner s intent to declare the mineral interest abandoned. R.C (E)(1). The holder then has 60 days after the date of service or publication to file a preservation claim or an affidavit with the county recorder that he intends to preserve and not abandon the mineral interest. R.C (H)(1). Under the original 1989 DMA, as well as the 2006 amendments, one of the enumerated Savings Events is the filing by the mineral holder of a preservation claim with the county recorder. R.C (B)(3)(e). In Dodd, the surface owner argued that the preservation claim was filed by the mineral holder after the notice of intent and not as a Savings Event within the 20 year period preceding the enactment of the 1989 DMA. The Supreme Court strictly construed the plain language of the 2006 amendments, stating that the statute clearly provides that, in response to a notice of intent to declare the mineral interest abandoned, the holder can preserve the mineral interest by filing within sixty (60) days either a preservation claim or an affidavit which identifies one of the Savings Events which had occurred within the 20 years preceding the date of notice from the surface owner. R.C (H)(1)(a)(b). This case is significant because, at least under the 2006 amendments, the holder can preserve the mineral rights by timely filing a claim of preservation after a notice of intent from a surface owner to declare the mineral interest abandoned, even if there had been no prior Savings Events. The court had sua sponte accepted a cross appeal on the issue of whether the reservation of a mineral interest referenced in a subsequent deed to the surface owner constituted a title transaction and thus a Savings Event. R.C (B)(3)(a). The court declined to decide this issue, determining that it was moot given the holding in the case. As a result, this issue remains for a subsequent ruling as an assignment of error in two of the pending cases before the Supreme Court of Ohio. { :} 14

15 Chesapeake Exploration v. Buell Supreme Court of Ohio, Case no On March 26, 2014 the Supreme Court of Ohio agreed to answer two questions certified by the United States District Court for the Southern District of Ohio as stated below. Oral argument was held on August 14, The court has not yet issued an opinion. Plaintiff/Petitioner North American Coal Royalty Company ( North American ) is the record owner of the oil and gas rights beneath the property and the lessees of the oil and gas rights are the other Plaintiffs/Petitioners. Defendants/Respondents Buell, et al. are the surface landowners. In 1943, the property at issue in Harrison County, Ohio was owned by the North American Coal Corporation ( NA Coal ), which transferred the Property to the Powhatan Mining Company ( Powhatan ) on or about January 30, In October 1958, Powhatan transferred the surface rights to Clarence and Anna Belle Sedoris, but expressly excepted and reserved the oil and gas rights by deed. Powhatan Mining merged into NA Coal in January 1959, and took ownership of the severed mineral interest at that time. The same reservations and exceptions applied to all of the subsequent transfers of the surface estate, including the transfer of the surface rights in acres of the property to Defendants/Respondents Jeffrey and Janice Elias in April 1995 and the transfer of the surface rights in acres of the property to Defendants/Respondents Ariel and Sunni Ordronneau in July In November 2008, Bellaire Corporation f/k/a NA Coal transferred the severed mineral estate, including the oil and gas rights, to Plaintiff/Petitioner North American Coal Royalty Company by a quit claim deed. North American Coal then leased the severed oil and gas rights to Mountaineer Natural Gas Company in January These severed oil and gas rights leases were subsequently transferred and assigned to Plaintiffs/Petitioners Chesapeake Exploration, L.L.C., CHK Utica, L.L.C., Larchmont Resources, L.L.C., Dale Pennsylvania Royalty, LP, TOTAL E&P USA, INC. and Dale Property Services Penn., LP, which previously held an interest in the oil and gas lease and assigned this interest to Plaintiff/Petitioner Dale Pennsylvania. I. Is The Recorded Lease Of A Severed Subsurface Mineral Estate A Title Transaction Under The Ohio Dormant Mineral Act, R.C (B)(3)(a)? North American, the mineral owner, entered into recorded oil/gas leases in 1974 and 1984 which were then assigned in 1975 and North American and the mineral lessees argue that a recorded oil/gas lease is a title transaction under the DMA and hence a Savings Event timely filed within the 20 year period prior to 1989 as follows: 1. The Marketable Title Act defines a title transaction as any transaction affecting title to any interest in land, with enumerated examples (R.C (F)). The examples are illustrative and not intended to exclude leases. 2. Every court but one that has addressed the issue has concluded that an oil and gas lease is a title transaction and therefore a Savings Event under the DMA. { :} 15

16 3. The analysis under the DMA should not be determined based on how Ohio law may have classified an oil and gas lease for other purposes. In Harris v. Ohio Oil Co., 57 Ohio St.118 (1897) the court held that an oil and gas lease creates a fee simple determinable interest, although that term was not explicitly stated. In Back v. The Ohio Fuel Gas Co., 160 Ohio St. 81 (1953), the court reasoned that an instrument similar to an oil/gas lease was akin to a license. Notwithstanding this apparent divergence, the mineral holders/lessees assert that it is not necessary to decide whether an oil/gas instrument conveys title to an interest in land or is a license because the definition of a title transaction is so broad; namely, whether the lease is any transaction affecting title. R.C (F). 4. To find that an oil/gas lease does not maintain a mineral owner s interest under the DMA would be completely contrary to the activity the act seeks to encourage, the development of minerals in Ohio. 5. Ohio law characterizes an oil/gas lease as a fee simple determinable interest, thus clearly establishing that the mineral interest was the subject of a title transaction. The surface owners argue that a recorded oil/gas lease is not a title transaction Savings Event for the following reasons: 1. The definition of title transaction in R.C (F) does not enumerate oil/gas leases. 2. A separate statutory Savings Event preserves a mineral interest from abandonment where there has been actual production or withdrawal of minerals under enumerated circumstances, including from the lands covered by a lease to which the mineral interest is subject. R.C (B)(1)(c)(ii). They argue that an executed lease by itself should not be the Savings Event, but instead actual production from lands covered by a lease which did not occur in this case. 3. An oil/gas lease is a license and therefore does not affect title. II. Is The Expiration Of A Recorded Lease And The Reversion Of The Rights Granted Under That Lease A Title Transaction That Restarts The 20 Year Forfeiture Clock Under The DMA At The Time Of The Reversion? The oil and gas reverted to North American in January, 1989 upon the expiration of the primary lease term. If the reversion of the oil/gas rights to the lessor upon the termination of a lease is a title transaction under the DMA, then the reversion in 1989 restarted the 20 year clock, which ran until 2009, three years after the DMA was amended in The mineral owners and lessees argued that the release of rights under an oil/gas lease qualifies as a title transaction because it affects title. They argue that the expiration need not be recorded because it occurs pursuant to the terms of the original recorded lease. { :} 16

17 The surface owners argue that: 1. An expiration of an oil/gas lease should not be considered a title transaction because it would create an unworkable system of verifying title in the oil/gas industry and thus contrary to the intent of the DMA. 2. The abandonment period is not tolled during the primary term of an oil/gas lease and thus requires a subsequent Savings Event to preclude abandonment. 3. The statutory Savings Event requires not only that the mineral interest is the subject of a title transaction, but also that the title transaction has been filed or recorded, R.C (B)(1)(c)(i). In this case, the reversion/expiration of the lease was not recorded. { :} 17

18 Corban v. Chesapeake Exploration Supreme Court of Ohio, Case no Petitioner/Plaintiff is the surface owner. Defendant/Respondent North American Coal Royalty Company is the sole record owner of the oil, gas and mineral rights. The other Defendants/Respondents are the lessees of the oil and gas rights. In 1959, Defendant/Respondent North American Coal Royalty Company s ( North American ) predecessor, North American Coal Corporation ( NA Coal ), conveyed the property at issue in Harrison County, Ohio to the predecessors of Petitioner/Plaintiff Hans Michael Corban and reserved the oil, gas and mineral rights for itself. NA Coal entered into an oil and gas lease recorded in February 1984 and assigned this lease to Carless Resources, Inc. in May beneath the property by virtue of an oil and gas lease from North American Coal Royalty Company and subsequent assignments. This lease expired and the rights reverted to Bellaire Corporation f/k/a NA Coal in In 2009, North American, Bellaire Corporation s successor, entered into an oil and gas lease with Mountaineer Natural Gas Company. The remaining Defendants/Respondents Chesapeake Exploration, L.L.C., CHK Utica, L.L.C., Larchmont Resources, L.L.C. Dale Pennsylvania Royalty, LP and TOTAL E&P USA, Inc. are the current lessees of the 2009 lease. The United States District Court for the Southern District of Ohio certified the following two questions to the Supreme Court of Ohio: 1. Does the 2006 version or the 1989 version of the DMA apply to claims asserted after 2006 alleging that the rights to oil, gas, and other minerals automatically vested in the surface land holder prior to the 2006 amendments as a result of abandonment? 2. Is the payment of a delay rental during the primary term of an oil and gas lease a title transaction and Savings Event under the DMA? On July 23, 2014 the court accepted the certified questions. Oral argument was held on May 6, No decision has been issued. The first question presents the same issues addressed in Walker v. Shondrick-Nau, Supreme Court case no , discussed more fully in the summary of that case. The second issue is directly related to certified state law questions in Chesapeake Exploration v. Buell, Supreme Court case no , discussed more fully in the summary of that case. { :} 18

19 Walker v. Shondrick-Nau Supreme Court of Ohio, Case no Plaintiff/Appellee is the owner of the surface rights and Defendant/Appellant is the holder of the mineral rights. In 1964, John Noon purchased the property at issue in Noble County, Ohio. On July 26, 1965, Noon severed the mineral rights and created a separate mineral estate by reserving the mineral rights to himself when he sold the surface rights on that date. These mineral rights were reserved in the deeds conveying the surface rights in subsequent transactions, including to Plaintiff/Appellee Jon Walker, Jr. On December 2, 2011, Defendant/Appellant sent a Notice of Abandonment of Mineral Interest to Noon. On January 10, 2012, Noon filed an Affidavit and Claim to Preserve Mineral Interest. Noon passed away after the Complaint was filed and his daughter, Shondrick-Nau, in her capacity as the executrix of Noon s estate and successor trustee of Noon s trust, was substituted as the Appellant in this case. By Opinion dated April 3, 2014, the Seventh District Court of Appeals ruled in favor of the surface owner on all issues, 2014-Ohio-1499, 2014 WL The Court of Appeals held that: 1. A deed transferring the surface property which references a prior mineral reservation does not constitute a title transaction, one of the enumerated Savings Events. R.C (B)(1)(c)(i). 2. The 1989 version of the DMA is self-executing. The original severance of the mineral interest occurred in 1965 with no Savings Event thereafter. The mineral estate became abandoned and merged with the surface in 1992, the end of the three year grace period after the enactment of the 1989 DMA. Any preservation claim filed pursuant to the 2006 statute was ineffective because the mineral interest had already been abandoned. This is the most significant and pivotal case regarding the DMA before the Supreme Court, determining whether the 1989 version of the DMA was self-executing during the time it was in effect prior to the enactment of the 2006 amendments to the statute, resulting in the abandonment of mineral rights as a matter of law in the absence of a Savings Event during the 20 year period preceding the enactment of the statute. The Appellant mineral holder asserts six propositions of law grouped generally into three categories as follows: I. The 2006 Version Of The DMA Is The Only Version Of The Statute To Be Applied After June 30, 2006, The Effective Date Of The Amendments. II. To Establish A Mineral Interest As Deemed Abandoned Under The 1989 Version Of The DMA, The Surface Owner Must Have Taken Some Action To Establish Abandonment Prior To June 30, The 1989 DMA is ambiguous with respect to whether it was intended to be selfexecuting, specifically as it relates to the interpretation of the 20 year period { :} 19

20 within which a Savings Event must occur and how the lapse would occur if there were no Savings Events. The 2006 DMA amendments removed the ambiguity by establishing a procedure for notice and recordation of abandonment or preservation of the mineral interest. 2. The interpretation of the statute as self-executing frustrates the purpose of the statute because it is not possible to ascertain from the record chain of title whether some of the Savings Events actually occurred. Therefore, the 1989 DMA should require a surface owner to commence a quiet title action or declaratory judgment to establish abandonment after the expiration of the 20 year period during which no Savings Event occurred. 3. Under the self-executing theory of abandonment, the 1989 version of the DMA results in a forfeiture of property and a loss of vested property rights in violation of the Ohio Constitution. 4. The 2006 amendments to the DMA eliminate the claimed ambiguity in the statute by establishing procedural safeguards to the mineral holder and by requiring record notice of either abandonment or preservation of the mineral interest. III. The 20 Year Lookback Period Should Be Calculated Starting On The Date A Complaint Is Filed Which First Raises A Claim Under The 1989 Version Of The DMA. The 1989 statute provided for the lapse to occur if no specified Savings Events occurred within the preceding 20 years. R.C (B)(1)(c). The question arises as to what this means 20 years preceding what date? The best course is to interpret the statute to require the filing of a lawsuit to quiet title or a declaratory judgment with the 20 year lookback period under the 1989 statute commencing on the date the action was filed. IV. For Purposes Of Establishing A Savings Event, A Severed Oil And Gas Mineral Interest Is The Subject Of Any Title Transaction Which Specifically Identifies The Recorded Document Creating That Interest, Regardless Of Whether The Severed Mineral Interest Is Actually Transferred Or Reserved. The most frequently litigated Savings Event is found in R.C (B)(3)(a). A mineral holder will retain the rights if the mineral interest has been the subject of a recorded title transaction during the relevant lookback period. The term title transaction is defined in the Marketable Title Act to mean any transaction affecting title to any interest in land... R.C (F). When inserting that definition into the language in R.C (B)(3)(a), the Savings Event occurs when: The mineral interest has been the subject of any transaction affecting title to any interest in land. Interpreting the legislative history, applying principals of statutory construction, and referencing R.C , a transfer of the surface which specifically references a prior severed oil and gas mineral interest constitutes a Savings Event. { :} 20

21 The Appellee surface owner asserts the following arguments: 1. The 1989 DMA is clear and unequivocal that a mineral interest is automatically abandoned if a Savings Event has not occurred within the statutory 20 year period. There is no requirement for the surface owner to commence any action to establish abandonment. 2. A rolling 20 year period of time should apply. The first analysis is to determine whether there was a Savings Event within the 20 years preceding the effective date of the statute, March 22, If there was no Savings Event, the interest lapsed and was automatically abandoned. If there was some Savings Event within that period, then the mineral interest can be preserved only if there has been a subsequent Savings Event within 20 years thereafter. If no such subsequent Savings Event occurred, the mineral interest is abandoned. In other words, the mineral interest can be preserved only by successive Savings Events within every 20 year period. 3. A severed oil/gas mineral interest is not the subject of any title transaction involving only the surface estate, even if the transferring recorded document makes specific reference to a prior oil/gas reservation. { :} 21

22 Swartz v. Householder Supreme Court of Ohio, Case no Shannon v. Householder Supreme Court of Ohio, Case no Appellants are the mineral holders. Appellees are the surface owners. In 1946, Elva and Alma Lawrence, Chellissa and Walter Swickard, and Jetta and Arthur Householder transferred the property at issue in Jefferson County, Ohio to Cleve and Marie Landis with a deed that reserved all of the oil and gas mineral interest. Appellees Ernest and Shelda Shannon acquired the surface rights to part of the property in Appellees Daniel and Donna Swartz subsequently became surface owners of part of the property when they acquired title to the property by Survivorship Deed dated April 2002 and recorded in May The Householder Appellants are the heirs of Elva and Alma Lawrence, Chellissa and Walter Swickard, and Jetta and Arthur Householder. In December 2010, the Shannon surface owners published notice of their intent to declare the mineral interest abandoned in a Jefferson County newspaper. In July 2011, the Swartz surface owners published notice of their intent to declare the mineral interest abandoned in the same newspaper. The mineral holders did not receive notice by certified mail of either notice. The mineral holders filed claims to preserve the mineral interest with the Jefferson County Recorder in July 2011 (in response to the Shannon notice) and August 2011 (in response to the Swartz notice). In an Opinion issued for both cases on June 2, 2014, the Seventh District Court of Appeals held: (1) Relying on Walker, the 1989 DMA is self executing and results in automatic abandonment of the mineral estate if no Savings Event has occurred in the 20 year period preceding the enactment of the statute (or the statutory grace period). In addition, the DMA is not unconstitutional Ohio-2359, 12 N.E. 2d On November 19, 2014, the Supreme Court accepted the appeal in both consolidated cases and held the case and stayed briefing for the decision in Walker v. Shondrick-Nau. { :} 22

23 Eisenbarth v. Reusser Supreme Court of Ohio, Case no This case is on appeal from the Seventh (7 th ) District Court of Appeals. The Appellant surface owner appealed two of the three propositions of law from the Opinion of the Seventh District Court of Appeals issued August 28, 2014, 2014-Ohio-3792, 18 N.E. 3d 477. The Supreme Court accepted jurisdiction on March 11, Oral argument has not been set. Plaintiffs/Appellants are the surface owners and Defendants/Appellees are the mineral holders. In 1954, William Eisenbarth transferred two tracts of land in Monroe County to Paul and Ida Eisenbarth. The deed reserved one-half of all minerals underlying the lands and all rights to develop and remove those minerals. However, the right to lease the minerals was expressly given to Paul and Ida Eisenbarth. William Eisenbarth then transferred his half of the mineral estate to his other child Mildred Reusser by royalty deed. Paul and Ida then entered into numerous oil and gas leases, the last being recorded in January, In 1989, Paul and Ida Eisenbarth transferred the second tract of land to their son Keith in a deed stating that it was subject to all reservations of record. When Paul Eisenbarth died, his interest in the first tract of land was conveyed to Ida Eisenbarth by a Certificate of Transfer filed in 1990, which included the 1954 deed s language on the mineral reservation and the right to lease. When Ida died, a Certificate of Transfer was filed in 1998, which transferred her interest in the first tract of land to her sons Plaintiffs/Appellants Keith, Leland and Michael Eisenbarth and also included the language from the 1954 deed. Mildred Reusser died in 2002 and left her estate to Defendants/Appellees Dean Reusser, Marilyn Ice, Wilda Fetty, Martha Maag (who died and left her interest to her husband Robert Maag), Vernon Reusser, Paul Reusser, Davis Reusser and Dennis Reusser. In 2008, the surface owners signed an oil and gas lease. In 2009, the surface owners published a notice of abandonment of Mildred Reusser s one-half interest in the minerals, and the mineral holders responded with a claim to preserve. In 2012, the Eisenbarths signed an oil and gas lease with another company and received a $766,250 signing bonus, half of which was being held in escrow. The issues on appeal to the Supreme Court are as follows: I. Whether A Recorded Oil And Gas Lease Is A Title Transaction Under The DMA. In 1974, the surface owner entered into an oil/gas lease with respect to the entire mineral estate, even though the original severance reserved 50% to the surface owner. The surface owner retained the executive right to enter into a lease regarding the entire mineral estate. One of the Savings Events is that the mineral interest has been the subject of a title transaction. R.C (B)(1)(c)(i). The term title transaction is defined in the Marketable Title Act to mean any transaction affecting title to any interest in land... Read together, the Savings Event occurs when a mineral interest has been the subject of any transaction affecting title to any interest in land. The Seventh District Court of Appeals reviewed the case law and the issue of whether an oil/gas lease is a license or a conveyance of the fee. But the court then determined that it did not { :} 23

24 have to reach that issue. The court held that a recorded oil/gas lease is an encumbrance on title and falls within the definition of any transaction affecting title to any interest in land. The Seventh District Court of Appeals held that the recorded oil/gas lease over the minerals sought to be abandoned constituted a Savings Event. II. Whether The 20 Year Period Within Which A Savings Event Must Occur Must Be Prior To The Enactment Of The 1989 Statute Or Within 20 Years Immediately Preceding Any Date In Which The 1989 DMA Was In Effect. This issue has been referred to as the 20 year rolling period. The 1989 DMA states that the mineral interest shall be deemed abandoned and vested in the owner of the surface if any of the Savings Events had not occurred within the preceding 20 years. R.C (B)(1)(c). The statute presents an apparent ambiguity because it is not clear how the starting date on which the preceding 20 years is determined. Surface owners argue that under the 1989 version of the DMA it should be 20 years preceding any date in which the 1989 DMA was in effect. Under this analysis, the mineral interest is deemed abandoned if the mineral holder did not take actions to effectuate a Savings Event every 20 years preceding any date between March 22, 1989 (the enactment of the DMA) and June 30, 2006 (the enactment of the DMA amendments). Under the facts in this case, the oil/gas lease at issue was recorded in January, 1974 but not recorded again after that date. The surface owner argued that, even if the 1974 oil/gas lease were a title transaction, the preservation of the mineral interest expired when it was not renewed by January, 1994, 20 years later. The mineral holder argued that the mineral interest is not abandoned if any Savings Event occurs 20 years prior to the enactment of the 1989 DMA, March 22, 1989, or within the three year grace period thereafter. R.C (B)(2). The Seventh District Court of Appeals held that the 20 year lookback period is fixed and not rolling. Therefore, assuming the 1989 version of the DMA governs, a mineral holder will have preserved the mineral interest if any Savings Event has occurred at any time within the 20 years preceding March 22, 1989, even if no actions were taken at any time after that to renew or re-establish a Savings Event. { :} 24

25 Dahlgren v. Brown Farm Properties, LLC Supreme Court of Ohio, Case no Plaintiffs/Appellants are the mineral holders and Defendants/Appellees are the surface landowners and developer. On February 16, 1949, Carl and Leora Dahlgren conveyed the property at issue in Carroll County, Ohio to William Lewis Dunlap with a deed that severed the subsurface title for oil and gas from the surface title for that property, as Leora Dahlgren excepted and reserved the mineral rights. Leora Dahlgren did not convey these mineral rights to anyone before her death on March 13, 1977, and her will and probate court orders vested her mineral rights in her three children. Her daughter mistakenly filed the probate court Certificates of Transfer with the Carroll County Probate Court rather than the Carroll County Recorder s Office. Thus, the reserved mineral rights were not the subject of any title transaction that anyone recorded in the Carroll County Recorder s Office between March 22, 1969 (20 years before the effective date for the 1989 version of the Dormant Minerals Act) and September 17, 2009 (the date when one of the Plaintiffs/Appellants first leased an oil and gas lease to a developer who recorded the lease). Each of the plaintiffs (Leora Dahlgren s descendants and their spouses) leased his or her oil and gas interests for the relevant properties to a developer who recorded those leases in the Carroll County Recorder s Office in 2009 or In March 2012, one of the surface landowners sent the mineral holders and the leaseholder developer a Notice of Owner s Intent to Declare the Abandonment of Mineral Interest for part of the relevant properties. Within 60 days after the surface landowners sent this notice, five of the eight mineral holders filed claims for their relevant mineral interests in the Carroll County Recorder s Office. The Court of Common Pleas for Carroll County issued an Opinion on November 5, 2013 authored by Judge Richard Markus, sitting by assignment, which held that the 1989 DMA deemed the mineral owners rights abandoned if none of the Savings Events occurred within the 20 year period prior to the enactment of the statute or the statutory grace period. But the court further held that this created an inchoate right and that it did not transfer ownership without judicial confirmation or at least the opportunity for the mineral holder to contest their absence or the effect of their absence. The court further found that the 2006 amendments governed and that five of the eight plaintiff mineral holders timely filed preservation claims under the amended statute, thus preserving their interest from abandonment. Relying on its prior decision in Walker v. Shondrick-Nau, 2014-Ohio-1499, 2014 WL and Schwartz v. Householder, 2014-Ohio-2359, 12 NE 2 nd 1243, the Seventh District Court of Appeals reversed in an Opinion issued September 14, 2014, 2014-Ohio-4001, 19 N.E. 3d 926. The Court of Appeals held that the 1989 DMA was indeed self-executing and that the mineral holder retained no inchoate rights after the mineral estate was abandoned and vested with the surface owner in the absence of Savings Events within the statutory 20 year period. On March 11, 2015, the Supreme Court accepted the appeal and held the case for the decisions in Walker v. Shondrick-Nau and Corbin v. Chesapeake Exploration, LLC. Pursuant to that order, no briefing on the merits has been submitted. { :} 25

26 Taylor v. Crosby Supreme Court of Ohio, Case no Plaintiffs/Appellants are the mineral holders and Defendants/Appellees are the owners of the surface rights. On August 5, 1971, Benjamin Belt conveyed the property at issue in Belmont County, Ohio to Eli and Virginia Bell with a deed that reserved a one-half interest in the oil and gas underlying the property. On July 10, 1975, Belt entered into an oil and gas lease with United Petroleum Corporation for his one-half interest. In July 1979, the Bells conveyed their entire interest in the property to Defendants/Appellees Donald and Richard Crosby (wives are Defendants/Appellees Tammy and Janis Crosby) (collectively the Crosby Defendants ) subject to Belt s reservation of the one-half interest in the oil and gas. From 1979 to the present, the Crosby Defendants have been the owners of the surface rights. Belt died in January 1993 and his estate was not probated until May, 2011, at which time Belt s one-half oil and gas interest in the parcel was transferred via probate to his grandchildren, the Plaintiffs/Appellants. On October 29, 2007, the Crosby Defendants leased the mineral rights to Defendant/Appellee Reserve Energy Exploration ( Reserve ). Reserve assigned its interest in the lease to Petroleum Corporation on May 15, On November 6, 2008, Reserve with the consent of the Crosby Defendants, published a Notice of Abandonment in the local newspaper regarding Belt s one-half interest in the oil and gas. The Plaintiffs/Appellants did not take any action and the Crosby Defendants recorded an Affidavit of Abandonment on December 19, 2008 stating that this one-half oil and gas interest had been abandoned. On September 24, 2014, the Seventh District Court of Appeals issued an Opinion, reaffirming its position expressed in Eisenbarth v. Royser that the 20 year period is a fixed look back period preceding the enactment of the 1989 statute (or the statutory grace period) and not a rolling look back period, 2014-Ohio-4433, 2014 Ohio App. LEXIS On April 8, 2015, the Supreme Court accepted the appeal and then held the case and stayed briefing for the decision in Walker v. Shondrick-Nau. { :} 26

27 Tribett v. Shepard Supreme Court of Ohio, Case no Plaintiffs/Appellants are the surface owners and Defendants/Appellants are the purported mineral owners. In 1962, Joseph, John and Keith Shepherd sold the surface rights and coal interests they had in the property at issue in Belmont County, Ohio to Seaway Coal and reserved all other mineral interests. This reservation was contained in the deeds of all subsequent transfers of the surface rights and coal interests. In 1996 and 2006, Plaintiffs/Appellants Vernon and Susan Tribett acquired the property at issue and became the surface owners. On September 29, 2011, the surface owners published a Notice of Abandonment of Mineral Interest in the local newspaper and did not attempt service. On October 28, 2011, Defendants/Appellants Barbara and Marion Shepherd, the purported mineral owners, filed an affidavit to preserve the mineral interests that they allegedly inherited from Joseph, John and Keith Shepherd. In an Opinion issued September 29, 2014, the Seventh District Court of Appeals held: (1) Relying on the prior opinion in Dodd v. Croskey (cross appeal accepted on this issue sua sponte by the Ohio Supreme Court and then not decided) and Walker v. Shondrick-Nau, the transfer of the surface lands with reference to a prior reservation of mineral rights does not constitute a title transaction with respect to the mineral interest under the DMA. (2) Relying upon the prior opinions in Walker and Schwartz v. Householder, Ohio-2359, the 1989 DMA is self-executing and results in automatic abandonment of the mineral estate if no Savings Event has occurred in the 20 year preceding the enactment of the statute (or the statutory grace period). In addition, the DMA is not unconstitutional. (3) Relying on its opinion in Eisenbarth v. Royser, 2014-Ohio-3792, the 20 year look back period is fixed and not rolling Ohio-4320, 20 N.E. 3d 365. On April 29, 2015, the Supreme Court accepted the appeal and then held the case and stayed briefing for the decision in Walker v. Shondrick-Nau. { :} 27

28 Farnsworth v. Burkhart Supreme Court of Ohio, Case no Plaintiffs/Appellees are the surface owners and Defendants/Appellants are the mineral owners. In 1980, Veronica Burkhart conveyed the property at issue in Monroe County, Ohio and reserved the mineral rights. These mineral rights were reserved in the deeds in subsequent transactions, including the 1988 deed that conveyed the property to Plaintiffs/Appellees Virgil and Theresa Farnsworth. When Veronica Burkhart died in 1995, her mineral rights were inherited by seven heirs, the Defendants/Appellants. However, Defendants/Appellants did not apply for a Certificate of Transfer until February 2012 and the Certificate of Transfer was recorded in the Monroe County Recorder s Office on February 27, In the meantime, on February 22, 2012, the surface owners generated a Notice of Abandonment, sending notice to the mineral holders by certified mail, return receipt requested. On April 19, 2012, these mineral holders recorded a claim to preserve their mineral interests. On April 23, 2012, the surface owners recorded an affidavit of abandonment. In an Opinion issued September 22, 2014, the Seventh District Court of Appeals held: (1) Relying on Walker, 1989 DMA is self-executing and results in automatic abandonment of the mineral estate if no Savings Event has occurred in the 20 year period preceding the enactment of the statute (or the statutory grace period). In addition, the DMA is not unconstitutional. (2) Relying on its decision in Eisenbarth v. Reusser, 2014-Ohio-3792, the 20 year look back period is fixed and not rolling. But the court then held that there was no abandonment under the 1989 DMA because the mineral rights were not severed until (3) Relying upon the prior Opinion in Dodd v. Croskey (cross appeal on this issue accepted sua sponte by the Ohio Supreme Court and then not decided) and Walker, the transfer of the surface lands with reference to a prior reservation of mineral rights does not constitute a title transaction with respect to the mineral interest under the DMA. (4) Relying upon the prior Opinion in Dodd v. Croskey, the preservation claim filed by the mineral holder pursuant to the 2006 amendments in response to a notice from the surface owner of its intent to declare the mineral interest abandoned was sufficient to preserve the mineral interests, even in the absence of a Savings Event having occurred in the preceding 20 years. This issue has now been decided by the Supreme Court in Dodd v. Croskey, affirming the holding of the Seventh District Court of Appeals on this issue Ohio-4184, 21 N.E. 3d 577. On April 29, 2015, the Supreme Court accepted the appeal, held the case, and stayed the briefing for the decisions in Walker v. Shondrick-Nau and Dodd v. Croskey. { :} 28

29 APPENDIX

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