Energy is a hot topic at the statehouse these days. The Ohio General Assembly is reviewing several proposals dealing with energy sources, including solar and wind facilities, oil, gas, and gas pipelines. The proposals raise a critical question about where control over energy production activities should lie: with the state or with local communities? The proposals offer contrasting views on the answer to that question.
Solar and wind projects. We reported in March that companion bills H.B. 118 and S.B. 52 were on hold due to conflicts with the proposals, which would have allowed citizens to use the referendum process to reject proposed large scale wind and solar energy developments in their communities. On May 12, the bill sponsors offered a substitute bill to the House Public Utilities Committee. The new approach in the substitute bill would allow a township to adopt a resolution designating all or parts of the township as “energy development districts.” Doing so would allow wind and solar facilities to be constructed within the designated district(s) and would prevent the Ohio Power Siting Board from approving any projects that are not within a designated district. The residents in a township, however, would have the right to petition an energy development district designation and submit it to a vote by township residents. Sponsor Sen. Rob McColley (R-Napoleon) explained that the new approach would allow a township to let energy developers know “up front” that the community is “open for business.” The committee will hear responses to the substitute bill in additional hearings, not yet scheduled.
Fossil fuel and gas pipelines. A proposal regarding energy generation from fossil fuels and gas pipelines takes an opposite approach on local control. H.B. 192, sponsored by Rep. Al Cutrona (R-Canfield) would prohibit counties, townships, and municipal corporations from prohibiting or limited the use of fossil fuels for electricity generation and the construction or use of a pipeline to transport oil or gas. About a dozen opponents testified against the bill at its third hearing before the House Energy and Natural Resources last week, with most arguing that the proposal removes rights of local communities to control their energy sources and violates the home rule authority for municipalities provided in Ohio’s Constitution. The bill is not yet scheduled for an additional committee hearing.
Natural gas. A bill that guarantees access to natural gas passed the House of Representatives on May 6, largely along party lines. H.B. 201, sponsored by Rep. Jason Stephens (R-Kitts Hill), guarantees that every person has a right to obtain any available distribution service or competitive retail natural gas service from gas suppliers, and bars a political subdivision from enacting laws that would limit, prevent, or prohibit a consumer within its boundaries from using distribution services, retail natural gas service, or propane. Opponents argue that the bill violates home rule authority and is unnecessary, since no community in Ohio has ever banned the use of natural gas. The bill was referred to the Senate Energy and Public Utilities Committee on May 12.
We'll keep you posted on the progress of these bills as the Ohio General Assembly continues to deal with the question of local versus state control of energy production and distribution in Ohio.
In our final part of our blog series analyzing the Ohio Supreme Court's recent decisions on mineral rights, we analyze the Court's decision in West v. Bode regarding the relationship between the Dormant Mineral Act and Ohio’s Marketable Title Act.
West v. Bode
Timeline of Events:
1902: George and Charlotte Parks sold 1/2 of the royalty interest in the oil and gas under their 66 acres of land located in Monroe County (the “severed royalty interest”) to C.J. Bode and George Nally; the transfer was recorded.
1916: Bode and Nally transferred the severed royalty interest to E.J. Wichterman, Clara Thompson, and M.M. Mann; the transfer was recorded.
1929: Parks transferred to Lettie West the 66 acres, but retained their 1/2 royalty interest in the oil and gas under the property and mentioned the severed royalty interest; the transfer was recorded.
1959: The surface land was transferred to George West; the transfer was recorded but did not mention the severed royalty interest (the “root title”).
1996: George West transferred property to Wayne West; the transfer was recorded but did not mention the severed royalty interest.
2002: Wayne West transferred a portion of the 66 acres to Rusty West; the transfer was recorded but did not mention the severed royalty interest.
Wayne and Rusty West (the “Wests”) filed an action in Monroe County Court of Common Pleas asking for a declaratory judgment that Ohio’s Marketable Title Act extinguished the severed royalty interest, and that the severed royalty interest had vested in the Wests. The remaining interested parties filed a counterclaim arguing they were owners of a portion of the severed royalty interest (the “interested parties”).
The interested parties claimed that the Wests failed to state a valid claim under the Marketable Title Act because the more specific provisions of Ohio’s Dormant Mineral Act displace the general provisions of the Marketable Title Act. The Wests argued that since neither the transfer from Lettie West to George West nor any recorded document since mentioned the severed royalty interest, the severed mineral interest vested back to the Wests under Ohio’s Marketable Title Act.
The Monroe County Court of Common Pleas agreed with the interested parties and declared them owners of the severed royalty interest. The Seventh District Court of Appeals reversed and asked the Common Pleas Court to adjudicate the case under the Marketable Title Act. The interested parties then appealed to the Ohio Supreme Court.
Does the Dormant Mineral Act Supersede the Marketable Title Act?
The Ohio Supreme Court was tasked with determining whether Ohio’s Marketable Title Act applies to severed interests in oil and gas because of the enactment of the newer Dormant Mineral Act.
The Dormant Mineral Act (R.C. §5301.56) is part of a series of laws known as the Ohio Marketable Title Act (§R.C. 5301.47 et seq.) Under Ohio law, courts should interpret potentially conflicting statutes in a way that gives effect to both laws. However, if there is an irreconcilable conflict between two laws, a more specific law will prevail over a more general one. Therefore, the Ohio Supreme Court determined that the issue in this case was whether there existed an irreconcilable conflict between the Marketable Title Act and the Dormant Mineral Act.
First, the Court looked at the intent of each act. The Court found that the Ohio General Assembly enacted the Marketable Title Act to extinguish interests and claims in land that existed prior to the root title so as to simplify and facilitate land transactions by allowing individuals to rely on a record chain of title. Similarly, the Ohio Supreme Court found that the Ohio Legislature enacted the Dormant Mineral Act to provide a method to terminate dormant mineral interests and reunify the abandoned mineral interest with the surface interests in order to promote the use of the minerals under the land.
But how do the two operate together? The Ohio Supreme Court analyzed that under the 1961 Marketable Title Act, property interests are extinguished after 40 years from the effective date of the “root title” unless some saving event has occurred. Once an interest has been extinguished under the Marketable Title act, it cannot be revived. An event that would save an interest from being extinguished under the Marketable Title Act include: (1) the interest being identified in the documents that form the record chain of title; (2) the interest holder recording a notice claiming the interest; or (3) the interest arose out of a transaction that was recorded subsequent to the effective date of the root title.
The Court also explained that the Dormant Mineral Act was enacted in 1989 (and amended in 2006) to supplement the Marketable Title Act. In order for mineral interests to be deemed abandoned the surface landowner must either send notice to holders of the mineral interest or publish the notice if the holders cannot be located. If a holder does not respond, a surface landowner can file with the county recorder an affidavit showing that notice was sent and published, and no saving event occurred within the 20 years prior to the notice. A saving event under the Dormant Minerals Act include: (1) existence of title transactions; (2) use of the minerals; (3) use of the interest for underground gas storage; (4) issuance of a permit to use the interest; (5) claims of preservation; and (6) issuance of separate tax parcel number for the interest.
The Ohio Supreme Court held that the Dormant Mineral Act operates differently than the Marketable Title Act thus no irreconcilable conflict exists. The Marketable Title Act extinguishes interests by operation of law, whereas the Dormant Mineral Act deems interests abandoned and vested in the owner of the surface. Essentially, the Court found that the two acts work in conjunction with one another, not against each other. The Court reasoned that the Dormant Mineral Act is not self-executing like the Marketable Title Act, but rather provides evidence that a surface owner may use in a quiet-title action to eliminate the abandoned mineral interest.
The Court stated that a surface owner may use the Dormant Mineral Act to reunify the surface and mineral interests prior to the 40-year time limit prescribed in the Marketable Title Act, thus making the Dormant Mineral Act a more abrupt way to reunify the two interest. This, the Court rationalized is why the Dormant Mineral Act works in parallel to the Marketable Title Act rather than against it. The Court found that the Dormant Mineral Act provides an additional mechanism to surface owners to reunify surface and mineral interests.
The Court ultimately held that a mineral interest holder’s interest may be extinguished by the Marketable Title Act or deemed abandoned by the Dormant Mineral Act, depending on the surrounding circumstances.
Takeaways from Part I and Part II
Make sure your interests are recorded! With any transaction, recording transfer of title (or mineral interests) can be crucial to protecting your assets. If you have any questions about whether your interests have been recorded, please contact a local attorney, it could be what saves your legacy.
Do the terms “abandoned mineral rights” mean anything to you? Do you currently own land that you don’t have the mineral rights to? Do you own mineral rights, but haven’t really done anything to make sure your rights are still protected?
Mineral rights are valuable asset in our personal portfolios that can allow us to build our legacy and provide for future generations. However, sometimes what we once thought as part of our legacy, is in fact now the legacy of another. The Ohio Supreme Court recently decided two cases dealing with abandoned mineral rights and the procedure in which a surface landowner can reunify the mineral rights with the surface rights.
This two-part blog series will first analyze the Ohio Supreme Court’s opinion regarding the notice requirements under Ohio’s Dormant Mineral Act and the second part will analyze how the Dormant Mineral Act and Ohio's Marketable Title Act work together.
Gerrity v. Chervenak
The Ohio Supreme Court addressed and clarified the notice requirements under the Ohio Dormant Mineral Act, Ohio Revised Code §5301.56.
John Chervenak is a trustee of the Chervenak Family Trust (“Chervenak”) which owns approximately 108 acres in Guernsey County. The rights to the minerals under the Chervenak property were retained by T.D. Farwell, the individual who transferred the 108 acres to the Chervenak family.
In 2012, a title search for the Chervenak property identified Jane Richards, daughter of T.D. Farwell, as the owner of the mineral rights under the property. The records listed a Cleveland address for Ms. Richards. Unfortunately, Ms. Richards passed away in 1997. At the time of her passing, Ms. Richards was a resident of Florida and had one son, Timothy Gerrity.
In 2012, Chervenak sought to reunite the severed mineral interest with the surface estate interest pursuant to Ohio’s Dormant Mineral Act. Chervenak recorded with the Guernsey County Recorder an affidavit of abandonment of the severed mineral interest. The affidavit stated that Chervenak sent notice by certified mail to Ms. Richards at her last known address – the Cleveland address – but the notice had been returned and marked undeliverable. The affidavit also stated that Ms. Richards’ heirs, devisees, executors, administrators, next of kin, and assigns had been served notice of the abandonment by publication in a Guernsey County newspaper.
In 2017, Gerrity filed an action in the Guernsey County Court of Common Pleas seeking to quiet title to the mineral rights under the Chervenak property and for a declaratory judgment that Gerrity was the exclusive owner of the mineral rights. Gerrity claimed that he was the rightful owner to the mineral rights under the Chervenak property as a result of the probate of his mother’s estate in Florida. The Guernsey county records, however, revealed no evidence of Ms. Richard’s death or of Gerrity’s inheritance of the mineral interest.
Further, Gerrity claimed that Chervenak did not comply with Ohio’s Dormant Mineral Act in two ways: (1) Gerrity argued that under the Dormant Mineral Act Chervenak must identify all holders of the mineral interest and notify them by certified mail; and (2) Chervenak did not employ reasonable search methods to locate all holders of the mineral interest before serving notice by publication.
Both the Guernsey County Court of Common Pleas and the Fifth District Court of Appeals declared Chervenak the owner of the mineral rights under the Dormant Mineral Act. Gerrity then sought the Ohio Supreme Court’s review.
The Dormant Mineral Act
Under current Ohio law, unless a severed mineral interest is in coal or is coal related, held by a political body, or a savings event has occurred within the 20 preceding years, a mineral interest will be considered abandoned and vested in the owner of the surface lands, so long as the surface landowner complies with Ohio Revised Code §5301.56(E).
R.C. §5301.56(E) states:
Before a mineral interest becomes vested in the surface landowner, the landowner shall do both of the following:
- Serve notice by certified mail to each holder or each holder’s successors or assignees, at the last known address of each, of the landowner’s intent to declare the mineral interest abandoned. If service of the notice cannot be completed, then the landowner shall publish notice of the landowner’s intent to declare the mineral interest abandoned in a newspaper of general circulation in each county in which the land is located.
- 30 days after serving notice, the landowner must file an affidavit of abandonment in the County Recorder’s office in each county that the land is located in.
Gerrity claimed that under the Dormant Mineral Act, his mineral interest cannot be deemed abandoned and vested in Chervenak because under R.C. §5301.56(E)(1) Chervenak is required to identify Gerrity and serve him Chervenak’s notice of intent to declare the mineral rights abandoned. The Ohio Supreme Court disagreed. While the Ohio Supreme Court agreed that Gerrity was considered a “holder” under the Dormant Mineral Act, Chervenak was not required to identify every possible holder and serve them notice, especially holders that do not appear on public record.
The Ohio Supreme Court found that such a stringent requirement would undo the intent behind the Dormant Mineral Act. The Court analyzed the text of the Dormant Mineral Act and found that because the Ohio General Assembly allows for a surface landowner to publish its notice of intent to declare the mineral rights abandoned in §5301.56(E)(1), the surface landowner is not required to identify and serve notice to each and every potential mineral interest holder.
The Court reasoned that no surface owner, no matter how much effort put forth, will ever really be certain that he or she has identified every successor or assignee of every mineral interest owner who appears on public record. This is why, the Court articulated, that the General Assembly allows for publication of a landowner’s intent to declare the mineral rights abandoned, because there will be instances when a holder may be unidentifiable or unlocatable.
Second, Gerrity argued that Chervenak must employ reasonable search methods to identify and locate all mineral interest holders – which include not only searching public records but also internet searches and searches of genealogy databases before publishing the notice in a newspaper. The Court agreed that a surface landowner must use reasonable diligence to try and identify mineral interest holders but disagreed with Gerrity to the extent in which a surface owner must go in order to have exercised reasonable diligence. The Ohio Supreme Court found that determining whether or not a surface landowner has exercised reasonable diligence to identify mineral interest holders will have to be determined on a case-by-case basis.
In this case, the Ohio Supreme Court found that Chervenak did exercise due diligence in trying to locate all holders. The Court determined that by searching through Guernsey County records and Cuyahoga County records (the county in which Cleveland is located), Chervenak fulfilled their due diligence requirement. The Court declined to impose a requirement that every surface landowner search the internet, especially due to the inconsistent reliability of such searches, or consult with any subscription-based service to identify a potential mineral interest holder. The Court held that a search of county property records and county court records will usually establish a baseline of due diligence by the surface landowner.