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Marketable Title Act or Dormant Mineral Act – Or Both?

By November 7, 2019Oil and Gas

By: Emens Wolper Jacobs & Jasin Law Firm Co., LPA
Cody Smith, Esq.

The Ohio oil and gas case law continues to develop regarding the Ohio Marketable Title Act (“MTA”) and the Ohio Dormant Mineral Act (“DMA”). Recently, in West v. Bode, 2019-Ohio-4092 (7th Dist.), the Court of Appeals for the Seventh District of Ohio (“Seventh District”) held that the MTA and the DMA are not irreconcilable and may both be applied to terminate historic severances of oil and gas.

In 1902, George L. Parks transferred “1/2 part of his royalty of all the oil and gas in and under” his land in Monroe County, Ohio (the “Severance”) to C.J. Bode and George T. Nalley. Through successive conveyances, the surface and one half of the oil and gas in and under land was transferred to Wayne West and Rusty West (the “Wests”). In 2017, the Wests filed a lawsuit for declaratory judgment alleging that the Severance was extinguished under the MTA and remerged with the surface. Heirs to the holders of the Severance (the “Bodes”) filed a motion to intervene in the Wests’ suit by alleging, in part, that historic severances are not capable of termination by the MTA because a more-specific statute, the DMA, was subsequently enacted to apply with respect to oil and gas interests to the exclusion of the MTA.

The MTA was enacted in 1961 to provide any person who has an unbroken chain of title of record to any interest in land for 40 or more years from the person’s root of title with marketable record title to the interest in land claimed. The MTA “operates to extinguish” all interests prior to the person’s root of title. Conversely, the DMA, which was enacted in 1989 as part of the MTA, was enacted to provide a surface owner with the means to have a severed interest in oil and gas “deemed abandoned” after 20 years in which the severed interest was not subject any of the six savings events enumerated in the act.

Under Ohio law, “If a general provision conflicts with a special or local provision, they shall be construed, if possible, so that effect is given to both. If the conflict between the provisions is irreconcilable, the special or local provision prevails as an exception to the general provision.” See Ohio Revised Code § 1.51. Thus, one statute will apply to the exclusion of another only if the two statutes present an irreconcilable conflict with each other. Based upon the Supreme Court of Ohio’s interpretation of the MTA in Blackstone v. Moore and of the DMA in Corban v. Chesapeake Exploration, L.L.C., the Seventh District held that both statutes may be used to terminate severed oil and gas interests in Ohio. (“They are co-extensive alternatives whose applicability in a particular case depends on the time passed and the nature of the items existing in the pertinent records.”). For example, the MTA involves extinguishment of a severed oil and gas interest after 40 years resulting in a “null and void interest” which cannot be revived while the DMA provides an abandonment process that may be used after a 20-year period with no savings event while allowing the severed oil and gas holder to file a post-notice claim to preserve. Thus, the Seventh District held that each statute may be applied independently and harmoniously with the other.

Bode appears to be the first appellate-level decision in Ohio to squarely address whether the MTA can continue to be used to terminate severed oil and gas interests after the enactment of the DMA, a more specific statute. The decision is a significant win for surface owners in Ohio who own property encumbered by a severed oil and gas interest. Because the MTA may “operate[] to extinguish” a severed oil and gas interest even if the surface owner takes no action (i.e. is a “self-executing” statute), surface owners often prefer to attempt to use the MTA (opposed to the DMA) as it is often less difficult to successfully utilize to claim the oil and gas underlying their land.