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Case Law Update – Oil and Gas Drilling Rights
Post on March 31st, 2022

The Supreme Court of Ohio recently decided two cases addressing oil and gas drilling rights  In a unanimous opinion, the Court held in Fonzi v Brown, Slip Opinion No. 2022-Ohio-901 that based on the particular facts of these cases, the surface landowners did not exercise reasonable diligence in attempting to identify all holders of mineral interests when they sought to declare the mineral rights abandoned.  In another unanimous opinion, French v. Ascent Resources-Utica LLC, Slip Opinion No. 2022-Ohio-869, the Court ruled that an action seeking a determination that an oil and gas lease has expired by its own terms is a controversy involving the title to or possession of real estate that is not subject to arbitration under R.C.2711.01(B)(1).

Fonzi v. Brown

The Fonzi case provided the Court an opportunity to further clarify what constitutes reasonable diligence in attempting to identify holders of mineral interests under the Dormant Mineral Act (“DMA”). The Court delayed its decision in Fonzi so that it could decide the case of Gerrity v. Chervenak, 162 Ohio St.3d 694, 2020-Ohio-6705. In Gerrity, the Court declined to adopt a bright line rule to define the steps a surface owner must take to identify and locate holders of severed mineral interests to comply with R.C. §5301.56(E)(1). Instead, the Court held that reasonable diligence will depend on the facts of the case. Based on the facts in Gerrity, the Court concluded that there was no need to search outside the county where the mineral interest was located, but the Court noted that there may be other circumstances in which the surface owner’s independent knowledge or information revealed by the surface owner’s review of the property and court records would require the surface owner to look elsewhere.

In Fonzi, the Court found those circumstances. The 1952 deeds transferring the surface rights for the Fonzi property noted that the mineral rights owner lived in Washington County, Pennsylvania. In attempting to locate the mineral rights owner, the surface owner searched only the records of Monroe County, Ohio—where the property was located. They did not search the records of Washington County, Pennsylvania—the mineral rights owner’s last known county of residence. For this reason, the Court held that the surface owner fell short of the reasonable diligence standard.

The Court’s decision also made clear that “in a subsequent action challenging a surface owner’s compliance with the DMA’s notification requirements, the surface owner has the burden of proving that he or she complied with those requirements and that he or she exercised reasonable diligence in doing so.”  See, Fonzi, at *10.

French v. Ascent

In French, the Court limited the enforceability of arbitration provisions in oil and gas leases. Justice Kennedy, writing for the Court, stated that the provisions of R.C. 2711.01 require the courts to enforce agreements to use arbitration to settle disputes. However, pursuant to R.C. 2711.01(B)(1) that requirement does not apply to controversies involving the title to or possession of real estate. The opinion discussed the Court’s ruling in Chesapeake Exploration LLC v Buell that a recorded oil ad gas lease is a title transaction under R.C. 5301.56 (b)(3)(a). The Court found that the action in the instant case is a controversy involving the title to or the possession of real property. The lease dispute was thus not subject to arbitration and the case was remanded to the trial court.

We highlight these decisions to assist those practicing in this evolving area of law. As always, if you have any questions, please contact us. We are here to help.

Gretchen Mote, Esq
Director of Loss Prevention
Ohio Bar Liability Insurance Co.
Direct:  614-572-0620
Email: [email protected]
Monica Waller, Esq.
Senior Loss Prevention Counsel
Ohio Bar Liability Insurance Co.
Direct:  614-859-2978
Email: [email protected]