Dormant Mineral Statue - 5301.56

In regards to Wiseman vs. Potts and the dormant mineral statue -5301.56, what must the heirs of an old mineral reservation do at present time to preserve their mineral rights, absent the surface owner filing a quite title suit or affidavit of abandonment?

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0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on March 27, 2013 at 4:21am

It's confiscatory government policy, plain and simple.  Beyond that the idea of having to pay property tax for oil and gas rights is amusing to me.  That assumes that oil and gas are real property, which I could argue they are very much not.  And who, precisely, is determining the value of these rights?  The county?  Because look around and you'll find that most of these county officials can't find their butt with both hands and a map.  So the solution is another bureaucrat making valuations based on what they have randomly cobbled together from the internet, basically.  I do oil and gas well valuations as part of my job.  It's not easy and it is very time consuming.  The counties are not capable of doing it and they certainly weren't able back in 1989.  

BTW, if oil and gas rights are real property what the law is saying is that we can take your real property from you if you don't follow these steps that we randomly made up and defined poorly.  No such law exists with other real properties.  I can own a field next to a booming development in the suburbs and let it sit there for decades.  I'm not forced to either develop it or lose it.

Permalink Reply by Dan on March 27, 2013 at 5:43am

HarcO, I agree that Dodd v Croskey deserves to be discussed too.  The arguments in that case are worth considering.  I do have trouble though with it's assertion that a  recent reservation reference could reverse a forfeiture that had already occurred in 1992 from the 1989 statute. 

Permalink Reply by Finnbear on March 27, 2013 at 6:40am

I do too. I have a problem with the interpretation of "the mineral interest attempting to be abandoned is the subject of a title transaction" including any and every sale of the surface after the original reservation. Every time a property is re-titled, this case seems to interpret as a "saving event" for the original reservation. That is just BS. I believe the intent was for "the subject of a title transaction" to mean just that - the mineral reservation is the subject of the transaction, meaning a separate deed is created for the reservation and then may be transferred like any other piece of real estate.

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on March 27, 2013 at 7:05am

Your interpretation of their interpretation is actually right on.  I happen to agree with their interpretation and believe in a broad definition of what a "title transaction" is.  I think ultimately my position (and this ruling) will be the minority in Ohio and eventually will be overturned.

Permalink Reply by Marc on March 27, 2013 at 4:59pm

more to the point, the definition of the 'subject of' a title transaction. defining a title transaction's subject narrowly to include only the interest transferred in the transaction would mean that even a new reservation would not preclude a surface purchaser from deeming the minerals abandoned. (basically allowing a surface owner to obtain through forfeiture what had just been excluded from the transaction - not something the legislature could have intended). also, its counter intuitive to say that a title transaction can give notice of something (a prior reservation) without the 'subject' of the title transaction touching on it. it's difficult to have it both ways, it seems to me.

Permalink Reply by Finnbear on March 27, 2013 at 5:55pm

I don't see how a new reservation could be affected that way. The current version of 5301.56 still has the 20 year look back provision.

Permalink Reply by Marc on March 27, 2013 at 4:44pm

Dan, Finnbear: under Dodd v. Croskey, the mineral interest was never forfeited and never vested in the surface owner. It was always the mineral owners. there is no 'reversing' of anything, just a interpretation of 5301.56 that probably ends up best servicing its broad purpose - preserving the marketability of minerals.

Permalink Reply by Finnbear on March 27, 2013 at 5:44pm

The intention of the 1989 version of 5301.56 was that the rights automatically vested back to the surface after 20 years of dormancy if nothing more had been done with the original reservation. It also allowed the reservist to create a separate deed for the reservation to make it permanent.

Permalink Reply by Finnbear on March 28, 2013 at 1:35am

And, the 1989 version of 5301.56 is not at all hard to understand if one takes a little time to read it and study the reason ("intent" for the legal minds) it was written in the first place.

Permalink Reply by Marc on March 28, 2013 at 5:10am

you see that's wrong. if that was the intent they would have written the minerals "vest" or "shall vest" - BUT they didnt write that.

P.S. a fundamental part of statutory interpretation is the assumption that every word has a purpose and none are superfluous.

what canon of interpretation are you applying to the '89 DMA Finnbear? I'd be curious to know.

Permalink Reply by Marc on March 28, 2013 at 5:15am

LOL nothing in the Dodd case requires you to track down heirs from deaths in the early 1900s. it seems to me you have a tenuous handle of what the DMA and the various trial court decisions actually say. in fact, the leasor in the Dodd case had no problem finding the mineral owners. That's why they signed an oil and gas lease with them - the threat of transferring mineral owners' vested property rights to a different party has become the biggest threat to mineral exploitation in the Utica shale. clearly, the exact opposite of what the DMA could have intended...

Permalink Reply by Dan on March 27, 2013 at 5:09am

Marcus, it's not arbitrary.  There is a process and protocol.  I firmly believe in private property rights, yet I feel the ideas being discussed in these cases have merit.

The idea is that the mineral rights to a property don't have the same quality of rights as the property itself.  In theory the surface owner still owns all the volume of land from the surface down to the center of the earth, but someone else can be given the right to extract the minerals found under that land.  However the minerals always have a unique connection to surface of the property above them, and while mineral interest can be severed from the surface legally, it is still attached to that surface.

When you look at it that way, it is a wonder that we are allowed to sever our mineral interest at all.   Yet, if it's our property, then we should have the right to do with it as we choose, right?   Yes, but once we have severed the mineral interest from the surface and have two different owners, how do we decide who's rights trump the others'?  Well, we give the mineral owner the right to disrupt the surface to extract their minerals, which seems to supercede the surface owners rights. We allow the mineral owner to treat their mineral interest in many ways as if it were property itself, by allowing them to lease or sell their minerals, or transfer them to heirs.  We even allow assigning a tax parcel number, so they exist as a separating taxing entity in the auditor's ledger.

So what is the difference between the surface owner's rights and the mineral owner's rights?   As long as the surface owner stays current on property taxes and have no other liens or encumbrances on the property, then they will continue to keep the property without challenge (with a few exceptions like imminent domain) in perpetuity. Once the mineral interest is severed from the property, the mineral owner keeps his interest in perpetuity also, but with the added requirement that they do something with it.  They could extract some of the minerals, or establish a separate parcel number for the minerals, or sell the mineral interest to another party, or even just record something saying they still want the minerals.  They just need to do something with it, that's all.  Just show that they want to keep them.  But how long can they go until they have to show that they intend to keep them?  In the 1989 statute, it stipulates that after 20 years of doing nothing, the surface owner regains the minerals. To be fair to those who didn't realize they needed to do something, they gave 3 years for anyone to reassert their mineral claim who cared enough to.  So after 1992 there were many mineral interests that were reunited with their surfaces.  This 20-year lookback period stayed in effect after the 1989 statute, and each year after that, mineral interests that had no saving events for the previous 20 years reverted back to the surface automatically. Some began to think that it was more fair that the surface owner should make some effort to regain their minerals after the 20 years of no action, so in 2006 a revised statute was passed that requires the surface owner to try to contact the mineral owner first, and then if they are not interested, paperwork can be filed to reunite the minerals.

This whole process of thought seems to me to be an attempt to respect the private property rights of both surface owners and mineral owners, and if we are going to allow severing of minerals at all, seems like a reasonable attempt at trying to be fair about it.  Obviously it affects us all in different ways, to our advantage or to our detriment, but there is nothing arbitrary about it, and I don't see it as a liberal law.

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