Ohio Dormant Mineral Act case law update
Blog Post
In the waning days of March, Ohio’s Seventh District Court of Appeals released a number of decisions relating to Ohio’s Dormant Mineral Act (the "DMA”). The Seventh District had accrued an extensive backlog of cases while it awaited interpretation of the DMA from the Ohio Supreme Court. Following the Supreme Court’s decision in Corban, the Seventh District finally had an opportunity to review and decide those pending cases.
The majority of the pending cases were decided simply by direct application of the holding in Corban. However, a few of the cases dealt with issues on which exploration and production companies operating in Ohio continue to await clarification.
First, the decision in Devitis v. Draper weighed in on an issue of first impression among Ohio’s appellate courts. 7th Dist. No. 13MO0017, 2017-Ohio-1136. The Devitis decision considered whether oil and gas royalty severances are subject to the DMA. The court cited the language of the Marketable Title Act (the “MTA”), of which the DMA is a part, to find that the DMA applies to all interests in property, including oil and gas royalties. Thus, according to the Seventh District, a severance of an oil and gas royalty may be extinguished pursuant to the DMA. However, this issue remains ripe for consideration by Ohio’s Supreme Court.
Unlike the MTA which applies to all interests, the DMA specifically provides that it applies to “[a]ny mineral interest,” and defines a mineral interest as “a fee interest in at least one mineral regardless of how the interest is created and of the form of the interest.” The Ohio Supreme Court has previously determined that a royalty interest constitutes personal property rather than realty. Pure Oil Co. v. Kindall, 116 Ohio St. 188, 156 N.E. 119 (1927). Thus, to hold that an oil and gas royalty interest is subject to the DMA, a court must rely on the language of the MTA and that portion of the DMA that states “regardless . . . of the form of the interest,” while ignoring that portion of the DMA that defines a mineral interest as only a “fee interest.” While it was refreshing to have an appellate court decide this issue, it is likely Ohio’s Supreme Court will need to weigh in soon.
Next, the Seventh District considered two cases which argued that the MTA automatically extinguished mineral severances regardless of Corban and the DMA. Warner v. Palmer, 7th Dist. Belmont No. 14BE0038, 2017-Ohio-1080; Jefferis Real Estate Oil & Gas Holdings, LLC v. Schaffner Lw Offices, L.P.A., 7th Dist. Belmont No. 14BE0019, 2017-Ohio-1013. Resolution of these issues will have to wait for another day, as the Seventh District remanded them to the trial court to further develop the record on this issue. In both cases, the 40-year unbroken chain of title required under the MTA extends beyond the time the DMA came into effect. Thus, it will be interesting to see how the courts rectify the automatic vesting of abandoned minerals provided for by the MTA against the active requirements for abandonment required under the DMA.