Tuesday, August 19, 2014

Mineral rights cases to be heard by Supreme Court of Ohio

Court News Ohio reports that the Supreme Court of Ohio is set to hear two cases involving mineral rights on Wednesday. The cases have arisen largely due to the use of fracking and horizontal drilling in Ohio and have potential multi-million dollar consequences. Both cases out of eastern Ohio involve questions as to the ownership of the natural resources located below the surface of property. Rights to those resources are often divorced from surface ownership, but it is sometimes unclear who actually has ownership of them. The Ohio Dormant Mineral Act (passed in 1989 and found in O.R.C. 5301.56) generally governs this issue. Columbus Business First describes this act as offering a “use it or lose it” rule. This essentially means that if certain actions are not taken with respect to the natural resources after 20 years have elapsed then ownership transfers to the surface landowner.  Prior to 2006 the mineral rights automatically transferred to the surface owners if those actions weren’t taken. In 2006, however, the law was amended to state that the 20 year look-back period does not begin until the landowners tell the holders of the mineral rights that they intend to declare their interests abandoned.

The specific cases before the court this week are Dodd v. Croskey and Chesapeake Exploration v. Buell. In Dodd, the landowners assert that although the deed to their property excludes the mineral rights below, the owners of those rights abandoned them by not acting in accordance with the Dormant Mineral Act in the past 20 years. The holders of the mineral rights argue that they did not need to perform this act, as another part of the statute preserved their interests. Specifically, they assert that because they filed a claim to their mineral rights within 60 days of the landowners serving an abandonment notice that this preserves their rights and they did not need to have taken specific actions within the preceding 20 years.

In Chesapeake, the owners of the mineral rights argue that creating a lease on their rights and ending the lease both acted as title transactions which each started a new 20 year time frame within which they had to act to preserve their rights. They argue that because ending the lease was a “savings event” that started a new time frame in 1989, the 20 year period ended in 2009, after the 2006 amendment to the law. They assert that this means the 2006 amendment applies and that the landowners had to give them notice before they could begin the 20 year look back period. Since no notice was given they claim that rights cannot have transferred. The landowners claim that the expiration of the lease was not a “savings event” and that the 20 year period began with the creation of the lease in 1984, and ended in 2004, before the 2006 amendment. As such, they claim that the property rights automatically transferred to them at that point, even though they did not give notice, because the 2006 amendment had not yet been passed.

The arguments will be streamed live online at sc.ohio.gov and broadcast live on The Ohio Channel.

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