Presentation on theme: "A Comparison of Mineral Law in Ohio, Pennsylvania, and North Dakota"— Presentation transcript:
1A Comparison of Mineral Law in Ohio, Pennsylvania, and North Dakota Sizing Up Shale StatesA Comparison of Mineral Law in Ohio, Pennsylvania, and North DakotaZach EcclestonGeorge ShiresChristopher Houston
3State Activity Ohio Pennsylvania North Dakota 365 wells drilled in 2011Added employment predicted up to 200,000 jobsPennsylvania2,931 wells drilled in 2011Added employment predicted at 180,000 jobsNorth Dakota2,017 wells drilled in 2011Lowest unemployment rate in nation at 3.3%
4Defining “Minerals” Ohio Oil and Gas statutorily defined “Other minerals” subject to interpretationCase law looks to intent–easement languageDetlor v. HollandDouble check w/ Kit on what he wants this to say
5Defining “Minerals” Ohio – Detlor v. Holland “Do hereby grant, bargain, sell, and convey all the coal of every variety, and all the iron ore, fire clay, and other valuable minerals . . .; together with the right of mining and removing such coal, ore, or other minerals; and shall also have the right to the use of so much of the surface of the land as may be necessary for pits, shafts, platforms, drains, railroads, switches, side tracks, etc., to facilitate the mining and removal of such coal, ore, or other minerals, and no more.”
6Defining “Minerals” Ohio Wiseman v. Cambria Products Co., finding “the words ‘other minerals’ and ‘other valuable minerals’ would include petroleum oil.”Jividen v. New Pittsburgh Coal Co., finding that a “surface only” deed reserving coal and “all other minerals,” but reciting rights specific to mining, such as sinking air shafts and extending switches, reserved oil and gas as well.
7Defining “Minerals” Pennsylvania Dunham Rule Generally does not include oil & gasPending case– Butler v. Powers EstateMarcellus shale gasUsing similar case pertaining to coalbed methaneDouble check changes with George
8Defining “Minerals” North Dakota Defined by statute – Oil and Gas Always MineralsDifferent for Conveyance/ Reservation and for LeaseQuestion of which statute applies based on date of instrument
9Defining Minerals North Dakota 1983 – Present Conveyances/reservation – included all minerals except those expressly excludedLeases – only minerals listed by name – regardless of use of the term “other minerals”
10Prior Law varies based on date, instrument, and substance Prior to 1955 a conveyance/reservation included coala conveyance excluded coala reservation included coalSee NDMTS 2.04
11Regulatory Bodies Ohio Pennsylvania North Dakota Highly-centralized regulatory schemeDivision of Oil and Gas Resources ManagementPennsylvaniaDepartment of Environmental ProtectionPossible pre-emption on many levels; multiple rules to checkNorth DakotaIndustrial CommissionDetailed regulatory scheme
12Hydraulic Fracturing Regulations OhioSB 315– expanded regulation of frackingChemical disclosure, water testingPennsylvaniaOil and Gas Act reformed by Act 13Stricter requirements on fracked wells than on othersNorth DakotaSection of Administrative CodeDisclosure, minimum strength & testing standards
13Records and Recording Ohio Pennsylvania North Dakota Title: “Notice” for Deeds and land contracts“Race” for Leases and MortgagesBut some practitioners interpret statute as “Race- Notice”Pennsylvania“Race-Notice”Uniform Parcel IdentifierNorth DakotaGrantor/ Grantee and Tract Indices are required by statuteBut see Hanson v. Zoller(Hanson v Zoller, NDSC 1971) Since the tract index maintained by the register of deeds is the only practical index through which instruments on record can be located, instrument recorded but not indexed under the correct tract description in the tract index does not constitute substantial compliance with the recording statutes. Prospective purchaser or encumbrancer can only be charged with notice of instruments that are indexed in the tract index, and so far as constructive notice is concerned, is not obliged to consult the grantor-grantee indexes or the reception book beyond the extent of determining whether there are any unrecorded instruments in the hands of the register of deeds that may not yet have been recorded and indexed.
14Dormant Mineral Act – Ohio Title:Dormant Mineral Act – OhioEnacted 1989; Amended 2006Does not apply to coal or government-owned mineralsMinerals reunite with surface after 20 years, absent a “Savings Event”
15Dormant Mineral Act – Ohio Title:Dormant Mineral Act – Ohio“Savings Events” defined as…“Subject” of recorded “Title Transaction”Actual production by owner or lesseeUse in underground gas storagePermit issued to the interest holderInterest holder has filed claim to preserveCreation of a separate tax number for the minerals
16Dormant Mineral Act – Ohio Title:Dormant Mineral Act – Ohio1989 ActSelf-executingAmbiguity in 20-year periodLikely rolling basisPreserved “indefinitely” by filing “successive” claimsBut one court has interpreted 20-year period as fixedExample: A conveys to B in 1965; B does not record until 1974
17Dormant Mineral Act – Ohio Title:Dormant Mineral Act – Ohio2006 AmendmentProcedural changeNotice and time to claimNew ambiguityIf no Savings Event occurred 20 years prior to notice, may the mineral owner still file a Claim to Preserve?
18Dormant Mineral Act - Pennsylvania Title:Dormant Mineral Act - PennsylvaniaNot a true dormant mineral act2006 Dormant Oil and Gas ActStatutory provision for leasing unlocatable mineral owner through trust“It is not the purpose of this act to vest the surface owner with title to oil and gas interests that have been severed from the surface estate.”
19Dormant Mineral Act - Pennsylvania Title:Dormant Mineral Act - PennsylvaniaNot a true dormant mineral act–yet.Recent HB 1707 would expandAllow surface owner to begin petitionAdds possibility of selling the mineralsWould result in a modified dormant mineral actNot self-executingSale of interest—not necessarily merger with surface estateTalk to George about this slide
20Dormant Mineral Act – North Dakota Title:Dormant Mineral Act – North DakotaND also has a Marketable Record Title ActTermination of Mineral Interest ActEffective 1985; amended 2009Applies to coalDoes not apply to governmental body or agencyCreates a mechanism to reunite the minerals with surface after 20-year with no “use”
21Dormant Mineral Act – North Dakota Title:Dormant Mineral Act – North DakotaReunification of minerals:20 year period of non-useProduction, storage, subject to recorded instrument, pooled, or a statement of claim is filedSurface Owner gives noticeBy three weeks of publication and notice to the address of record owner – if no address use reasonable inquiry to determine addressCopy of notice and service recorded with county Clerk
22Dormant Mineral Act – North Dakota Title:Dormant Mineral Act – North DakotaReunification of minerals:4. Perfection of title – NDCCA) Follow steps 1-3 above, then institute action in district court for quiet titleB) Court is required to issue findings of fact, conclusions of law, and enter judgment in favor of surface ownerC) Judgment is conclusive and lessee may rely on the judgment – lease remains in effect and lessee is not liable even if judgment is later vacated
23Dormant Mineral Act – North Dakota Preservation of mineral interest:During 20 year period “use” minerals“Second Chance” - Within 60 days after first publication of notice:File instrument demonstrating “use”File a statement of Claim
24From Governmental Bodies Leasing:From Governmental BodiesOhioAvailability based on land classificationNew Oil & Gas Leasing Division for state landPennsylvaniaDifficult; multiple governmental levels with differing requirements and proceduresNorth DakotaImportant because of state mineral reservationsIf advertising and bidding scheme not followed, may void leaseDifferent reservations based on years--??
25From Governmental Bodies Leasing:From Governmental BodiesNorth DakotaReservation to state by yearPrior to 1939: no mineral reservations1939 – 1941: reservation of 5% minerals1941 – 1960: reservation of 50% minerals of all landsEven if deed did not expressly reserve minerals: reservation of 100% of minerals in grant lands and 50% of minerals in non-grant lands1973 – present: all minerals reserved in all state land conveyancesDifferent reservations based on years--??
26Roads Ohio Pennsylvania North Dakota Leasing: Municipal streets: presumption of fee in cityFee may be “qualified”County roads and highways: presumed fee in abutting landowner to center of roadPennsylvaniaGenerally strip-and-goreNorth DakotaCan be altered by statute allowing particular eminent domain act
27Waters & Riparian Rights Leasing:Waters & Riparian RightsOhioAbutting owners own to center regardless of navigabilityPennsylvaniaVaries based on navigabilityChanges in watercourse specifically addressedNorth DakotaCurrent Litigation
28Concurrent Owners Ohio Pennsylvania North Dakota Leasing:Concurrent OwnersOhioWhether all cotenants are needed is unsettledPennsylvaniaLeasing from less than all may be trespassRemedy is partitionNorth DakotaDo not have to lease from all co-tenantsAccount for share of net profitsLet Zach know WV is by case law and not by statute (developed from statute though)
29Joint Tenancy Ohio Pennsylvania North Dakota Leasing:Joint TenancyOhioNot Recognized–statutory Survivorship Tenancy after 1985No common law Four UnitiesPennsylvaniaRecognized– Survivorship requires clear intentCommon law Four Unities recognizedTenancy by the EntiretiesNorth DakotaRecognized– Defined by StatuteNo common law Four Unities; straw man not needed
30Successive Owners Each require both Life Tenant & Remainderman Ohio Leasing:Successive OwnersEach require both Life Tenant & RemaindermanOhioMethod of payment undeterminedRecognizes Open Mine DoctrinePennsylvaniaPayment method clearNorth DakotaOpen Mine Doctrine not yet adopted
31Pooling & Compulsory Pooling Ohio:Forced pooling availableMandatory Unitization also availablePennsylvaniaOnly for formations below Onondaga–includes Utica shaleBut no Marcellus forced poolingNorth DakotaStatutory risk-penaltiesHow to pronounce Onondaga
32Effects of Foreclosure Maintaining the Lease:Effects of ForeclosurePennsylvania & North Dakota are Lien-TheoryForeclosure wipes out Lessee’s interestIf Mortgage/ lien was filed prior to Lease filingGet Lease subordinatedOhio2010 StatuteOil & Gas Lease will not be extinguished by foreclosure and has priority over all prior recorded encumbrancesBasically a massive subordination
33Effects of Foreclosure - Ohio Maintaining the Lease:Effects of Foreclosure - OhioOhio
34Competing Development Issues during Production:Competing DevelopmentOhioWell subject to approval if in “coal bearing township”Spacing provisionsPennsylvaniaCoal Operator right to objectFuture wind conflict possibleNorth DakotaPolicy to develop, but statutory guidance scarcePossible Kerbaugh application