Since the Ohio Supreme Court’s September decision in Dundics et al. v. Eric Petroleum Corp., Ohio’s oil and gas landmen have found themselves in a precarious position. That decision held that oil and gas landmen, specifically leasing agents and mineral rights brokers, are subject to the requirements of R.C. 4735. Effectively, that statute would require landmen who negotiate oil and gas leases or the sale of mineral rights, as well as pipeline rights-of-way, to become licensed real estate brokers, or face potentially severe penalties.
Because the requirements of R.C. 4735 bear little to no relation to their long-established and highly-specialized profession, many landmen had hoped for a wholesale evisceration of the Dundics holding by the Ohio General Assembly. On December 19, they received good, if slightly disappointing news in the form of SB 263. That bill, which passed in the Ohio Senate by a 31-0 vote and was signed into law by Gov. John Kasich, generally resolves the most burdensome implications raised by Dundics, but also includes some compromises and additional requirements that many will undoubtedly find bothersome.
SB 263 adds section GG to R.C. 4735.01, defining an “Oil and gas land professional” as “a person regularly engaged in the preparation and negotiation of agreements for the purpose of exploring for, transporting, producing, or developing oil and gas mineral interests, including, but not limited to, oil and gas leases and pipeline easements.”
Oil and gas land professionals are then exempted from the real estate brokers licensure requirements as long as they are either “not engaged in the purchase or sale of a fee simple absolute interest in oil and gas,” or “employed by the person, partnership, association, limited liability company, limited liability partnership, or corporation for which the oil and gas land professional is performing the oil and gas land professional’s duties.” Importantly, it appears that independent, non-employee mineral brokers would fall outside of this exemption, and would still be required to obtain a real estate broker’s license.
For those negotiating leases and for employees, the bill imposes some additional requirements. Landmen will now be required to register annually with the superintendent of real estate and pay an annual fee, maintain membership in a professional organization that develops ethical standards (such as the American Association of Professional Landmen), and provide specific notices to landowners on forms approved by the superintendent. We do not know the amount of the fee, but SB 263 includes a $100/year cap, and the superintendent has until the law becomes effective on March 19 to provide guidance as to the notice forms.
Ultimately, SB263 accomplishes an important objective, allowing oil and gas landmen to do their jobs without the threat of legal action and civil fines. While landmen may see its additional burdens as less-than-ideal, those burdens are certainly much easier to live with than the post-Dundics alternative. A full copy of SB 263 can be found here, with the relevant portions at pages 35 through 41.
Disclosure: Drew Romig is a member of the Legislative and Regulatory Committee for the Michael Late Benedum Chapter of the American Association of Professional Landmen.