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Report of the Natural Resources Committee

To the Council of Delegates:

The Natural Resources Committee recommends to the Council of Delegates a proposal to amend Section 5301.56 of the Ohio Revised Code to clarify the procedure for unused mineral rights in real estate to "lapse" and vest in the owner of the surface estate.

Respectfully submitted,
M. Howard Petricoff,
Columbus
Chair

Committee Comments:

For well over 100 years, there has been active mineral extraction (including coal, oil, gas, and other hard minerals) throughout much of Ohio. This activity has led to the frequent severance of mineral estates from the surface. Over the years, severed mineral interests have become fractionalized and abandoned as individual owners die and corporate owners go out of business, resulting in difficulties with title examination and the inability to develop the minerals.

In an attempt to address this situation, in 1989, the Ohio State Bar Association supported enactment of Ohio’s "Mineral Lapse Statute" (ORC § 5301.56) which, in summary, provided that severed mineral rights will vest in the owner of the surface estate if there is no specified activity affecting the mineral rights for a span of 20 years. However, in the years since enactment of ORC § 5301.56, Courts and practitioners have experienced difficulty in interpreting this statute, which resulted in the Natural Resources Committee’s preparation of this amendment.

The major changes addressed in the amendment are the following:

1) the original statute provided for the lapse to occur if no specified activities took place within "the preceding twenty years." Questions arose as to whether that language meant 20 years preceding enactment of the statute, 20 years preceding commencement on an action to obtain the minerals or any 20-year period in the chain of title. To clarify this, the amendment provides that the effective period is the 20 years immediately preceding the filing of a notice;

2) a definition of "minerals" and "mineral interest" are included in the amendment; and

3) a specific procedure for a landowner to follow to obtain the mineral interest is included in the amendment.

The Natural Resources Committee supports this amendment as a necessary clarification of the existing statute.

§ 5301.56 Mineral interests in realty.

(A) As used in this section:

(1) "Holder" means the record holder of a mineral interest, and any person who derives his rights from, or has a common source with, the record holder and whose claim does not indicate, expressly or by clear implication, that it is adverse to the interest of the record holder.

(2) "Drilling or mining permit" means a permit issued under chapter 1509., 1513., or 1514. of the Revised Code to the holder to drill an oil or gas well or to mine other minerals.

(3) "Mineral Interest" means a fee interest in an estate of one or more minerals, however created and regardless of form, whether absolute or fractional, divided or undivided.

(4) "Minerals" includes gas, oil, coal, coalbed methane gas, other gaseous, liquid, and solid hydrocarbons, sand, gravel, clay, shale, gypsum, halite, limestone, dolomite, sandstone, other stone, metalliferous or nonmetalliferous ore, other material or substance of commercial value excavated in a solid state from natural deposits on or in the earth, and any other substance defined as a mineral by the laws of this State. As used in this section, "minerals" does not include the space that may be created by the withdrawal of minerals.

(B)(1) Any mineral interest held by any person, other than the owner of the surface of the lands subject to the interest, shall be deemed abandoned and vested in the owner of the surface estate after the procedures prescribed in division (E) of this section are followed, if none of the following applies:

(1a) The mineral interest is in coal, or in mining or other rights pertinent to or exercisable in connection with an interest in coal, as described in division (E) of section 5301.53 of the Revised Code; however, if a mineral interest includes both coal and other minerals, the non-coal mineral interests may be deemed abandoned and vested in the owner of the surface estate pursuant to this section;

(2b) The mineral interest is held by the United States, this state, or any political subdivision, body politic, or agency of the United States or this state, as described in division (G) of section 5301.53 of the Revised Code;

(3c) Within the preceding twenty years immediately preceding the date on which notice is served or published pursuant to division (E)(1) of this section, one or more of the following has occurred:

(ai) The mineral interest has been the subject of a title transaction that has been filed or recorded in the office of the county recorder of the county in which the lands are located;

(bii) There has been actual production or withdrawal of minerals by the holder from the lands, from lands covered by a lease to which the mineral interest is subject, from a mine where a portion thereof is located beneath the lands, or, in the case of oil or gas, from lands pooled, unitized, or included in unit operations, under sections 1509.26 to 1509.28 of the Revised Code, in which the mineral interest is participating, provided that the instrument or order creating or providing for the pooling or unitization of oil or gas interests has been filed or recorded in the office of the county recorder of the county in which the lands that are subject to the pooling or unitization are located;

(ciii) The mineral interest has been used in underground gas storage operations by the holder;

(div) A drilling or mining permit has been issued to the holder, provided that an affidavit that states the name of the permit holder, the permit number, the type of permit, and a legal description of the lands affected by the permit has been filed or recorded, in accordance with section 5301.252 [5301.25.2] of the Revised Code, in the office of the county recorder of the county in which the lands are located;

(ev) A claim to preserve the mineral interest has been filed in accordance with division

(C) of this section;

(fvi) In the case of a separated mineral interest, a separately listed tax parcel number has been created for the mineral interest in the county auditor’s tax list and the county treasurer’s duplicate tax list in the county in which the lands are located.

(2) A mineral interest shall not be deemed abandoned under division (B)(1) of this section because none of the circumstances described in that division apply, until three years from the effective date of this section.

(C)(1) A claim to preserve a mineral interest from being deemed abandoned under division (B)(1) of this section may be filed for record by its holder. Subject to division

(C)(3) of this section, the claim shall be filed and recorded in accordance with sections 317.18 to 317.201 [317.20.1] and 5301.52 of the Revised Code, and shall consist of a notice that does all of the following:

(a) States the nature of the mineral interest claimed and any recording information upon which the claim is based;

(b) Otherwise complies with section 5301.52 of the Revised Code;

(c) States that the holder does not intend to abandon, but instead to preserve, his the holder’s rights in the mineral interest.

(2) A claim that complies with division (C)(1) of this section or, if applicable, divisions (C)(1) and (3) of this section preserves the rights of all holders of a mineral interest in the same lands.

(3) Any holder of an interest for use in underground gas storage operations may preserve the holder’s interest, and those of any lessor of the interest, by a single claim, that defines the boundaries of the storage field or pool and its formations, without describing each separate interest claimed. The claim is prima-facie evidence of the use of each separate interest in underground gas storage operations.

(dD)(1) A mineral interest may be preserved indefinitely from being deemed abandoned under division (bB) of this section by the occurrence of any of the circumstances described in division (bB)(1)(c3) of this section, including, but not limited to, successive filings of claims to preserve mineral interests under division (cC) of this section.

(2) The filing of a claim to preserve a mineral interest under division (cC) of this section does not affect the right of a lessor of an oil or gas lease to obtain its forfeiture under Section 5301.332 [5301.33.2] of the Revised Code.

(E)(1) Before a mineral interest becomes vested in the owner of the surface estate under division (B) of this section, the owner of the surface estate must file for record with the recorder of the county or counties in which the real estate is located an affidavit of abandonment after serving notice by certified mail, return receipt requested, to the mineral interest holder or the holder’s record successors or assigns, at the last known address of the holder or the holder’s successors or assigns, or if service is not obtained by certified mail, by giving notice by publication at least once in a newspaper of general circulation in the county in which the land is located, of the owner of the surface estate’s intent to declare the mineral interest abandoned. If service is obtained by certified mail, and if the mineral interest is held by more than one party, separate service shall be made upon each of the mineral interest holders.

(2)The notice or publication provided for under division (E)(1) of this section, shall be addressed to the holder, their record successors and assigns, and shall contain the name of the holder; a description of the land owned by the owner of the surface estate, which description shall contain a reference by volume and page to the record of the deed or other recorded instrument under which the owner of the surface estate claims title or otherwise satisfy the requirements of division (A)(3) of section 5301.52 of the Revised Code; a description of the mineral interest, which description shall include the volume and page of the recorded instrument upon which the Mineral Interest is based; a statement that none of the events described in division (B)(3) of this section have occurred within the twenty years immediately preceding the date on which the notice is served or published; and shall state the intention of the owner of the surface estate to file for record an affidavit of abandonment with the county recorder after thirty days and not more than sixty days from the date that notice is served or published.

(3)After thirty days and not more than sixty days from the date that the notice described in division (E)(2) of this section is served or published, the owner of the surface estate, or the owner of the surface estate’s record successors or assigns, shall file with the county recorder an affidavit of abandonment setting forth that the owner of the surface estate, its successor or assign, is the owner of land subject to a severed mineral interest; the volume and page of the record upon which the mineral interest is based; that the mineral interest has been abandoned pursuant to division (B) of this section, reciting the facts constituting such abandonment; and that notice was served on the mineral interest holder or the holder’s successors or assigns, or publication made and the manner and time thereof.

(a)If the holder, or the holder’s successors or assigns, claims that the mineral interest has not been abandoned, the holder, or the holder’s successors or assigns, shall, within sixty days from the date that the notice described in division (E)(2) of this section is served or published, notify the person who filed the affidavit of abandonment, and file for record a claim that complies with division (C)(1) of this section or file for record an affidavit that identifies which of the events described in division (B)(3) of this section have occurred within the twenty years immediately preceding the date on which notice is served or published pursuant to division (E)(1) of this section.

(b)If within sixty days from the date that the notice described in division (E)(2) of this section is served or published, the holder, or the holder’s successors or assigns, does not file for record a claim that complies with division (C)(1) of this section or file for record an affidavit that identifies which of the events described in division (B)(3) of this section have occurred within the twenty years immediately preceding the date on which notice is served or published pursuant to division (E)(1) of this section, then at any time after the sixtieth day after the notice described in division (E)(2) of this section is served or published the owner of the surface estate shall cause the county recorder to note upon the margin of the record upon which the severed mineral interest is based the following: "This mineral interest abandoned pursuant to affidavit of abandonment recorded in vol. . . ., page. . . ." Thereafter the mineral interest will vest in the owner of the surface estate, its successors or assigns, and the record of the mineral interest shall not be notice to the public of the existence of the mineral interest or of any rights thereunder and the record shall not be received in evidence in any court of the state on behalf of the holder or the holder’s successors or assigns against the owner of the surface estate, its successors or assigns. The abandonment and vestment provided for under this section shall only be effective as to the property of the owner of the surface estate filing the affidavit.

(4)For recording the affidavit of abandonment and for noting such cancellation upon the margin of the record, the recorder shall charge the fees provided by section 317.32 of the Revised Code.

(5)In a county in which the county recorder has determined to use the microfilm process as provided by section 9.01 of the Revised Code, the recorder may, where applicable, require that the notation "This mineral interest abandoned pursuant to affidavit of abandonment recorded in vol. . . ., page. . . ." be entered on the affidavit, and that the affidavit be recorded in the record provided for by section 317.08 of the Revised Code. Thereafter, the mineral interest will vest in the owner of the surface estate, its successors or assigns, and the record of the mineral interest is not notice to the public of the existence of the mineral interest or of any rights thereunder and the record shall not be received in evidence in any court of the state on behalf of the holder or the holder’s successors or assigns against the owner of the surface estate, its successors or assigns. The abandonment and vestment provided for under this section shall only be effective as to the property of the owner of the surface estate filing the affidavit. The recorder shall charge the fee for a recording under this section as provided by section 317.32 of the Revised Code for the recording of deeds.

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