Charleston, WV
The Wildcatter
(By Nikolas Tysiak)
Happy New Year! After a hiatus, we are back with new laws and cases for your information.
In Nicholson v. Severin POA Group, LLC, 895 S.E.2d 927 (W. Va. I.C.A. 2023), the West Virginia intermediate court of appeals was asked to interpret the meaning of an oil and gas reservation in a Doddridge County deed. The original deed involved a conveyance from F. W. Severin to L. D. Nicholson for 117.55 acres, excepting and reserving “one-sixteenth of all the oil and gas in and under said land.” In 2022, this language gave rise to a dispute as to whether Severin retained a 1/16 interest in oil and gas, or a ½ interest in oil and gas. After reviewing several older cases involving different iterations of oil and gas reservations, most of which involved either fractional splits between oil and gas rights (i.e., 1/16 oil and ½ gas) or referenced royalty as to the oil, gas, or both, the intermediate court determined the language of Severin’s reservation did not include the same factors creating ambiguity, that the Severin reservation was therefore not ambiguous, and concluded that Severin, and his successors in title, only retained an undivided 1/16 interest in oil and gas, based on the unambiguous language of the original deed.
In DD Oil Company v. State ex rel Ward, — S.E.2d —, 2023 WL 8588491 (W. Va. I.C.A.), DD Oil Company had permits to drill several wells in Ritchie County. The West Virginia Department of Environmental Protection (WVDEP) issued violations against DD Oil, which required DD Oil to cease all drilling operations and caused a protracted administrative and judicial review process. More than a year after the initial notice of violation, and after expiration of all the permits issued to DD Oil, WVDEP withdrew its notice of violation. The net effect of these actions was that DD Oil was never able to fulfill the requirements of its permits but was also banned from further action due to the expiration of those same permits. An administrative review of WVDEP’s notices of violation was pending before the West Virginia Environmental Quality Board (“EQB”) which hears administrative appeals on permitting matters, at the time when the notices were withdrawn. The EQB reported being troubled by the actions of WVDEP requested to DD Oil, but ultimately the EQB felt it could not offer relief as the source of the dispute technically no longer existed, and also felt that they could not provide the type of relief request by DD Oil – an extension of the relevant permits to make up for lost time caused by WVDEP’s actions. The West Virginia Intermediate Court disagreed, finding that the EQB was perfectly qualified to offer relief under the circumstances, that the relief requested by DD Oil was reasonable and within EQB’s power to give, and that the withdrawal of the violation notices did not negate the EQB’s authority to give the relief requested. The Court referred the case back to the EQB for further adjudication in accordance with its holdings.
In Lodge v. Hoyt, 2023 WL 8234312 (Pa. Super. 2023), surface owners of a 111-acre tract brough a quiet title action against various parties (the “Hoyt Appellants”). While acknowledging that their interests in the 111-acre tract were subject to a reservation of oil and gas from 1893 benefitting the predecessors to the Hoyt Appellants, Lodge claimed the reservation was void as to their 111 acres. In addition, another party (the “Solomons”) claimed title to the oil and gas under the 111 acres through a Tax Claim Deed from 1981. Lodge further claims that the tax claim deed was void as to the oil and gas under the 111 acres because the tax claim deed reference to effected acreage contained a substantive, typographical error. The Trial Court found that the statute of limitations regarding challenging tax claim deeds had expired, and so the 1981 tax claim deed was beyond challenge, essentially vesting the oil and gas rights with the Solomons. The Superior Court determined that there was a material issue of fact that needed resolution to determine whether the Tax Claim deed to the Solomons mistakenly included mineral rights that had not been assessed and remanded to the trial court for additional findings.
The West Virginia Legislative session started in January and several bills of note have been introduced, but not yet passed. A few critical ones, which do not appear to be favorable to the oil and gas industry, are listed below:
Senate Bill 235 and House Bill 4292 – proposed to introduce a new section to the West Virginia code, providing for a monetary penalty assessable against an operator who fails to pay royalties for mineral production for six months, equal to three times the market of the extracted minerals for which payment was due, plus reasonable fees and costs incurred to enforce the landowners’ rights as W. Va. Code §36-4-9c.
Senate Bill 270 and House Bill 4722 – proposed to create a tax credit against the severance tax relating to mineral production for private taxpayers that make infrastructure investments in roads and bridges. As written, the bills currently do not apply to oil and gas producers.
Several Dormant Mineral Act and/or Marketable Title Act cases arose from Ohio 7th District Court of Appeals as well:
Jeffco Resources, Inc. v. Abrecht, 2023-Ohio-4712 (7th Dist. December 22, 2023) – Surface owners in Harrison County did not exercise reasonable due diligence in determining owners of severed oil and gas interest, as there was sufficient information in probate and other records to extend the search beyond the “record title baseline” search.
Kemp v. Rice Drilling D, LLC, 2023-Ohio-4732 (7th Dist. December 20, 2023) – Surface owners in Belmont County made a claim to a severed ½ oil and gas interest from 1917 under their land via the Marketable Title Act. The root of title deed included language stating, “ALSO RESERVING one-half of the oil and gas royalty as heretofore reserved.” The Court of Appeals decided this reference was not a sufficiently specific identification of a recorded title transaction for the purposes of the Marketable Title Act because it contains an error as to the interest previously reserved. We note that this decision appears to go against the spirit of Erickson v. Morrison, 2021 Ohio-746 (2021), an Ohio Supreme Court case. Consequently, there remains a question as to whether the above case is good law in Ohio.
Crum v. Mooney, 2023-Ohio-4451 (7th Dist. December 6, 2023) – Surface owners in Monroe County made a claim to a severed oil and gas royalty interest from 1898 under their land under the Marketable Title Act. The court found that the Marketable Title Act did not extinguish the severed royalty interest. The court further found that the 1898 severance created a fixed fractional 1/16 royalty interest.
White Revocable Trust v. Kemp, 2023-Ohio-4513 (7th Dist. December 5, 2023) – Surface owners in Belmont Conty made a claim to severed oil and gas interest from a 1930 severance deed reservation. The surface owners’ 1970 root of title deed contained the following language “Said premises also subject to oil and gas lease previously given and also subject to easements for rights of way as previously given and conveyed.” The court found that there was no reference to a specific record title transaction containing an oil and gas severance, and that the reference to the prior lease was not sufficient to give the surface owners notice that there was a severed mineral interest affecting the land. Factually, the parties that granted the lease at issue did not own oil and gas rights, resulting in the lease effectively being unenforceable, and therefore inapplicable as a title transaction for Marketable Title Act purposes.
Crozier v. Pipe Creek Conservancy, LLC, 2023-Ohio-4297 (7th Dist. November 28, 2023) – Surface owners in Belmont County make a Marketable Title Act claim against severed oil and gas mineral rights from 1930 underlying their property. The root of title deed contained a word-for-word repetition of the language used in the original 1930 reservation (excepting and reserving all the oil and gas). Nevertheless, the court found the reference to be a general reference without specific reference to a record title transaction and stated that the Marketable Title Act may serve to divest the severed mineral owners. We note that this decision appears to go against the spirit of Erickson v. Morrison, 2021 Ohio-746 (2021), an Ohio Supreme Court case. Consequently, there remains a question as to whether the above case is good law in Ohio.
As always, if you come across any interesting or applicable laws, court cases or regulations, please forward them on to us friendly folks of the Legislative and Regulatory Committee.
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Reprinted with permission from the MLBC February 2024 issue of The Wildcatter. All rights reserved.