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Ohio’s 5th Appellate District Addresses the Due Diligence Standard Under the Dormant Mineral Act

Posted in Energy

The Fifth Appellate District recently addressed whether an internet search to identify / locate the holders of severed mineral interests is always required under Ohio’s Dormant Mineral Act (“ODMA”). See, Gerrity v. Chervenak, 2019-Ohio-2687. In 1965, Jane Richards obtained title to certain severed mineral interests located in Guernsey County, Ohio (“Gerrity Minerals”). In 1997, Ms. Richards passed away in Florida and devised all of her real estate to Timothy Gerrity. Although Mr. Gerrity became the owner of the severed mineral interests, no ancillary estate was opened in Guernsey County. A certificate of transfer memorializing the devise was also not recorded.

The owner of the surface subject to the Gerrity Minerals subsequently abandoned the Gerrity Minerals under the ODMA. However, Mr. Gerrity claimed that the abandonment was invalid. Mr. Gerrity argued that the surface owner failed to exercise reasonable diligence to identify, locate, and serve him with a notice of abandonment. Under the ODMA, a surface owner must serve the holder of the mineral interest with a notice of abandonment by certified mail, return receipt requested. However, if service cannot be completed by certified mail, return receipt requested, the surface owner may serve the notice by publication.

In Gerrity, the surface owner attempted to serve Ms. Richards, the record title owner, with a notice of abandonment at her last known address in Cuyahoga County. However, certified mail service failed. Thus, the surface owner searched the county recorder’s office and probate court’s office in both Guernsey County and Cuyahoga County to identify an alternate address for Ms. Richards. However, the search did not reveal any other addresses for Ms. Richards or any information concerning her probate estate and devisees. As a consequence, the surface owner served its notice of abandonment by publication. 

The trial court found the surface owner to be the lawful owner of the Gerrity Minerals. Mr. Gerrity appealed and argued that reasonable diligence required the surface owner to search the internet for the address of Ms. Richards and for the identity of her devisees and their whereabouts. The court of appeals rejected this argument. The court cited the plain language of the ODMA, which only requires certified mail service at the holder’s last known address. In this particular case, the surface owner attempted certified mail service at Ms. Richards’ last known address. Further, when certified mail service failed, the surface owner conducted a search of two counties’ property and probate records. That search too failed to produce Ms. Richards’ probate estate or the identity of her devisees. The court found this searching to be reasonable under the circumstances because the ODMA does not contemplate a worldwide exhaustive search for a holder. 

USEPA Proposes to Redesignate Columbus Area in Attainment of 2015 Ozone NAAQS

Posted in Environment

On July 3, 2019, USEPA issued a proposed rule finding the Columbus, Ohio area is attaining the 2015 ozone National Ambient Air Quality Standard (NAAQS). The Columbus area is currently designated as nonattainment for the 2015 ozone NAAQS. However, in response to Ohio EPA’s request for redesignation to attainment supported by monitoring data for 2016-2018, USEPA determined that the Columbus area has met the requirements for redesignation under the Clean Air Act and is proposing to designate the area in attainment of the 2015 ozone NAAQS. The 2015 ozone NAAQS is attained in an area when the 3-year average of the annual fourth highest daily maximum 8-hour average concentration is equal to or less than 0.070 ppm at all of the ozone monitoring sites in the area.

In connection with the proposed attainment designation, USEPA is proposing to approve Ohio’s maintenance plan to keep the Columbus area in attainment of the 2015 ozone NAAQS through 2030. USEPA is also proposing to approve Ohio’s 2023 and 2030 VOC and NOx Motor Vehicle Emission Budgets for the Columbus area.

Comments on the proposed rule must be submitted by August 2, 2019.

Ohio EPA Issues Draft Vapor Intrusion Guidance

Posted in Energy, Environment

On June 24, 2019, Ohio EPA issued a draft Vapor Intrusion Sampling and Evaluation Guidance (Guidance). The draft Guidance, which is intended to update the 2010 version of Ohio EPA’s Vapor Intrusion Guidance, is applicable to sites subject to CERCLA, RCRA, and Ohio Voluntary Action (VAP) oversight.

Comments on the draft Guidance must be submitted to Ohio EPA by July 15, 2019.

Ohio Court of Appeals Addresses Interplay of Oil and Gas Lease and Statutory Unitization Order

Posted in Energy

On June 19, 2019, Ohio’s Seventh District Court of Appeals decided a case involving the interplay of a private oil and gas lease and Ohio’s statutory unitization law.  See Paczewski v. Antero Resources Corp., 18 MO 0016.  When signing an oil and gas lease, the original contracting parties struck a voluntary unitization clause.  Unable to secure to an amendment that would have given the producer/successor lessee the contractual authority to form the horizontal drilling unit, the producer applied to Ohio’s Division of Oil and Gas Resources Management for a statutory unitization order.  The successor lessors sued, claiming that the producer breached the lease by applying for the unitization order, and that the resulting order effected an unconstitutional taking of property rights.

The trial court dismissed the complaint and the court of appeals affirmed.  The appellate court held that striking the voluntary unitization clause from the lease rendered the lease silent.  And the “deletion does not prohibit the parties from engaging in the action that is the subject of the voided clause.”  The court also rejected the lessors’ takings claim, noting that consistent with Ohio law and decisions from other producing states, Ohio’s statutory unitization process protects correlative property rights in oil and gas—rather than taking such rights away—and serves as a proper exercise of the state’s police power.

Read the decision here.

[Disclosure: Vorys represented Antero Resources Corp. in this case].

Ohio H.B. 168 Creates Superfund-like Protections for Qualifying Purchasers of Brownfield Properties

Posted in Environment

The Ohio House of Representatives recently passed a bill (H.B. 168) that provides “bona fide prospective purchasers” (BFPPs) of brownfield properties with an affirmative defense against state lawsuits seeking to impose liability for the cleanup of such properties. To qualify for the liability protection as a BFPP under H.B. 168, a landowner must satisfy the criteria for a similar defense provided under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). Specifically, a BFPP must perform “all appropriate inquiries” (see 40 CFR § 312.20) prior to acquiring the property, and demonstrate “no affiliation” with a liable party. CERCLA also requires the BFPP to satisfy certain obligations after acquiring the property including:

• Compliance with land use restrictions and not impeding the effectiveness or integrity of institutional controls;
• Taking reasonable steps to stop continuing releases of hazardous substances and preventing threatened future releases;
• Providing cooperation, assistance, and access to persons conducting response action or natural resource restoration at the property;
• Complying with information requests and administrative subpoenas; and
• Providing legally required notices related to the discovery or release of hazardous substances at the property.

Ohio H.B. 168, which now goes to the Senate, would provide real estate developers and businesses security when considering investing in brownfield properties. The current version of H.B. 168 may be viewed here.

Ohio Court of Appeals Rejects Sanctions Against City of Munroe Falls

Posted in Energy

Four years after the Supreme Court of Ohio struck down the City of Munroe Falls’ attempt to regulate oil and gas development through zoning, a lower appeals court held that the City and its law director could not sanctioned for attempting to enforce ordinances that required Beck Energy to obtain a zoning certificate and/or variance prior to drilling wells within the city.  See State of Ohio, ex rel. Thomas W. Kostoff v. Beck Energy Corp (Apr. 3, 2019).   The sanctions motion came in response to the City’s suit for declaratory judgment in 2016 in order to determine whether all municipal zoning matters were preempted by state law—a question the City claimed was left open by the 2015 Supreme Court decision.

President Trump Issues Energy-Related Executive Orders

Posted in Energy

On April 10, 2019, President Trump issued two Executive Orders (EOs) to facilitate the construction of primarily energy-related infrastructure, including pipelines. EO 13867, Issuance of Permits with respect to Facilities and Land Transportation Crossings at International Borders, was issued to expedite permitting of facilities crossing the international border, such as oil and gas pipelines to and from Canada. EO 13868, Promoting Energy Infrastructure and Economic Growth, aims to promote efficient permitting processes, reduce regulatory uncertainties, and develop new energy infrastructure.

Additional details on the two EOs are available here.

Appellate Court Again Holds Ohio’s Marketable Title Act Applies to Fee Oil and Gas Interests

Posted in Energy

Ohio’s Seventh District Court of Appeals recently held once again that fee oil and gas interests are subject to possible extinguishment under Ohio’s Marketable Title Act (MTA). See Stalder v. Bucher, 2019-Ohio-936. In Stalder, the mineral owners advanced two arguments against extinguishment. First, they claimed that the MTA no longer applies to mineral interests. In their view, Ohio’s Dormant Mineral Act (DMA) supersedes the MTA because it is the more specific statute as to terminating mineral interests. The Court rejected this argument. According to the Court, oil and gas interests are subject to both the MTA and DMA. Second, they maintained that an exception to extinguishment applied. The Court agreed and thus preserved the oil and gas interest in the mineral owners’ favor.

 

 

 

U.S. EPA Finalizes New Owner Clean Air Act Audit Program for Oil and Natural Gas Sector

Posted in Energy, Environment

On March 29, 2019, U.S. EPA finalized a New Owner Clean Air Act (CAA) Audit Program for new owners of upstream oil and natural gas exploration and production facilities – i.e. well sites, tank batteries, and vapor control systems (the “Program”). The Program encourages new owners voluntarily to conduct a self-audit of newly acquired facilities, and identify, correct and self-disclose CAA violations to U.S. EPA in accordance with the Oil and Natural Gas Exploration and Production Facilities New Owner Audit Program Agreement (“Agreement”).

In order to participate in the Program, new owners must meet certain eligibility requirements and notify U.S. EPA within nine months following the acquisition of covered facilities regarding their intent to participation in the Program. Under the Agreement, U.S. EPA will not impose a civil penalty for CAA violations that are properly disclosed and corrected. The Agreement requires vapor control system-related violations to be corrected within 180-days of discovery, and other violations to be corrected within 60-days of discovery. It should be noted that U.S. EPA reserves the right to enter into an Agreement if the Agency or a states has already discovered CAA noncompliance at newly-acquired facilities.

Pennsylvania Court Rules on Unfair Trade Practices as to Natural Gas Leasing

Posted in Energy

On March 15th, the Pennsylvania Commonwealth Court issued its opinion in Anadarko Petro. Corp. v. Pennsylvania, No. 60 C.D. 2018 (Pa. Commw. Ct. March 15, 2019), holding that the Pennsylvania Attorney General could file action for unfair lease negotiations under Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (the “Unfair Trade Law”), but could not currently use the Unfair Trade Law to assert antitrust violations as to such alleged activity.  The Attorney General alleged that Anadarko and Chesapeake agreed to split portions of northeast Pennsylvania between them so that each would effectively have exclusive areas in which to seek oil and gas leases, without the fear that the other would tender competing offers to private landowners who were prospective lessors.   The Attorney General equated this practice as deceptive and actionable antitrust behavior pursuant to the Unfair Trade Law.  Anadarko and Chesapeake, however, argued that the Unfair Trade Law does not apply to the leasing of private mineral interests and, moreover, being private matters, the Attorney General was precluded from asserting his claims.

The court held that the Unfair Trade Law was enacted to benefit the public at large by eliminating practices as asserted by the Attorney General and, further, the Unfair Trade Law does not place restrictions on the Attorney General to bring such claims.  The court noted that a landowner’s relinquishment of title to oil and gas rights for terms of years was the functional equivalent of a sale, which is covered by the Unfair Trade Law.  As to the antitrust assertion, the court noted that the Unfair Trade Law permits the Attorney General and General Assembly to both define monopolistic behavior, but such definition must be completed through a statutory rule making process.  As of now, neither the Attorney General nor the General Assembly has done so.  Therefore, the court concluded that the Attorney General could not proceed with an antitrust claim because the asserted collusive actions have not been expressly defined as monopolistic behavior for purposes of the Unfair Trade Law.