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The Supreme Court of Ohio To Address Due Diligence Under ODMA

Posted in Energy

In July, we wrote about Gerrity v. Chervenak (5th Dist., Guernsey County), involving the level of due diligence that the Ohio Dormant Mineral Act requires surface owners to use when notifying mineral holders of abandonment proceedings. On October 15, 2019, the Supreme Court of Ohio agreed to hear Gerrity.  The Court will consider the following propositions of law:

Appellant’s Proposition of Law No. I:  R.C. 5301.56 Requires Strict Compliance and a Surface Owner Seeking to Capture a Severed Mineral Interest Must First Attempt Service by Certified Mail before Resorting to Publication.

Appellant’s Proposition of Law No. II: In Order to Satisfy Due Process and the Publication Provision of R.C. 5301.56(E), a Surface Owner Must Employ Reasonable Search Methods Conforming to Due Diligence Designed to Locate All Holder(s) of a Severed Mineral Interest.

In the same order, the Court declined to hear Paczewski v. Antero (7th Dist., Monroe County), which we previously covered here.

Court Reaffirms Ohio’s Marketable Title Act and Dormant Mineral Act are not in Conflict

Posted in Energy

The Seventh District Court of Appeals reaffirmed that claimants can use both Ohio’s Marketable Title Act (“MTA”) and Dormant Mineral Act (“DMA”) to extinguish and abandon, respectively, mineral interests. In West v. Bode, 2019-Ohio-4092, the appellant-surface owners attempted to extinguish a severed oil and gas royalty interest under the MTA. The holders of the royalty interest argued, in part, that the MTA did not extinguish the royalty interest because, as between the MTA and DMA, the DMA is the more specific statute with regard to terminating mineral interests and the DMA did not abandon the royalty interest. The Court rejected the royalty holders’ argument, as it had done in similar, prior cases. However, in its decision, the Court offered its strongest defense of the MTA to date. The Court explained that, pursuant to R.C. 1.51, it must construe conflicting, but interrelated, statutory provisions together so it can give effect to both. Only in the event that there is a conflict between the two provisions and the conflict is irreconcilable does the special provision prevail as an exception to the general provision, unless the general provision is the later adoption and the General Assembly manifested an intent that the general provision prevail. In this case, the Court did not find any irreconcilable conflict between the MTA and DMA. In fact, it noted the different look-back periods, savings events, and termination procedures under the two acts and found that each applies to a particular situation independent of the other. Thus, the MTA could apply to extinguish the severed royalty interest.

You can read the full decision here.

USGS: Big Increase in Undiscovered Marcellus and Utica Gas

Posted in Energy

The Marcellus and Utica Shales contain around 214 tcf of undiscovered, technically recoverable natural gas, according to a new U.S. Geological Survey (USGS) assessment.  “This is a significant increase from the previous USGS assessments of both formations. In 2011, the USGS estimated a mean of 84 trillion cubic feet of natural gas in the Marcellus Shale, and in 2012 the USGS estimated about 38 trillion cubic feet of natural gas in the Utica Shale,” the agency reports.

You can read more about the USGS’s findings here.

Update for Ohio’s Oil and Gas Land Professionals

Posted in Energy

The Division of Real Estate & Professional Licensing issued new guidance for Ohio’s Oil and Gas Land Professionals (“Land Professionals”).  First, the Division updated its Land Professional Disclosure Form. Ohio law requires Land Professionals to provide this disclosure form to landowners prior to or at its first meeting with landowners.  Second, the Division is requesting that all Land Professionals complete the disclosure form in its entirety. Specifically, Land Professionals should include the address and tax parcel number of the subject property. The Division noted that landowners may own multiple properties; hence, the need to identify the subject property. Additionally, the Division recommends that Land Professionals remind landowners to return the disclosure form to the Land Professional and not the Division.

Land Professionals can find the updated disclosure form here.


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.