By March 28, 2015 Read More →

Millions of dollars at stake for landowners, drillers in Supreme Court mineral rights case

, Reporter-Columbus Business First.
The Ohio Supreme Court will hear two cases next week on a law that has caused mass confusion among Ohio oil and gas landowners and drillers.

Ohio’s Dormant Mineral Act has been the focus of many lawsuits since production began a few years ago in the state’s Utica shale play as land and mineral-rights owners dispute ownership of valuable underground minerals.

Earlier this month, I wrote about the court approving another mineral-act related case, separate from the two being heard next week.

That case and next Wednesday’s could wind up redirecting tens of millions of exploration dollars to landowners from drillers.

Here’s a summary of the act and why it’s suddenly important in eastern Ohio, from my story earlier this month:

It’s been common since the 19th century for mineral rights underneath the ground to be split from surface rights. The division allows a landowner to make some extra money if an energy company comes knocking. But mineral rights can be fragmented on big parcels and mineral rights owners could be heirs who are oblivious to a long-deceased relative’s ownership. It can make determining ownership difficult.

Such confusion wasn’t a big deal until 2010, when horizontal drilling and fracking enabled drillers to reach minerals that previously were difficult to get to.

Enter dormant mineral rules, which are a way for states to handle such issues. They generally are in place either to locate and identify mineral owners who might otherwise be unaware of their enrichment from oil, gas or mineral development, or to reunite mineral rights with the surface rights if it’s determined the mineral rights are abandoned.

Ohio’s law, adopted in 1989, can be simply described as “use-it-or-lose-it.” If a certain action isn’t made on the minerals in a 20-year period, those rights float to the surface owner. In 2006, the state legislature amended the law demanding a surface owner tell a mineral owner of his intention to declare the mineral interest abandoned.

The amendment also clarified the 20-year rule. Now, a surface owner’s claim for mineral surrender starts 20 years before they declare the minerals abandoned. So, if a surface owner today tried to declare mineral rights abandoned, there couldn’t have been mineral activity on the land since 1994. But Utica exploration began in 2010, so that claim likely would lose.

Many surface owners argue the 1989 law applies, which means if they bought the land in 1980, for example, they owned the minerals as of 2000.

Drillers have signed contracts worth millions, so the decisions the court makes can wind up shifting loads of money.

The Supreme Court’s cases next week involve disputes in Harrison County; click here for specifics.

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Posted in: Mineral Rights News

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