Lawsuits in Ohio and Supreme Court of Ohio regarding Mineral Rights Holders

We received a lease check from Hess Oil last year as a payment for a five-year lease. Now they are drilling, but we are not receiving a royalty check. We have been told the oil companies in Ohio are holding royalty checks for those who own mineral rights but do not own the surface land. We are told they are waiting to see who gets the money until the State of Ohio Supreme Court makes a decision on if the recipient will be the mineral rights owners or the land owners. Does anyone have further information on this? Here we are paying mineral rights taxes to Harrison County, yet we may not even get any money from our mineral rights! If you have information, we will be most appreciative. 

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Permalink Reply by Joseph-Ohio on April 18, 2015 at 1:51pm
The way I understand it:

The lease agreement renders ownership of the right to drill to the 'lessee'.

By virtue of the terms of the lease agreement, the 'lessee' becomes the one who owns the rights for as long as the leasehold exists / is in force.

By virtue of the terms of the lease agreement, the 'lessor' leased (sold) his right to drill / his right to the minerals / mineral rights to the 'lessee'.

What did the 'lessee' lease (buy) with the leasehold agreement if not the minerals / mineral rights / the right to drill / the right to develop the minerals ? If it's under lease the 'lessee' owns the above for as long as the lease is in force.

Lessees even sell those rights / leaseholds once they own them. They do it all the time. No one can sell anything they don't own.

The way I understand it all.
Permalink Reply by Joseph-Ohio on April 18, 2015 at 2:24pm
BTW, RITA KERR indicated she is paying 'Mineral Rights Taxes' in her original post.

Guess I missed that earlier - so - sorry about that.

Maybe her lease doesn't specify that the 'lessee' pays any / all taxes wrought by the lessee's development of the Oil & Gas natural resources ? Maybe that's the unwritten hook ? Maybe that's the reason for all the court cases ?

That's all I got as far as it goes trying to understand what all the differing perspectives entail (with only these few entries to try and enlighten myself with). I'm staying tuned for clarification as I think this is pretty important.
Permalink Reply by Joseph-Ohio on April 19, 2015 at 1:48am
Anyway, evidently, in RITA KERR's instance the 'Mineral Rights' have been separated from the 'Land' and are 'Leased'.

Wonder how it's going shake out ?
Permalink Reply by bo boboski on April 19, 2015 at 3:06am

I hope to hell I didn't read that right. If Harrison county can get away with assessing landowners $300 per acre for their mineral rights,especially undrilled,how long will it be before other counties to do the same? Some landowners dont even get $300 per acre AFTER they are drilled.

Permalink Reply by Joseph-Ohio on April 19, 2015 at 3:18am
Yeah, think about it.

As far as I understand all this, at this moment in time, it appears to me that the key to whether or not the 'Mineral Rights Owner is 'Assessed' or not, is the condition of being 'Leased' or 'Unleased'.

Then take it a little further and contemplate the impact of being 'Force Pooled'.

Catch my 'drift' ?
Permalink Reply by Craig Cooper on April 18, 2015 at 3:42pm

Joseph,

The lessee doesn't own anything. Leasing doesn't = ownership.

The owner (lessor) grants certain privileges to someone else (lessee) in exchange for some sort of compensation per terms of a legal agreement. 

The lessee doesn't own the mineral rights, but rather rents them from the lessor who allows the lessee to drill, produce & sell hydrocarbons in exchange for a portion of the income.

Lessees can, and often do, take on partners to reduce their (monetary) exposure & risk. But that effectively = a sub-lease, not a sale.

Permalink Reply by Joseph-Ohio on April 18, 2015 at 4:13pm
Obviously we see things somewhat differently and (if I've learned anything as I've attempted to study these complex matters) there are different interpretations / senses of the various words used in the context of leasing gas and oil development rights - even simple / familiar words.

I can't even tell you how many times I've read articles of how this company or that company sold so many thousands of acres to another certainly implying 'ownership' of what was being sold.

For my own understanding I've settled on what was being sold were leaseholds granting the lessee the right to drill / develop, and normally the 'lion's share' of the production; while granting the lessor a smaller percentage of the production and many times a sign-on bonus - all under other terms and conditions specified.

All of those things (to me) specify degrees of ownership by the contracting parties in the context of oil and gas development under the terms and conditions of the leasehold agreement.

Waiting to see what happens with the litigation underway.

That's my perspectiive on these important matters.

Thank you for our discussion Mr. Cooper.
Permalink Reply by Tim Tarr on April 18, 2015 at 5:17pm

"Like I posted a couple posts ago,when I called the Treasurer office they told me that it does not matter if it has been drilled and producing,or the rights have just been leased and nothing done yet ,the owner of the mineral rights will be assessed $300 per acre.We have not received a tax notice. It has only been 1 year since it was leased and it is still in probate,but she said that the lawyer or executor should have received a bill" williet57

If that is even close to accurate I see lots of tax sales and a revolt.

Permalink Reply by Paul Butler on April 19, 2015 at 4:12am

Taxing leased mineral interests is going to create a number of issues and I'll be watching closely how the law develops.

Note that one of the minor scams Oil & Gas companies inflict on the landowners is calling the oil & gas lease a lease.

If you get production, the effect of the instrument, styled an oil & gas lease, is to create a fee estate known as a fee simple determinable.  This means that the lessee, for all practical purposes owns the minerals in Fee Simple Absolute but the estate is subject to complete defeasance (divestment/reversion) upon the occurrence of a specific event, under the ordinary lease cessation of production.  Cessation of production causes the mineral estate to revert to the Lessor. 

The Lessee, during production, controls all incidents of ownership of the mineral estate.

Arguably, if the minerals are leased they are no longer owned by the Lessor, but by the Lessee. 

Levy another tax on the oil & gas companies.  They got the dough!  At least they did.

Permalink Reply by Joseph-Ohio on April 19, 2015 at 4:52am
I'm reading you loud and clear.
Permalink Reply by williet57 on April 19, 2015 at 5:40am

Is there a gas/oil attorney on here that could simplify   and explain  all about these taxes that are being applied by the counties on mineral owners and non surface land owners that  have a lease with oil company?

Permalink Reply by Joseph-Ohio on April 19, 2015 at 5:49am
Sounds like the O & G Industry can establish (or is working toward the ability to establish) a Leasehold Agreement with a 'Mineral Rights Owner', develop a well, choose to throttle back / not produce from the well and then stick the Lessor for the tax burden.

Seems to me a fix would be to make sure a clause exists in the Leasehold Agreement that the Lessor is responsible for any tax increases wrought by development / production.

One problem with that idea that I see would be if the Lessor / Mineral Rights Owner would be 'Force Pooled' into a Leasehold Agreement that didn't have such specification.

How can such entrapments be allowed to be made legal ?

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