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Ohio Court Provides Further Guidance on Who is a “Holder” Under the ODMA

Posted in Energy

Following up on its recent decision in M&H P’Ship v. Hines, Ohio’s Seventh District Court of Appeals has offered further guidance on the term “holder” as used in the Ohio Dormant Mineral Act (ODMA)—finding that heirs of the record holder of a dormant mineral interest are “holders” for purposes of the statute, even if they did not acquire their interest through a chain of title of conveyances or probate estates that specifically transmitted the dormant mineral interest. See Warner v. Palmer (March 22, 2017).

In Palmer, the surface owner argued that heirs of the now-deceased record holders of the dormant mineral interest did not have standing to challenge its notice of abandonment. Under the ODMA, only the “holder or a holder’s successors or assignees” are permitted to record a claim to preserve dormant mineral interests in response to a notice of abandonment. And the word “heir” is omitted from the statute, the surface owner noted. Moreover, in this particular case, the record showed that the dormant mineral interest was omitted from the record holders’ estate inventories. According to the surface owner, these facts established that the heirs were neither the record holders of the dormant mineral interest nor “successors or assignees” of the record holders.

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White House Approves Keystone XL Pipeline

Posted in Energy, Environment

The White House issued a permit today approving Keystone XL, “bringing the mammoth oil pipeline a step closer to fruition more than a year after former President Barack Obama blocked its construction,” writes The Wall Street Journal. The paper notes that the pipeline, which will carry up to 830,000 barrels of oil a day once completed, “still faces state-level legal challenges in Nebraska and South Dakota that could cause further delays.” Click here to read the full story (subscription required).

Ohio Court Construes the Term “Holder” under the 2006 DMA to include the Heirs and Devisees of the Record Owner

Posted in Energy

Ohio’s Seventh District Court of Appeals recently interpreted the term “holder” under the 2006 version of the Ohio Dormant Mineral Act (R.C. § 5301.56) (“2006 DMA”) and held that the term should be construed broadly to include the heirs and devisees of the record owner of the severed mineral interest that succeed to the severed mineral interest by intestacy or devise.

In M&H P’ship v. Hines, 2017-Ohio-923, the plaintiff surface owners published a notice of abandonment to have the subject mineral interest deemed abandoned under the 2006 DMA. Within the statutorily prescribed time period, the defendant mineral owners, who are the grandchildren of the now-deceased record owners (“Original Owners”), recorded a claim to preserve in response. The trial court found that the defendant mineral owners sufficiently preserved their mineral rights and the plaintiff surface owners appealed.

In one of their assignments of error, the plaintiff surface owners argued that the trial court erred in holding that the defendant mineral owners proved that they are the successors in interest to the Original Owners. As such, the defendant mineral owners did not have standing to challenge the plaintiff surface owners’ notice of abandonment by filing a claim to preserve. The Court rejected the plaintiff surface owners’ argument and ultimately affirmed the trial court’s decision. In doing so, the Court found that the “broad definition of holder” includes the defendant mineral owners.

The term “holder” means “the record holder of a mineral interest, and any person who derives the person’s rights from, or has a common source with, the record holder and whose claim does not indicate, expressly or by clear implication, that it is adverse to the interest of the record holder.” R.C. § 5301.56(A)(1). In this case, the defendant mineral owners derived their mineral rights from, or had a common source with, the Original Owners because they succeeded to the Original Owner’s interest by intestacy and devise. As such, the defendant mineral owners were “holders” of the subject mineral interest and had standing to challenge the plaintiff surface owners’ notice of abandonment.

Click here to read the full opinion.

Ohio Court Rules Landmen Need to be Licensed Real Estate Brokers to Receive Compensation

Posted in Energy

Ohio’s Seventh District Court of Appeals recently held that landmen are subject to the requirements of R.C. Chapter 4735 requiring real estate broker’s licenses in order to be entitled to compensation for brokering deals with landowners on behalf of oil and gas companies.

In Dundics v. Eric Petroleum Corp., plaintiff landmen alleged that they were not compensated by the defendant oil and gas company for their work in assisting the company with negotiating and obtaining oil and gas leases in Ohio.  The company moved to dismiss the lawsuit, asserting that the landmen were not licensed Ohio real estate brokers, and therefore, were barred from recovering under R.C. 4735.21, which precludes the recovery of compensation for “real estate. . . brokerage transaction[s]” unless the person brokering the transactions is a licensed estate broker.

Agreeing with the lower court’s ruling, the appellate court held that “real estate,” for purposes of the statute, was broadly defined to include “leaseholds as well as any and every interest or estate in land” ­ ­– which, under Ohio law, includes oil and gas rights.  And so, to be entitled to compensation for brokering in oil and gas rights, the landmen needed to be licensed.  The court rejected the landmens’ argument that R.C. 4735.21 was inapplicable because oil and gas was different from traditional real property, noting that “the fact that oil and gas rights are different does not excuse third parties who ask the courts to enforce their engagement with either owners of surface real estate or those who wish to extract subsurface oil and gas from the real estate broker’s license requirement at issue here.”   Also, based on its conclusion that the statute was unambiguous, the Court declined to consider “legislative intent, legislative history, public policy, [or] the consequences of [its] interpretation.”

Click here to read the full opinion.

Bohlen v. Anadarko

Posted in Energy

Earlier this week, the Supreme Court of Ohio heard oral arguments in Bohlen v. Anadarko.  The Bohlens entered into a lease with Alliance in 2006 for a one year primary term.  Paragraph 3 of the lease contained a delay rental provision:

This lease, however, shall become null and void and all rights of either party hereunder shall cease and terminate unless the Lessee shall thereafter pay a delay rental of $5,500.00 Dollars each year, payments to be made yearly, but in no event not less than yearly, for the privilege of deferring the commencement of a well.

In an addendum, the parties also provided:

In the event that during any calendar year the total royalties paid from production of the leased premises, shall be less than the annual rental of $5,500.00, Lessee shall tender to Lessor such sum that will equal to the $5,500.00 annual rental payment.

Within seven months of signing the lease, Alliance drilled two wells, one of which was a producer.  Between 2008 and 2013, Alliance paid royalties to the Bohlens, but the royalty amounts fell below the $5,500 per year required by the lease.

The Bohlens filed suit, making a twofold argument that the lease had terminated.  First, they claimed that the lease had lapsed due to Alliance’s failure to pay the entire $5,500 minimum annual royalty payment, which the Bohlens characterized as a delay rental required by Paragraph 3 of the lease (and therefore, subject to the termination provision in the delay rental clause).  Next, the Bohlens claimed that regardless of whether the lease had terminated for failure to pay the required payments, the lease allowed Alliance to make delay rental payments during the secondary term, and therefore was a perpetual lease that was void ab initio as offensive to Ohio public policy.

When it heard the case, the Fourth District Court of Appeals didn’t find either argument persuasive, ruling that the minimum royalty provision in the addendum was not incorporated in the delay rental clause in paragraph 3 of the lease, and therefore, that the royalty shortfall did not trigger the automatic termination of the lease.  The appellate court also ruled that the lease did not allow Alliance to make delay rentals during the secondary term, and therefore, was not a perpetual lease.

During Wednesday’s oral arguments, the justices also appeared skeptical of the Bohlens’ claims.  You can watch the arguments here.

Sixth Circuit Holds WOTUS Case Pending Supreme Court Review

Posted in Energy, Environment

On January 25, 2017, the Sixth Circuit granted a motion to hold in abeyance litigation regarding U.S. EPA’s rule defining “waters of the United States” (WOTUS) pending the Supreme Court’s review of whether the Sixth Circuit has jurisdiction to hear the case. The Supreme Court granted certiorari to settle the jurisdictional issue on January 13, 2017.

The Nanoscale Rule

Posted in Environment

On May 12, 2017, EPA’s first rule regulating chemical substances produced at the nanoscale will take effect as part of the Toxic Substances Control Act (“TSCA”).  The Nanoscale Rule, part of TSCA Section 8(a), will require all current and future manufacturers and processors to report to EPA when such nanoscale chemical substances are produced in new forms not previously reported to the EPA.  Anyone who has produced a new form of a nanoscale chemical substance at any time during the three years prior to May 12, 2017, will have to report to EPA before May 12, 2018 (a one time only report will be required for anyone intending to process a new form after the effective date of the rule – this report will be required 135 days before processing).  TSCA recently underwent a major revision through the Frank R. Lautenberg Chemical Safety for the 21st Century Act (“Act”).  The Act provides for civil penalties of up to $37,500 per violation, per day, under TSCA.  Accordingly, if you are a manufacturer or processor of nanoscale chemical substances, you need to be focused on compliance with these new pending obligations and tuned-in to any new EPA guidance on the Nanoscale Rule before EPA enforcement efforts begin.

U.S. Supreme Court Denies Certiorari in Ohio Dormant Mineral Act Case

Posted in Energy

Today, in its Order List, the Supreme Court of the United States denied certiorari in Jon D. Walker, Jr. v. Patricia J. Shondrick-Nau, Executrix of the Estate of John R. Noon and Successor Trustee of the John R. Noon Trust. Walker involved interpretation and application of the Ohio Dormant Mineral Act (R.C. § 5301.56) (the “DMA“), and was most recently decided by the Supreme Court of Ohio.

The Supreme Court of Ohio Decision

In 2012, Walker filed a complaint to have a dormant mineral interest declared abandoned pursuant to the 1989 version of the DMA (the “1989 DMA“). Prior to the filing of his complaint, certain lower courts in Ohio had held that the 1989 DMA automatically abandoned dormant mineral interests when the record revealed that none of the six “savings events” occurred from March 22, 1969 to March 22, 1992. In concluding that the dormant mineral interest was not abandoned, the Supreme Court of Ohio held that the 1989 DMA was not self-executing; instead, the 1989 DMA created only a conclusive presumption as to abandonment. The Court further held that the abandonment procedure set forth in the 2006 version of the DMA (the “2006 DMA“) applies to all claims to abandon dormant mineral interests asserted after June 30, 2006. The Supreme Court of Ohio’s decision in Corban v. Chesapeake Exploration, L.L.C., et al., was the basis for these holdings. Although Walker attempted to abandon the dormant mineral interest by complying with the abandonment procedure set forth in the 2006 DMA, the holder of the dormant mineral interest filed a claim to preserve in response. As such, the DMA did not operate to abandon the dormant mineral interest.

Appeal to the Supreme Court of the United States

Walker subsequently filed a petition for a writ of certiorari with the Supreme Court of the United States. In his petition, Walker argued that the dormant mineral interest was abandoned and had vested in him on March 22, 1992, pursuant to the 1989 DMA. Walker still contended that the 1989 DMA was self-executing citing Justice Pfeifer’s dissenting opinion in Corban and the Supreme Court of the United States’ decision in Texaco v. Short. Texaco involved interpretation of Indiana’s Dormant Mineral Interests Act, which Act was, in fact, self-executing in nature and held to pass constitutional muster. Moreover, Walker advanced the proposition that the 2006 DMA is to be applied prospectively only, and application of the 2006 DMA to an already abandoned and vested dormant mineral interest was a violation of due process. Today, the Court denied certiorari and Walker (and Corban) remains the law in Ohio.

USFWS Lists Rusty Patched Bumble Bee as Endangered

Posted in Energy, Environment

On January 11, 2017, the U.S. Fish and Wildlife Service (“Service”) published a final rule listing the Rusty Patched Bumble Bee as an endangered species under the Endangered Species Act of the 1973 (“ESA”). Pursuant to Section 4 of the ESA, the Service is required to make listing decisions – relying on the best scientific and commercial data available – based on (a) the present or threatened destruction, modification or curtailment of habitat, (b) species overutilization, (c) disease or predation, (d) inadequate existing regulatory mechanisms, or (e) other natural or manmade factors affecting the species continued existence. The Service’s decision to list the bee as endangered is based on a study of the species’ overall viability in which the Service found that the resiliency, representation, and redundancy of the species have all declined since the late 1990s and are projected to decline over the next several decades. The study showed an 88 percent decline in bee populations along with a decrease in range and distribution since 2000. The Service sites several past and ongoing stressors as likely causes of the decline in the bee’s population, including disease, pesticides, and habitat loss.

The final rule becomes effective on February 10, 2017.

U.S. E.P.A. Agrees to Review Drilling Waste Regulations to Settle Suit

Posted in Energy, Environment

In May of 2016, environmental groups sued the U.S. E.P.A., alleging that the agency failed to review and revise its regulations and state waste management plan guidelines regarding waste materials from oil and gas production as required by the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq.  On December 28, 2016, the court approved a consent decree between the parties that requires the agency to review its existing regulations and guidelines, and by March 15, 2019, propose revisions to these items or determine that such revisions are unnecessary.

Read the consent decree here.