In Chesapeake Exploration, LLC v. Buell, Slip Opinion No. 2015-Ohio-4551 (Chesapeake), the Ohio Supreme Court addressed two questions certified by the United States District Court for the Southern District of Ohio concerning the application of the Ohio Dormant Mineral Act (“DMA”), Ohio Revised Code § 5301.56.
Certified Question One
Is the recorded lease of a severed subsurface mineral estate a “title transaction” under the Ohio Dormant Mineral Act, R.C. § 5301.56(B)(3)(a)?
The DMA, codified at R.C. 5301.56, provides that a severed mineral interest is deemed abandoned and reunited with the surface estate unless certain statutory conditions are met. Under the version of the DMA amended in 2006, abandonment may be avoided if (1) a qualifying saving event occurred within the 20-year period preceding the required notice by the surface owner, and (2) the surface owner complied with the statute’s notice and procedural requirements. The court noted that its opinion did not address when the 20-year look-back period begins under the original 1989 version of the DMA.
The statute identifies six possible saving events in R.C. 5301.56(B)(3). One such event, set forth in R.C. 5301.56(B)(3)(a), occurs when the mineral interest “has been the subject of a title transaction that has been filed or recorded” in the county recorder’s office. In Chesapeake, the court was asked to determine whether a recorded oil and gas lease qualifies as such a title transaction.
The court concluded that a recorded oil and gas lease does constitute a title transaction and therefore qualifies as a saving event under R.C. 5301.56(B)(3)(a). In reaching this conclusion, the court relied on the definition of “title transaction” in R.C. 5301.47(F), which includes “any transaction affecting title to any interest in land.” Although the statute lists certain instruments affecting title, oil and gas leases are not expressly included. The court emphasized, however, that the statutory list is not exhaustive and is not limited to transactions transferring ownership interests. Chesapeake, ¶ 39.
The court then examined whether a recorded oil and gas lease affects title to an interest in land. In doing so, it cited Harris v. Ohio Oil Co., 57 Ohio St. 118, 48 N.E. 502 (1897), which characterized an oil and gas lease as more than a mere license, recognizing that it creates a vested, though limited, estate in land. As explained in Harris, such a lease grants the lessee a vested right to possess the land to the extent reasonably necessary to carry out the lease terms. Chesapeake, ¶¶ 44–47.
The court also noted that, effective March 23, 2015, R.C. 5301.09 was amended to expressly acknowledge that oil and gas leases and licenses create an interest in real estate. This statutory change further supported the conclusion that such leases affect title.
Reviewing the specific lease at issue, the court observed that it imposed restrictions on the surface estate, ran with the land, granted the lessee reasonable surface-use rights for production, and limited termination rights largely to the lessee. Based on these and similar provisions, the court concluded that the lease affected title to both the surface and mineral estates. Id. ¶ 58.
The court explained that title transactions are not limited to instruments that alter ownership interests outright. Transactions creating easements, use rights, or other interests that affect possession and control of land may also qualify. Although an oil and gas lease may not permanently transfer ownership, the rights conveyed are sufficient to affect title to the mineral estate. Id. ¶ 60.
In addition, the court recognized that an oil and gas lease typically grants the lessee exclusive rights to the mineral estate for a fixed term that may continue so long as production occurs. Ohio courts have construed this interest as a fee simple determinable in the mineral estate, with a reversionary interest retained by the lessor. Id. ¶¶ 61–62.
Based on this analysis, the court held that a recorded oil and gas lease is a title transaction under R.C. 5301.47(F) and therefore constitutes a saving event under R.C. 5301.56(B)(3)(a) when properly recorded. Id. ¶ 66.
Certified Question Two
Does the expiration of a recorded lease and the reversion of rights granted under that lease constitute a title transaction that restarts the 20-year period under the DMA?
The court answered this question in the negative, holding that the unrecorded expiration of a recorded oil and gas lease and the automatic reversion of rights do not restart the 20-year clock. Id. ¶ 68.
This holding differs from the reasoning in McLaughlin v. CNX Gas Co., No. 5:13 CV 2346, 2013 WL 6579057 (N.D. Ohio Dec. 13, 2013), where the federal district court suggested that the release of rights under a lease could itself qualify as a title transaction.
In Chesapeake, the Ohio Supreme Court explained that when a lease expires by its own terms or by operation of law, the public record does not reflect that reversion unless the lessee records a formal release. Even if the expiration of a lease could be considered a title transaction, it would not qualify as a saving event under R.C. 5301.56(B)(3)(a) unless it is filed or recorded. Id. ¶ 75. The court expressly declined to decide whether a recorded release of an oil and gas lease would constitute a title transaction, as that issue was not before it.
The petitioner argued that the existence of an active lease should suspend the 20-year clock for the duration of the lease term, reasoning that mineral interests should not be deemed abandoned while subject to a lease. The court rejected this argument, noting that a lease may expire or be extended based on events not apparent from the record. Because the recorded lease does not provide notice of when expiration actually occurs, a title examiner cannot determine from the record alone whether the lease remains in effect. Id. ¶¶ 80–81.
Accordingly, the court held that the unrecorded expiration of an oil and gas lease does not constitute a saving event and does not restart the 20-year period under R.C. 5301.56(B)(3)(a). Id. ¶ 81.
Analysis
The Chesapeake decision clarifies that the recording of an oil and gas lease qualifies as a saving event under the 2006 version of the DMA, while the unrecorded expiration of such a lease does not. The court also made clear that the 20-year look-back period begins on the date the lease is recorded and is not extended by the stated term of the lease.
As a result, once an oil and gas lease is recorded, a title examiner must look forward 20 years from the recording date to determine whether an additional saving event has occurred. Although a lessee may choose to record a release of the lease, the court did not decide whether a recorded release would qualify as a title transaction under R.C. 5301.56(B)(3)(a).
The court further noted that actual production may constitute a saving event that restarts the 20-year clock. However, because cessation of production is not typically reflected in the public record, uncertainty may remain as to when production has ended and the lease has expired. Until additional guidance is provided by the Ohio Supreme Court, parties seeking to preserve mineral interests may consider recording a claim to preserve those interests in compliance with R.C. 5301.56(B)(3)(e), even where production is ongoing.
Finally, the court emphasized that its analysis was limited to the 2006 version of the DMA. The original 1989 DMA differs in several respects, including the absence of a notice requirement. Questions regarding whether the 1989 DMA provides for automatic vesting, when the 20-year period begins, and whether that period is rolling or fixed remain unresolved. The answers to those questions will determine how decisions such as Chesapeake ultimately affect mineral interests governed by the 1989 DMA.
