United States: Recent Supreme Court Of Ohio Rulings May Alter The Status Of Dormant Mineral Rights Throughout The State

The Supreme Court of Ohio recently brought clarity to issues plaguing the holders of both mineral and surface rights for years by addressing two questions: When does the owner of dormant mineral rights abandon those rights? And when do those rights merge with the surface holders' rights?

Surface owners, mineral rights owners, and the courts in Ohio have, for decades, disagreed about when mineral rights are deemed abandoned and are merged with the surface owner's estate. The Ohio legislature attempted to clear up this issue by passing the Dormant Mineral Act in 1989. The law provided that "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" unless one of a number of "saving events" had occurred within the preceding 20 years. Former R.C. 5301.56(B)(1), 142 Ohio Laws, Part I, at 985, 986–87.

The law was later amended in 2006. The only true substantive change was that surface rights holders were required to (1) provide advance notice to the mineral rights holder; and (2) give the mineral rights holder an opportunity to preserve its rights before those rights could be deemed abandoned and merged with the surface estate. R.C. 5301.56 (E)–(G).

Because the 2006 version included the notice requirement and the 1989 version did not, many believed the Dormant Mineral Act of 1989 was "self-executing." Therefore, under this interpretation, if no saving event occurred after 20 years, the dormant mineral rights would automatically transfer to the surface holder. Relying on this reading of the law, many surface owners assumed that they owned the mineral rights under their property due to the automatic vesting. In addition, many mineral rights owners assumed that their mineral rights had been abandoned and were therefore worthless.

However, the Supreme Court of Ohio recently issued a number of decisions affecting mineral rights throughout the state.

In the lead case, Corban v. Chesapeake Exploration, L.L.C., Slip Opinion No. 2016-Ohio-5796, the Supreme Court of Ohio settled the debate and declared the 1989 version of the Dormant Mineral Act was not self-executing. Therefore, no mineral rights in Ohio automatically passed to surface holders.

In Corban, North American Coal Corporation conveyed 164.5 acres of land to Orelen and Hans Corban in 1959. However, in doing so, the corporation reserved to itself all oil, gas and mineral rights. The surface rights were later transferred down through the Corban family while the mineral rights were continually leased and assigned to numerous exploration entities. In 2013, then-surface-owner Hans Michael Corban filed an action in Harrison County Common Pleas Court seeking to quiet title to the oil and gas rights under his surface lands.

In response to this action, the mineral rights holders moved for summary judgment, which Corban followed with a motion of his own. Facing the dual motions for summary judgment, the district court asked the Supreme Court of Ohio to clarify "whether the 1989 or 2006 version of the Dormant Mineral Act should be applied to a quiet title action filed after 2006 that asserts that the rights to minerals vested in the surface owner as a result of abandonment prior to 2006." The Ohio Supreme Court obliged.

The court heard the same arguments others have been hearing for years. Corban argued the 1989 version was self-executing because the statute did not require any affirmative action or judicial confirmation for the mineral rights to be deemed abandoned. Therefore, the General Assembly must have intended the mineral rights to automatically transfer to the surface holder after the 20-year period, he argued. In response, the mineral rights holders argued that the 1989 version was not self-executing and that the surface owner under the 1989 Act must have taken legal action to quiet title in order to obtain the mineral interest.

In its opinion, the court noted that the 1989 law did not use the words "extinguish" or "null and void," but simply stated the mineral rights "shall be deemed abandoned and vested in the owner of the surface." Analyzing Sixth Circuit precedent, the word "deemed" was found to merely create a conclusive presumption that the mineral rights had been abandoned. Therefore, the 1989 law provided surface owners seeking to quiet title evidentiary proof that the mineral rights holder had abandoned its interest, nothing more. It did not automatically transfer the mineral rights interest to the surface owner.

Therefore, according to the Ohio Supreme Court, the 1989 Dormant Mineral Act "was not self-executing" and "did not automatically transfer ownership of dormant mineral rights" to surface owners. Under the 1989 Act, the only way surface holders were able to merge their rights with the underlying mineral rights was to quiet title.

Following Corban, the status of dormant mineral rights throughout the state of Ohio has been clarified. Surface owners who wished to merge their rights with the dormant mineral rights prior to 2006 only did so successfully if they quieted title. No mineral rights automatically transferred to surface holders under the 1989 Act. Furthermore, any surface holder seeking to have the mineral rights below its property merged after 2006 must comply with the provisions outlined in the statute to do so. These provisions include providing the mineral rights holder advance notice of an abandonment proceeding and giving it an opportunity to preserve its rights.

In short, if you think you own the dormant mineral rights below your surface estate in the state of Ohio because those rights automatically transferred to you under the 1989 Dormant Mineral Act, you do not. You may need to take further action to solidify your interest. On the other hand, if you believe your mineral rights were automatically abandoned, and the surface right holder did not quiet title or follow the procedures outlined in the 2006 amendments, you may still have an ownership interest in those rights.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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