Ending the suspense last week, the Ohio Supreme Court issued decisions in fourteen pending appeals of lower court decisions related to the effect of the Ohio Dormant Mineral Act (“DMA”) on leasehold rights in Ohio. The Court answered several questions that oil and gas industry professionals, lawyers, and judges have all struggled with since the beginning of the Utica Shale boom in 2010.
Corban v. Chesapeake Exploration, L.L.C., Slip Opinion No. 2016-Ohio-5796, received the plurality of the Court’s time and ink. Corban originated in the Ohio Supreme Court based on certified questions from the United States District Court for the Southern District of Ohio, one of which concerned when to apply the 2006 DMA.
The Corban decision answers two questions that have been asked of the Supreme Court on appeal over a dozen times: (1) was the 1989 version of the DMA self-effecting; and (2) may a court, in 2016, apply the 1989 version of the DMA when the legislature amended the law in 2006?
In short, the answer to both questions is no.
The 1989 DMA was not-self effecting, according to the decision. That is, the party seeking abandonment of the minerals was required to take some form of action in order to effect the abandonment. The decision in Corban focuses on the definition of the word “deemed” as the key word in the 1989 version of the DMA. The former Ohio Revised Code Section 5301.56(B)(1) read, “[a]ny mineral interest held by a 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, if none of the following applies. . . ” (emphasis added).
The Court found that the use of the word “deemed” created a conclusive presumption of abandonment in favor of the surface holder if the remaining conditions of the law were met. However, the Court’s decision clarifies that the surface holder still had to take some sort of action in order to effect the legal abandonment of the minerals. In short, the law provided a mechanism for surface owners to present compelling evidence of the abandonment of minerals, but did not go so far as to execute that abandonment.
Until the Corban ruling, oil and gas companies and the attorneys advising were hard-pressed to determine whether the 2006 DMA (which specified the actions necessary to reunite surface and mineral rights) applied to disputes where application of the 1989 DMA could have or should have resulted the abandonment of mineral interests if the surface owner had taken action at the appropriate time. The Court answered the question in simple terms. If the claim for abandonment is made after June 30, 2006 (the effective date of the 2006 DMA), then the 2006 DMA applies.
The Court handled Walker v. Shondrick-Nau, written about in an earlier Ohio Energy + Environment post, by simply applying the rules handed down in Corban. In Walker, the claim for abandonment arose after the effective date of the 2006 DMA. When Walker attempted to effect abandonment of the minerals under the 2006 DMA, Noon (the predecessor party to Shondrick-Nau) timely filed an affidavit to effect non-abandonment of his interest. Because the 2006 version of the law was the only remedy available to Walker, and it was promptly opposed by the mineral owner pursuant to the statute, the minerals were not abandoned. The Court did not need to fully evaluate Walker’s discussion of the word “vested” in the original statute, because the Court’s interpretation of the word “deemed” rendered that discussion moot.
The implications of the Supreme Court’s decisions are likely just beginning to be understood. We will continue to update the case history as it unfolds.