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Ohio Supreme Court sides with mineral rights holders in oil and gas reserve cases

by Marc kovac | Capital Bureau Chief Published: September 16, 2016 4:21 PM

Columbus -- In a hefty release Sept. 15, the Ohio Supreme Court sided with longtime mineral rights holders in more than a dozen decisions involving oil and gas reserves in the eastern part of the state.

The bottom line: Owners of mineral rights don't automatically abandon those rights absent surface owners following procedures outlined in state law.

And that could mean a lot of future court cases, as surface owners try to sort out whether they really hold the mineral rights to their land.

"There will certainly be a lot of activity as people sort out the implications of the decision and where they stand on their mineral right interest relative to the decisions," said Webb Vorys, who served as a legal adviser to the Ohio Oil and Gas Association in the case.

The lead case, Corban v. Chesapeake Exploration LLC, focused on mineral rights in Harrison County, but that opinion was cited in 13 other pending cases involving the state's Dormant Mineral Act.

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The ownership issues came to light as companies turned to horizontal hydraulic fracturing, or fracking, to drill for oil and gas reserves in shale formations deep underground.

In Corban, justices ruled that the current surface owner of about 165 acres was not entitled to compensation for minerals extracted by a company that long held oil and gas rights to the property, despite decades of inactivity at the site.

Other cases decided Sept. 15 pitted current property owners against companies that have held mineral rights but did not launch exploration work for years.

The former alleged the companies had abandoned their mineral rights, with a prior state law automatically shifting those rights to the surface owner. The latter held that those rights were reserved and properly documented or held and were not automatically abandoned.

In the Sept. 15 decisions, a majority of justices sided with the mineral rights holders, saying that a 1989 state law did "not automatically transfer the interest from the mineral rights holder to the surface owner by operation of law Rather, a surface holder seeking to merge those rights with the surface estate under the 1989 law was required to commence a quiet title action seeking a decree that the dormant mineral interest was deemed abandoned."

Additionally, law changes enacted in 2006 directed surface owners to provide advance notice and follow recording procedures in order to deem mineral rights abandoned.

Translated, that means surface property owners could not declare mineral rights abandoned without completing that process.

Vorys said the decisions mean surface landowners could need to pursue court action to solidify abandoned mineral rights -- " You then have to go through the process of getting it merged with the surface [rights]," he said.

Marc Kovac is the Dix Capital Bureau Chief. Email him at mkovac@dixcom.com or on Twitter at OhioCapitalBlog.

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