In McLaughlin v. CNX Gas Company, Case No. 5:13CV1502 (December 13, 2013), the U.S. District Court for the Northern District of Ohio recently concluded that a release of an oil and gas lease qualified as a title transaction that preserved minerals from being abandoned under the 1989 Dormant Mineral Act (the “1989 DMA”). The facts were straightforward: In 1957, Consolidation acquired acreage in Carroll County that included the oil and gas rights (the “Subject Premises”). In 1979, Republic Steel Corporation leased the Subject Premises for a 50 year primary term (the "Lease"). Thereafter, through a 1985 deed from Consolidation to DuPont, the oil and gas rights were severed from the surface.
On July 6, 1992, Kelt Resources., Inc., the assignee to Republic Steel Corporation, executed a Partial Release of Oil and Gas Lease (the “1992 Release”), which released the Lease as to the Subject Premises. In September 2011, Consolidation conveyed the oil and gas rights to the Subject Premises to CNX. The surface owner alleged that pursuant to the 1989 DMA, the minerals lapsed into the surface on January 3, 2005, twenty years following the 1985 severance.
CNX argued that the 1992 Release qualified as a title transaction which preserved the minerals from abandonment. The plaintiff, relying on Back v. The Ohio Fuel Gas Co. (1953), argued that an oil and gas lease is a mere license which does not formally pass property, and as such, a lease and its release cannot qualify as title transactions. The Court found that an oil and gas lease was a title transaction reasoning that:
[A title] transaction means any transaction affecting title to any interest in land. It is difficult for the Court to conceive of a broader definition than the one chosen by Ohio law. By its plain language, the statute does not require a conveyance or transfer of real property in order to constitute a title transaction. Rather, the statute simply requires a transaction that affects title to any interest in the land.
The Court concluded that even if an oil and gas lease was something less than a grant of real property, it would still affect title to the oil and gas rights. “As the lease itself was a title transaction, there can be no dispute that the release of rights under that lease qualifies as a title transaction as well.”