1. A Comparison of Mineral Law in Ohio, Pennsylvania, and North Dakota
Sizing Up Shale States
A Comparison of Mineral Law in Ohio, Pennsylvania, and North Dakota
Zach Eccleston
George Shires
Christopher Houston

2. Shale Plays in the United States

3. State Activity Ohio Pennsylvania North Dakota
365 wells drilled in 2011
Added employment predicted up to 200,000 jobs
Pennsylvania
2,931 wells drilled in 2011
Added employment predicted at 180,000 jobs
North Dakota
2,017 wells drilled in 2011
Lowest unemployment rate in nation at 3.3%

4. Defining “Minerals” Ohio Oil and Gas statutorily defined
“Other minerals” subject to interpretation
Case law looks to intent–easement language
Detlor v. Holland
Double check w/ Kit on what he wants this to say

5. Defining “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.”

6. Defining “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.

7. Defining “Minerals” Pennsylvania Dunham Rule
Generally does not include oil & gas
Pending case– Butler v. Powers Estate
Marcellus shale gas
Using similar case pertaining to coalbed methane
Double check changes with George

8. Defining “Minerals” North Dakota Defined by statute –
Oil and Gas Always Minerals
Different for Conveyance/ Reservation and for Lease
Question of which statute applies based on date of instrument

9. Defining Minerals North Dakota 1983 – Present
Conveyances/reservation – included all minerals except those expressly excluded
Leases – only minerals listed by name – regardless of use of the term “other minerals”

10. Prior Law varies based on date, instrument, and substance
Prior to 1955 a conveyance/reservation included coal
a conveyance excluded coal
a reservation included coal
See NDMTS 2.04

11. Regulatory Bodies Ohio Pennsylvania North Dakota
Highly-centralized regulatory scheme
Division of Oil and Gas Resources Management
Pennsylvania
Department of Environmental Protection
Possible pre-emption on many levels; multiple rules to check
North Dakota
Industrial Commission
Detailed regulatory scheme

12. Hydraulic Fracturing Regulations
Ohio
SB 315– expanded regulation of fracking
Chemical disclosure, water testing
Pennsylvania
Oil and Gas Act reformed by Act 13
Stricter requirements on fracked wells than on others
North Dakota
Section of Administrative Code
Disclosure, minimum strength & testing standards

13. Records and Recording Ohio Pennsylvania North Dakota Title:
“Notice” for Deeds and land contracts
“Race” for Leases and Mortgages
But some practitioners interpret statute as “Race- Notice”
Pennsylvania
“Race-Notice”
Uniform Parcel Identifier
North Dakota
Grantor/ Grantee and Tract Indices are required by statute
But 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.

14. Dormant Mineral Act – Ohio
Title:
Dormant Mineral Act – Ohio
Enacted 1989; Amended 2006
Does not apply to coal or government-owned minerals
Minerals reunite with surface after 20 years, absent a “Savings Event”

15. Dormant Mineral Act – Ohio
Title:
Dormant Mineral Act – Ohio
“Savings Events” defined as…
“Subject” of recorded “Title Transaction”
Actual production by owner or lessee
Use in underground gas storage
Permit issued to the interest holder
Interest holder has filed claim to preserve
Creation of a separate tax number for the minerals

16. Dormant Mineral Act – Ohio
Title:
Dormant Mineral Act – Ohio
1989 Act
Self-executing
Ambiguity in 20-year period
Likely rolling basis
Preserved “indefinitely” by filing “successive” claims
But one court has interpreted 20-year period as fixed
Example: A conveys to B in 1965; B does not record until 1974

17. Dormant Mineral Act – Ohio
Title:
Dormant Mineral Act – Ohio
2006 Amendment
Procedural change
Notice and time to claim
New ambiguity
If no Savings Event occurred 20 years prior to notice, may the mineral owner still file a Claim to Preserve?

18. Dormant Mineral Act - Pennsylvania
Title:
Dormant Mineral Act - Pennsylvania
Not a true dormant mineral act
2006 Dormant Oil and Gas Act
Statutory 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.”

19. Dormant Mineral Act - Pennsylvania
Title:
Dormant Mineral Act - Pennsylvania
Not a true dormant mineral act–yet.
Recent HB 1707 would expand
Allow surface owner to begin petition
Adds possibility of selling the minerals
Would result in a modified dormant mineral act
Not self-executing
Sale of interest—not necessarily merger with surface estate
Talk to George about this slide

20. Dormant Mineral Act – North Dakota
Title:
Dormant Mineral Act – North Dakota
ND also has a Marketable Record Title Act
Termination of Mineral Interest Act
Effective 1985; amended 2009
Applies to coal
Does not apply to governmental body or agency
Creates a mechanism to reunite the minerals with surface after 20-year with no “use”

21. Dormant Mineral Act – North Dakota
Title:
Dormant Mineral Act – North Dakota
Reunification of minerals:
20 year period of non-use
Production, storage, subject to recorded instrument, pooled, or a statement of claim is filed
Surface Owner gives notice
By three weeks of publication and notice to the address of record owner – if no address use reasonable inquiry to determine address
Copy of notice and service recorded with county Clerk

22. Dormant Mineral Act – North Dakota
Title:
Dormant Mineral Act – North Dakota
Reunification of minerals:
4. Perfection of title – NDCC
A) Follow steps 1-3 above, then institute action in district court for quiet title
B) Court is required to issue findings of fact, conclusions of law, and enter judgment in favor of surface owner
C) 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

23. Dormant 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

24. From Governmental Bodies
Leasing:
From Governmental Bodies
Ohio
Availability based on land classification
New Oil & Gas Leasing Division for state land
Pennsylvania
Difficult; multiple governmental levels with differing requirements and procedures
North Dakota
Important because of state mineral reservations
If advertising and bidding scheme not followed, may void lease
Different reservations based on years--??

25. From Governmental Bodies
Leasing:
From Governmental Bodies
North Dakota
Reservation to state by year
Prior to 1939: no mineral reservations
1939 – 1941: reservation of 5% minerals
1941 – 1960: reservation of 50% minerals of all lands
Even if deed did not expressly reserve minerals
: reservation of 100% of minerals in grant lands and 50% of minerals in non-grant lands
1973 – present: all minerals reserved in all state land conveyances
Different reservations based on years--??

26. Roads Ohio Pennsylvania North Dakota Leasing:
Municipal streets: presumption of fee in city
Fee may be “qualified”
County roads and highways: presumed fee in abutting landowner to center of road
Pennsylvania
Generally strip-and-gore
North Dakota
Can be altered by statute allowing particular eminent domain act

27. Waters & Riparian Rights
Leasing:
Waters & Riparian Rights
Ohio
Abutting owners own to center regardless of navigability
Pennsylvania
Varies based on navigability
Changes in watercourse specifically addressed
North Dakota
Current Litigation

28. Concurrent Owners Ohio Pennsylvania North Dakota
Leasing:
Concurrent Owners
Ohio
Whether all cotenants are needed is unsettled
Pennsylvania
Leasing from less than all may be trespass
Remedy is partition
North Dakota
Do not have to lease from all co-tenants
Account for share of net profits
Let Zach know WV is by case law and not by statute (developed from statute though)

29. Joint Tenancy Ohio Pennsylvania North Dakota
Leasing:
Joint Tenancy
Ohio
Not Recognized–statutory Survivorship Tenancy after 1985
No common law Four Unities
Pennsylvania
Recognized– Survivorship requires clear intent
Common law Four Unities recognized
Tenancy by the Entireties
North Dakota
Recognized– Defined by Statute
No common law Four Unities; straw man not needed

30. Successive Owners Each require both Life Tenant & Remainderman Ohio
Leasing:
Successive Owners
Each require both Life Tenant & Remainderman
Ohio
Method of payment undetermined
Recognizes Open Mine Doctrine
Pennsylvania
Payment method clear
North Dakota
Open Mine Doctrine not yet adopted

31. Pooling & Compulsory Pooling
Ohio:
Forced pooling available
Mandatory Unitization also available
Pennsylvania
Only for formations below Onondaga–includes Utica shale
But no Marcellus forced pooling
North Dakota
Statutory risk-penalties
How to pronounce Onondaga

32. Effects of Foreclosure
Maintaining the Lease:
Effects of Foreclosure
Pennsylvania & North Dakota are Lien-Theory
Foreclosure wipes out Lessee’s interest
If Mortgage/ lien was filed prior to Lease filing
Get Lease subordinated
Ohio
2010 Statute
Oil & Gas Lease will not be extinguished by foreclosure and has priority over all prior recorded encumbrances
Basically a massive subordination

33. Effects of Foreclosure - Ohio
Maintaining the Lease:
Effects of Foreclosure - Ohio
Ohio

34. Competing Development
Issues during Production:
Competing Development
Ohio
Well subject to approval if in “coal bearing township”
Spacing provisions
Pennsylvania
Coal Operator right to object
Future wind conflict possible
North Dakota
Policy to develop, but statutory guidance scarce
Possible Kerbaugh application

35. Pending Litigation
Ohio
Anschutz Lease Litigation

36. Pending Litigation Pennsylvania North Dakota
Butler v. Charles Powers Estate
Ownership of natural gas found in coal
North Dakota
Landowner suit ownership of minerals between high and low water mark

37. Lease Termination & Filing Requirements
Post-Lease Issues:
Lease Termination & Filing Requirements
Ohio
Recording required
Either in margin of lease or separate document
Pennsylvania
Abandonment, if lessee intended such
No statute requiring recording
North Dakota
Statutory provisions for lessor voiding abandoned lease