Chesapeake Exploration, L.L.C. v. Buell (Slip Opinion)
144 Ohio St. 3d 490
| Ohio | 2015Background
- In 1958 mineral rights were severed from surface rights for ~90 acres in Harrison County; mineral rights underwent multiple transfers and leases, most recently a recorded 2009 oil-and-gas lease (the "2009 Lease").
- Petitioners include Coal Royalty (record owner) and multiple lessees/assignees (Chesapeake, CHK Utica, Larchmont, Total E&P, Dale); respondents are surface owners descended from the original surface grantees.
- Federal district court certified two Ohio-law questions to the Ohio Supreme Court under the Dormant Mineral Act (R.C. 5301.56): (1) whether a recorded lease of severed mineral rights is a "title transaction" for R.C. 5301.56(B)(3)(a); and (2) whether the unrecorded expiration/reversion of such a lease is a title transaction that restarts the 20-year dormancy clock.
- R.C. 5301.56(B)(3) lists six saving events preventing abandonment; subsection (a) saves an interest if it "has been the subject of a title transaction that has been filed or recorded." R.C. 5301.47(F) defines "title transaction" as "any transaction affecting title to any interest in land," followed by illustrative examples.
- The Court treated whether a recorded oil-and-gas lease alters title/creates an interest in land as dispositive, noting recorded leases are required by R.C. 5301.09 and that leases grant extensive exclusive rights to lessees (use of surface, possession for production, royalties, reverter conditions).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a recorded oil-and-gas lease of severed mineral rights is a "title transaction" under R.C. 5301.56(B)(3)(a) | Recorded lease affects title to an interest in land and thus is a "title transaction"; it is recorded, so it is a saving event | A lease is a license/encumbrance that does not alter ownership/title and thus is not a "title transaction" | Yes — a recorded oil-and-gas lease is a title transaction and therefore can be a saving event under R.C. 5301.56(B)(3)(a) |
| Whether the unrecorded expiration/reversion of a recorded lease is a title transaction restarting the 20-year dormancy clock | Expiration returns rights and thus should restart the 20-year period; the recorded lease itself shows term | Expiration is automatic/unrecorded and does not provide record notice; it does not affect title as required by statute | No — mere unrecorded expiration/reversion is not a title transaction that restarts the 20-year clock |
Key Cases Cited
- Pure Oil Co. v. Kindall, 116 Ohio St. 188 (Ohio 1927) (minerals in place are part of the realty)
- Nonamaker v. Amos, 73 Ohio St. 163 (Ohio 1905) (recognition of minerals as realty)
- Kelly v. Ohio Oil Co., 57 Ohio St. 317 (Ohio 1897) (oil in the earth is realty)
- Harris v. Ohio Oil Co., 57 Ohio St. 118 (Ohio 1897) (oil-and-gas lease creates a vested, limited estate for lease purposes)
- Back v. Ohio Fuel Gas Co., 160 Ohio St. 81 (Ohio 1953) (distinguishing instruments that operate as licenses versus conveyances based on granting language)
- Quarto Mining Co. v. Litman, 42 Ohio St.2d 73 (Ohio 1975) (severed mineral estate includes surface-use rights reasonably necessary for mining)
- Blakely v. Capitan, 34 Ohio App.3d 46 (Ohio Ct. App. 1986) (court decree affecting use restrictions can be a title transaction under Marketable Title Act)
- Kramer v. PAC Drilling Oil & Gas, L.L.C., 197 Ohio App.3d 554 (Ohio Ct. App. 2011) (characterizing oil-and-gas lease as granting a fee simple determinable subject to reverter)