Oil and gas law is, at its core, real estate law that has been shaped by a thousand years of common law and, more recently, statutory law. Ohio is no exception, and one area that has been impacted significantly by shifting legal policies and statutes is the ownership of minerals beneath “school lands” in Section 16 of Ohio’s Townships.
In the Federal Land Ordinance of 1785, Ohio was required to reserve one section of land (i.e., one square mile, usually section 16), in every Ohio township for the support of public education. Extending that federal mandate, in 1917, the Ohio Legislature passed a law that, among other provisions, provided, “It is declared to be the policy of the state to conserve … mineral resources of the [school lands held in trust] … and to this end the state reserves all gas, oil, coal, iron and other minerals that may be upon or under the said school lands… .” H.B. No. 192, passed March, 20, 1917 (107 Ohio Laws 357). Realizing the magnitude of this reservation and the fact that the Ohio Dormant Minerals Act cannot be used against government interests, my interest was tweaked and I decided to dig a little deeper.
The Land Ordinance of 1785
At the dawning of America, land was one of the greatest assets owned by the federal government. It was used to pay for the service of Revolutionary War soldiers, repay other debts and raise money. It would fulfill the dream of private land ownership essential to Jeffersonian democracy. However, to be marketable, and valuable, land titles would need to be based upon descriptions — not “from a tree, thence to a rock,” etc., but upon defined and reproducible descriptions that would be backed up by the government. Thankfully, at the time, the accuracy of surveying equipment and clocks was evolving to allow for such descriptions. See, Ohio Lands and Their Subdivision, by William E. Peters, published by W.E. Peters, Athens, Ohio, 1918. Also, Measuring America, by Andro Linklater, 2002. Also, Longitude, by Dava Sobel, 2007.
On May 20, 1785, Congress enacted a land ordinance that became one of the most significant pieces of legislation ever passed by the federal legislature. Predating the Northwest Ordinance of 1787 — and adoption of the U.S. Constitution — the Land Ordinance of 1785 created rules for the orderly survey, sale and settlement of the public domain, with settlement to occur only on surveyed land. Land ceded by the colonies in what is now Ohio (and land that would be later purchased from Native Americans) was to be divided into six-mile square townships created by lines running north and south intersecting at right angles with east-west lines. Townships were to be arranged in north-south rows called ranges. Most townships were to be subdivided into 36 one-mile square sections. Each range, township, and section was to be numbered in a regular, consistent sequence. The survey of government-owned land started at what is now East Liverpool, Ohio. See, Dr. George W. Knepper, The Auditor of State, The Official Ohio Lands Book, 2002. (“Knepper”).
Land was also the primary asset available to the federal government to advance another important public goal: public education, which the Founding Fathers believed was necessary to sustain a self-governing republic. So, the Land Ordinance of 1785 provides, simply:
“There shall be reserved the lot No. 16, of every township, for the maintenance of public schools within the said township.”
Ohio Takes Shape
As Congress negotiated terms with delegates from the Ohio constitutional convention, it offered a provision that section 16 in every township, “and where such section has been sold, granted or disposed of,” equivalent land closest to section 16, “shall be granted to the inhabitant of such township for the use of schools.” Note that “inhabitant” is singular.
Convention delegates responded with a counterproposal. They said the United States should donate one thirty-sixth (2.77%) of the land area of Ohio for the support of public schools. Also, the United States should give the state not less than three percent of the net proceeds derived from public land sales in Ohio for constructing roads within the state, and should donate one survey township (23,040 acres) for an institution of higher learning (which benefitted Miami University). Finally, the Ohio legislature should be given control of the donated lands, in trust, for the purposes Congress intended when making the grant. Congress accepted these bold counterproposals on March 3, 1803, thereby appropriating public land to honor its commitment to Ohio. Ohio achieved statehood in 1803. Knepper, page 58.
Congress cemented the deal enacting:
“That the following several tracts of land in the state of Ohio, be, and the same are hereby, appropriated for the use of Schools in that state, and shall, together with all the tracts of land heretofore appropriated for that purpose, be vested in the legislature of that state, in trust for the use aforesaid, and for no other use, intent, or purpose, whatever….”
Act of March 3, 1803, 2 Stat. 225 (1850). The provision goes on to describe specific tracts in the United States’ Military Tract, the Connecticut Reserve, the Virginia Military Reservation, and “One thirty-sixth part of all the lands of the United States lying in the state of Ohio, to which the Indian title has not been extinguished, which may hereafter by purchased….” Section 3 of the Act provides that to the extent a given section 16 may have been otherwise disposed of, the Secretary of the Treasury should select unappropriated reserved sections in the most contiguous townships. The ball is in Ohio’s court.
In one of its first acts, the Ohio Legislature passed a law upholding its part of the bargain with Congress. The law provides that School lands “shall be let on lease for the purpose of improving the same, and thereby rendering them productive, that the profits arising therefrom may be applied to the support of schools, according to the true intent and meaning of the original donation and the several laws of the United States, reserving, granting and appropriating the same.” For the tracts in the United States’ Military Tract, leases were not to exceed 15 years. For other tracts, seven years. Act of April 15, 1803, Ohio Laws p. 61.1
Section 3 of the law required lessees to make improvements. They had to clear and fence 15 acres in separate fields or parcels, one of which was to be five acres, “with all the timber and other wood cut and cleared off and sowed down in timothy or red clover seed and another lot of three acres, cut and cleared in the same manner and planted with 100 thrifty and growing apple trees, and the remaining tract of seven acres cleared and prepared for cultivation in the ordinary manner of improving arable land.” And there was a deadline — 12 years for the 15-year leases, five years for the seven-year leases.
In 1805, the right to lease was vested in the trustees of the townships. They were to lease lots of between 80 and 200 acres for a period not to exceed 15 years. Act of Feb. 20, 1805, 3 Ohio Laws p. 230. In 1810, the law provided that when there were 20 electors in the township there was to be an election of three township trustees and a treasurer. They were to employ a surveyor and lease the school land not to exceed 15 years. Act of Feb. 6, 2010, 8 Ohio Laws p. 100. In 1814, a change appears. For leases in Washington County, the leases were to be for 99 years, subject to an annual rent of 6% of the valuation and subject to a revaluation every 33 years. Act of Feb. 11, 1814 12 Ohio Laws p. 174.
The trend to realize the value of the school lands continued. Some legislators wanted to sell school lands, and on Feb. 1, 1826, Congress permitted sales with the provision that the township’s inhabitants must vote their consent to sell school lands. The legislature complied with this mandate and, on Jan. 20, 1827, enacted the voting, appraisal and conveyance procedures to be followed. Proceeds from the sale of school lands were to be deposited in a state fund known as the Common School Fund, and interest on the principal paid to the schools within the original surveyed townships. Knepper, p. 58.]