How To Recover Abandoned Oil and Gas Rights
In Ohio, owners of real estate have the opportunity to reserve certain rights in real estate even though they are transferring the surface of the real estate to another. One common reservation is an oil and gas reservation. An oil and gas reservation, allows the transferring landowner to reserve all of the all oil and gas under the surface of the property. Therefore, the reserving party has the right to all royalties associated with the production of oil and gas from the property and additionally has the exclusive right to enter into a lease for the reserved minerals. Due to the increased leasing activity associated with the Utica Shale in Northeastern Ohio, many landowners have a renewed interest in the status of their oil and gas rights. Unfortunately, some landowners have learned that they do not own the oil and gas rights under their property due to an oil and gas reservation.
Commercial oil and gas production started in Ohio in 1860 and as a result there exists the potential for oil and gas reservations that are more than 150 years old. In some cases the reserving party has either passed away or simply forgotten about the reservation. However, the existence of the reservation in the chain of title for the property will prevent a surface owner from entering into an oil and gas lease. Landowners who have an oil and gas reservation in their chain of title may have an opportunity to reclaim the oil and gas under their property under Ohio’s Dormant Mineral Title Act located in Ohio Revised Code Section 5301.56.
In order for the Ohio Dormant Mineral Title Act to apply, the oil and gas reservation in question cannot have been the subject of a title transaction within the last 20 years. A mineral interest is the subject of a title transaction when the reserved mineral interest is transferred in a document filed in a recorder’s office. There are other exceptions to the application of the Act including without limitation, the oil and gas rights at issue cannot have been produced or used as an underground gas storage field in the immediately preceding twenty years or have been assigned a tax parcel number on the county auditor’s tax list.
In order to use the Ohio Dormant Mineral Title Act, the oil and gas attorney will conduct a title search to review the chain of title for the surface owner to first locate the oil and gas reservation, and then to determine whether or not the oil and gas reservation has been the subject of a title transaction within the immediately preceding twenty years. The oil and gas attorney performing the search will start with the surface owner’s deed and search backwards in time to locate any references in the chain of title to the oil and gas reservation. Assuming no such title transaction exists within the last twenty years, the oil and gas attorney will then run a chain of title forward from the deed reserving the oil and gas rights in order to determine if the reserving party has transferred the oil and gas rights. In the event the owner of the reserved oil and gas rights has passed away it may be necessary for the oil and gas attorney to inspect the Probate Court Records to determine the heirs of the reserving party.
Once the identity of the current owner of the reserved oil and gas rights is located, the surface owner is required to serve a Notice of Abandonment by certified mail on the owner of the reserved oil and gas rights and/or their successors and assigns. The Notice of Abandonment is simply a notification of the surface owner’s intent to deem the oil and gas rights abandoned. Sometimes it is very difficult to locate the owner of the reserved oil and gas rights and/or their successors and assigns, and as a result, the statute does provide the ability to serve the Notice of Abandonment by publication in a local newspaper.
Once a Notice of Abandonment is served, the surface owner is required to file an Affidavit of Abandonment in the Recorder’s office identifying the oil and gas reservation at issue and the surface owner’s intent to have the oil and gas reservation abandoned. The owner of the reserved oil and gas rights has a period of 60 days after receiving the Notice of Abandonment in which to file an affidavit declaring his/her intent to retain the oil and gas rights. If the owner of the reserved oil and gas rights timely files an affidavit, then the oil and gas rights remain in the owner’s name. If the owner of the reserved oil and gas rights does not timely file an affidavit, then the surface owner has the right to request the County Recorder to mark the oil and gas reservation: “This mineral interest abandoned pursuant to affidavit of abandonment recorded in Volume . . ., Page . . . .” Once the reservation is marked abandoned the oil and gas rights are deemed to have transferred to the surface owner of the property.
To avoid having one’s oil and gas reservation abandoned, the owner of reserved oil and gas rights should file an affidavit to preserve the oil and gas rights in the Recorder’s every twenty years.
Oil and gas companies are willing to enter into oil and gas leases with those parties who have acquired their oil and gas rights through Ohio’s Dormant Mineral Title Act. Therefore, surface owners with oil and gas reservations in their chain of title should consider consulting an oil and gas attorney to see if Ohio’s Dormant Mineral Title Act can help recover their oil and gas rights.
NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice.
If you have any questions about this article, feel free to contact Gregory W. Watts at 330.497.0700.