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ESTATE BASICS IN OHIO, PENNSYLVANIA, AND WEST VIRGINIA

Issue Ohio Pennsylvania West Virginia

STEPTOE & JOHNSON PLLC MARCH 8, 2013

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Interests in Land Common Tenancy Joint Tenancy Future Interests-Perpetuities Exceptions, Reservations

Currently Presumed without express Language 1985 to Present with express language. 21 Years - must vest For rule of perpetuities

Common Tenancy Presumed after 1812 Joint Tenancy Presumed before 1812 Rule against Perpetuities abolished, 2007 No reservation in non-party, clear language required

Co-tenants presumed in conveyance to two or more parties Survivorship is created only by express language (W. Va. Code § 36-1-20) Does not recognize tenancy by the entirety (W. Va. Code § 36-1-19, as construed in McNeely v. South Penn Oil Co.) Adopted Statutory Rule Against Perpetuities (W. Va. Code § 36-1A-1) in 1992

Entitlement, Lease Payments Life Tenant Remainderman

Rental and Interest paid to life tenant. Bonus and Royalties in Interest Bearing Account

Blaklee vs. Marshall, Life Tenant entitled to receive interest only. Remainderman entitled to Bonus, royalties, etc. Variations— Exception, life Estate with power of consumption

Requires leases from life tenant, remainderman. Royalty/delay rental may be subject to open mines doctrine. Bonus may not be subject to open mines doctrine.




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Power to Commit Contingent Remainder, etc.

Both Should Sign Life Estate and Remainder are vested. Contingent Remainder vests when the contingency is satisfied

Life Estate and Remainder (typically) are vested. Contingent Remainder vests when the contingency is satisfied—conveyance requires Court Proceedings under the Inalienable Property Act and its progeny

Sale or lease of real property subject to future interests requires court approval (W. Va. Code § 36-2-1 et seq.)

Record Proof of Death Certified copy of Death Certificate; Presumption of Death allowed in Ohio

Current- record death certificate Prior- Document similar to application for letters but not incident to appointment of a personal representative, called Proof of Death

Death certificate

Conveyance of Decedent’s Real Estate by Personal Representative

Power to sell property only if: Will provides, contest, argument by heirs, payment of deaths. Selling: No order required if will empowers executor, but Administrator needs an order

Pre-1947, Court approval required Post-1947, broad sale power. But, Court approval still required. for— Deviation from devise, Minor beneficiary, Self dealing

Does not generally require court approval. If minor inherits real property, conservator must be appointed to convey interest. W. Va. Code § 37-1-2

Conveyance by the Heirs

Ohio, if none found court appoints “Suitable person” will be appointed.

No later sale by the personal representative will divest a deed from the heirs where personal representative appointed later, more than 1 year after death

W. Va. Code § 44-8-5 (conveyance by heirs more than one year after decedent’s death is not subject to claims of creditors against decedent’s estate)




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Rights of a Widow/Widower

Will or intestate share family Exemption. Intestate law – 1931- Descent and Distribution Statute. 1976 – half & half Abolished

Will or intestate share

Family exemption Election against the Will

(after 1947) Property received is disclaimed; Gifts are cancelled

Statutory dower 1917-1978 Surviving spouse takes 1/3 real estate conveyed without joinder

Dower/curtesy abolished on June 5, 1992 (W. Va. Code § 43-1-1) Prior to June 5, 1992, surviving spouse entitled to one-third life estate in the decedent’s real estate.

Dower, Curtesy Statutory Dower in Ohio 1/3 Life Estate Interest

Common Law Dower before 1917 Life estate in 1/3 real estate

Wills, Rules of Interpretation

Adopted take whole Equitable Adoption Anti-lapse (for relatives)

Whole and half blood alike. Adopted children and children born out of wedlock take same as natural children and children of a marriage No stepchildren. Child takes as of conception. Death of a beneficiary results in lapse. Lapse, anti-lapse, from 1917, substitution of issue and others—won’t impair residuary

After 1931: Wills can be “self-proved” W. Va. Code § 41-5-15 Anti-lapse statute: W. Va. Code § 41-3-3




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gift to a spouse. Construed as if executed immediately before death. “Words of inheritance” not required to pass the entire estate in real estate. A class of beneficiaries shall be ascertained at the time when the gift or devise is to take effect in enjoyment. “Failure of Issue” is ascertained as at death of the designated person. Property is presumed to pass subject to liens.

Challenge to Appointment of Personal Rep., to Will

Court Asks What is Best interest of estate for relatives at any time during estate administration.

Caveat stays appointment 1 year time limit to challenge

Challenge must be brought within six months (for domestic wills) and one year for all other wills

Claims of Beneficiaries and Estate Creditors-- Priority

Judgment can be executed on behalf order of Distribution(Court of Common Pleas) Need Probate Court Order to execute on Estate Assets.

Prima facie claim by filing: Defeat by O.C., proceedings for Confirmation of Account Creditor claim has priority, except, beneficiary distribution, where distribution precedes claim, and claim made more than 1 year after letters.

Priority set forth in W. Va. Code § 44-2-21: (1) Administrative costs and expenses; (2) funeral expenses; (3) debts and taxes with preference under federal law; (4) unpaid child support; (5) debts and taxes with preference under West




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Virginia law; (6) reasonable and necessary medical and hospital expenses of the last illness of the decedent, including compensation for persons attending the decedent during his or her last illness; and (7) all other claims.

State Death Tax Lien for estate tax 6% over 338,333 + 13,900.00 7% over 5000,000 + 23,600 / 10 years for lien.

Enacted, 1919 Implied lien for tax Lien expires 20 yrs.and9 mos., and there must have Been an arms’ length transfer to bona fide purchaser

Enforcement of tax claim against devisees/heirs barred after two years for distribution or filing of appraisement.

Conveyance by Guardian

Guardian of Estate with Order

Court approval required Court approval required.

Marital Rights Arising in Divorce

Divorce extinguishes all right including dower.

Before 1980—none After 1980; marital property rights raised by— Final separation, or Filing of divorce. Rights terminated by— Documented settlement, or Final court order

Divorce settlement agreement may terminate right of survivorship between joint tenants.

Common Law Marriage Recognized until 1991. Was recognize until 2003




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Powers of Attorney Signed, acknowledged, must have grantors name; must be recorded.

Express power to deal with real estate required Durability allowed – 1976. Durability presumed – 1992.

Must contain express power to deal in real estate Durable Power of Attorney Act adopted in 1986 (W. Va. Code § 39-4-1 et seq.)

Federal Estate Tax Lien is implied—perpetual. Filing FET return with Register of Wills required

Lien is implied - perpetual

Disability of Married Woman to Convey without Joinder of Husband

Conveyance without joinder was void until 1957- lack of capacity in the grantor

Recognizes doctrine of equitable adoption

Adoption of Uniform Trust Code

Yes Yes, effective 11/6/06 Yes, effective 7/1/11

TRUST: Requirements for Creation

5804.01: - Written Agreement - Will or other disposition - Oral Declaration - Power of Appointment - Court Order Settlor must have capacity, written expression of intent, and a definite or ascertainable beneficiary.

20 Pa CSA 7731, by written agreement or declaration, or under Will. Before 2006, grant to a trustee sufficed. Transfer of real estate to trust required signed writing. Trusts are presumed revocable. Before 2006, presumed irrevocable. 20 Pa CSA 7732, Settlor must have capacity, written expression of intent, and a definite or ascertainable beneficiary.

WV Code §44D-4-402. Grantor must have capacity; make intention in writing; and the trust must have a definite beneficiary.




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TRUST: Signed writing Ohio also allows Oral Trusts 5804.07.

20 Pa CSA 7732, writing signed by the settlor is required. Signature by mark permitted. Before 2006, trust of real estate required a signed writing

WV Code 44D-4-402. "Grantor indicates an intention, in writing, to create the trust." ** It is assumed that this means signed but this issue has yet to be litigated.

TRUST: Appointment/ designation of Trustee

ORC 5807.01. Trustee selected by appointment. Accepts by taking property or exercising authority. May reject before appointment.

20 Pa CSA 7761, Trustee selected by appointment. Accepts by taking property or exercising authority. May reject before appointment. Pre 2006, same.

WV Code §44D-7-701. Trustee is appointed. Accepts by either (1) complying with the method of acceptance provided in the trust instrument or (2) accepting trust property and performing trustee duties.

TRUST: Powers of Trustee

ORC 5808.01. Trustee has broad power of sale without court approval; Must take reasonable steps to protect trust property.

20 Pa CSA 7780.6 Trustee has broad power of sale without court approval. Pre- 2006, trustee had broad power of sale after Act of 1949. Earlier, sale power derived from only from the Will or trust instrument, or Court.

20 Pa CSA 7777 A trustee may delegate his/her authority. Pre- 2006, delegation only as authorized by the trust instrument.

WV Code §44-5A-3. Trustee can sell trust property without court approval. WV Code §44D-8-807. Trustee may delegate to agent, but must review and monitor performance and compliance.




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TRUST: Authority of co-trustees, dissent

ORC 5815.05. Co-trustees should usually act jointly. They may act by majority without court approval. Where no concurrence and no majority, the matter must be resolved by the Court

20 Pa CSA 7763 Co-trustees should usually act jointly. They may act by majority without court approval. Where no concurrence and no majority, the matter must be resolved by the Court. Pre- 2006, no action by a majority of trustees-- unanimous joint action or Court action required.

WV Code §44D-7-703. Unless otherwise provided by the trust document, co-trustees unable to reach a unanimous decision may act by majority decision. Non majority decisions, the Court may resolve the matter.

TRUST: Protection of persons dealing with Trustees

ORC 5815.05. Persons dealing with the trustee may assume the proper exercise of trust power, unless such persons have contrary actual knowledge

20 Pa CSA 7790.2 Persons dealing with the trustee may assume the proper exercise of trust power, unless such persons have contrary actual knowledge. Pre- 2006, no definite authority. 20 Pa CSA 7136. No good faith sale will be prejudiced by the later removal of the trustee or by the later probate of an inconsistent Will.

WV Code §44D-10-1012. A person dealing with a trustee in good faith, without knowledge that the trustee is exceeding or improperly exercising his powers, is protected from liability.




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TRUST: Reformation, Modification, Division, Termination

ORC 5804.12. Modification, termination of irrevocable trust by consent of the settlor and all beneficiaries even if inconsistent with a material purpose. Modification by consent of all beneficiaries with court approval, only if not inconsistent with a material purpose. Court approval required in all cases where contingent or unborn beneficiaries.

20 Pa CSA 7740.2 and 20 Pa CSA 7740.3. Modification, termination of irrevocable trust by consent of the settlor and all beneficiaries even if inconsistent with a material purpose. Modification by consent of all beneficiaries with court approval, only if not inconsistent with a material purpose. Court approval required in all cases where contingent or unborn beneficiaries. Pre- 2006, court approval always required to modify or terminate; cannot be contrary to a material purpose; cannot alter dispositive provisions.

WV Code §44D-4-414. After notice to beneficiaries, trusts valued less than $100,000 can be terminated without court approval, if the trustee determines that the value is insufficient to justify the costs. Before 2011, trusts valued at less than $50,000 could be terminated upon petition to the court. WV Code §44D-4-412. Court may modify the terms of a trust, or terminate the trust, in order to further the purposes of the trust.

TRUST: Vacancy of Trustee office, appointment of successor, substitute

ORC 5807.04. Vacancy need not be filled if a co-trustee remains in office. Successor shall be (1) named in the trust instrument (2) approved by unanimous written consent of qualifying beneficiaries (3) appointed by the Court.

20 Pa CSA 7764. Vacancy need not be filled if a co-trustee remains in office. Successor shall be (1) named in the trust instrument (2) approved by unanimous written consent of qualifying beneficiaries (3) appointed by the Court. Pre-2006, court approval required to appoint.

WV Code §44D-7-704. Unless the trust instrument provides otherwise, if one or more co-trustees remain in office, a vacancy need not be filled. Qualified beneficiaries may, by unanimous, written agreement, appoint a trustee. Court can appoint an additional trustee or “special fiduciary.”




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TRUST: Removal of trustee

ORC 5807.06. Court order required

20 Pa CSA 7766 Court order required. Pre 2006-- same.

WV Code §44D-7-706. The court may remove a trustee.

TRUST: Claims of Creditors

ORC 5805.06; Generally, creditor of a beneficiary may reach his interest by attachment. "Spendthrift" provision is generally enforceable

20 Pa CSA 7741 and 20 Pa CSA 7742. Generally, creditor of a beneficiary may reach his interest by attachment. "Spendthrift" provision is generally enforceable. Pre- 2006, same.

WV Code §44D-5-501. Unless there is a spendthrift provision, the court may authorize a creditor to reach the beneficiary’s interest in trust property.

TRUST: Certificate of Trust

ORC 5805.06. Trustee can furnish or record a Certification of Trust containing(1)trust existence and creation date,(2)identity of the settlor,(3) identity and address of current acting trustee,(4) powers of the trustee,(5) revocability, (6) authority of acts of less than all co-trustees, if any,(7)the taxpayer id number [prevailing practice is to redact], and(8)manner of taking title to trust property. Person to whom Cert. is delivered has the right to receive excerpts of the trust text which grant power to act in the pending transaction. Persons dealing with the trustee are entitled to rely on the Cert.

20 Pa CSA 7790.3. Trustee can furnish or record a Certification of Trust containing(1)trust existence and creation date,(2)identity of the settlor,(3)identity and address of current acting trustee,(4)powers of the trustee,(5)revocability,(6)authority of acts of less than all co-trustees, if any,(7)the taxpayer id number [prevailing practice is to redact], and (8)manner of taking title to trust property. Person to whom Cert. is delivered has the right to receive excerpts of the trust text which grant power to act in the pending transaction. Persons dealing with the trustee are entitled to rely on the Cert. Pre-2006, no provision for Cert. of Trust.

WV Code §44D-10-1013. Trustee may furnish a Certification of Trust containing:(1)existence of the trust;(2)grantor’s identity;(3)the identity and address of the individual currently acting as trustee;(4)powers of the trustee;(5)the trust’s revocability;(6)the authority of co-trustees;(7)the trust’s taxpayer id number; and(8)the manner of taking title to trust property. Cert. may be signed or authenticated by any trustee. Cert. must state that the trust has not been revoked, modified, or amended in a way that would cause its representations to be incorrect.

Tracey.Korrell

Text Box

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V. INTESTATE SUCCESSION IN PENNSYLVANIA

Issue—A person‘s issue includes all of their descendants, i.e., their children, grandchildren, etc.

Per stirpes—Each taker in a given class receives only what his or her predecessor was entitled

to.

Per capita a/k/a per capita by representation—Each taker in a given class receives an equal

share.

*Please see Section V. INTESTATE SUCCESSION: Definitions and Examples hereinabove

for more complete definitions of the terms used herein and examples of per stirpes and per capita

distribution.

1980 to Present (P.L. 565): The surviving spouse‘s share of the estate passes as follows:

1. No issue and no parents—then all to the spouse.

2. No issue but surviving parent(s)—then the spouse gets the first $30,000, plus one half of

the remaining estate.

3. If there are surviving issue, all of whom are also issue of the surviving spouse, the spouse

gets $30,000, plus one half of the remaining estate.

4. If there are surviving issue, one or more of whom are not issue of the surviving spouse,

then the surviving spouse gets one half of the estate.

The share of the estate to which the surviving spouse is not entitled, and the entire estate if there

is no surviving spouse, passes in the following order:

1. Issue

2. Parents

3. Siblings, or their issue

4. A surviving grandparent(s), or their children or grandchildren; the estate is divided

between the paternal and maternal sides

5. Uncles and aunts or their children or grandchildren

6. The Commonwealth

Note: If at least one grandparent survives on one side, and there are only great-grandchildren on

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the other side, the entire estate goes to the surviving grandparent. The intestate share is limited to

the grandchildren of aunts and uncles; more distant relatives do not qualify. Finally, there is an

express limit on representation; no grandchildren of aunts or uncles can take by representation if

there is at least one living first cousin.

1978-1979 (P.L. 42):

Same as 1959-1966 except the spousal allowance was also granted when there were children, all

of whom are children of the surviving spouse.

1967-1977 (P.L. 420):

Same as 1959-1966 except the spousal allowance increased to $20,000, and the intesate share

was limited as follows:

If at least one grandparent survives on one side, and there are only great-grandchildren on the

other side, the entire estate goes to the surviving grandparent. The intestate share is limited to the

grandchildren of aunts and uncles; more distant relatives do not qualify. Finally, there is an

express limit on representation; no grandchildren of aunts or uncles can take by representation if

there is at least one living first cousin.

1959-1966 (P.L. 1747):

The surviving spouse‘s share passed as follows:

1. Surviving spouse and one child—the surviving spouse gets one-half (1/2), and the child,

or the child‘s descendents, gets one-half (1/2).

2. Surviving spouse and more than one child or descendants of a child—the surviving

spouse gets one-third (1/3), and the children, or their descendents, share two-thirds (2/3).

3. No issue—the surviving spouse gets one-half (1/2), plus $10,000.

4. No issue, parents, grandparents, or collaterals as close as an uncle or aunt—then all to the

surviving spouse.


is no surviving spouse, passed in the following order:

1. Issue

2. Parents


4. A surviving grandparent(s), or their issue; the estate is divided between the paternal and

maternal sides

5. Uncles and aunts or their children or grandchildren

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6. The Commonwealth

Note: The limits on heirship form the 1947 Act were expanded to include heirship and

representation by grandchildren of aunts and uncles (first cousins once removed).

1947-1958 (P.L. 80):

The surviving spouse‘s share passed as follows:






4. No issue, parents, grandparents, or collaterals as close as an uncle or aunt—then all to the

surviving spouse.


is no surviving spouse, passed in the following order:*

1. Issue

2. Parents



maternal sides

5. Uncles and aunts or their children

6. The Commonwealth

*Note: The Act of 1947 placed a strict limit that no one more remote than a first cousin could be

an heir or take by representation (driven by a notorious case involving 26,000 claims by

purported heirs of a childless widow with a multimillion dollar estate).

1917-1946 (P.L. 429):

After 1917, the surviving spouse was entitled to a fee interest in the decedent‘s real estate, not

just a life estate. The surviving spouse‘s share passed as follows:



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4. No issue or other known heirs—then all to the surviving spouse.

The share of the estate to which the surviving spouse was not entitled, and the entire estate if

there was no surviving spouse, passed in the following order:*

1. Issue

2. Parents

3. Siblings, or their childen or grandchildren


maternal sides

5. Uncles and aunts or their children

*Note: The 1917 Intestate Act continued the modified per stirpes scheme, also known as per

capita with representation, that is still used currently. There were no limits on collateral heirship,

so an estate would never escheat to the Commonwealth. Representation was limited to the

grandchildren of siblings, and the children of aunts and uncles (meaning that if no closer heir

was in that line, its share would go back to the other lines with representation at a recognized

level).

1833-1916 (P.L. 315):

The decedent‘s surviving spouse received a dower (for women) or curtesy (for men) interest,

which was a life estate in 1/3 of the decedent‘s real estate. Subject to the dower or curtesy

interest of the surviving spouse, the decedent‘s real property descended as follows:

1. Issue*

2. Surviving parent(s), for life

3. Siblings of the whole blood, or their children by representation

4. Next of kin, defined as descendants of any whole blood siblings

5. Surviving parents

6. Siblings of the half blood, or their children by representation

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7. Next of kin (but without any representation)

8. Surviving spouse

*Children born out of wedlock got nothing at this time.

West Virginia Intestate Succession Time Period Descent & Distribution Dower & Curtesy January 1, 1787 to December 28, 1868

1. To children (or their descendants). 2. If no descendants, then to father. 3. If no descendants or father, then equally to mother, siblings (or their descendants).

1/3 Life Estate

December 29, 1868 to December 21, 1873

1. To children (or their descendants). 2. If no descendants, then to spouse. 3. If no descendants or spouse, then to father 4. If no descendants, spouse or father, then equally to mother and siblings (or their descendants).

1/3 Life Estate

December 22, 1873 to December 31, 1930

1. To children (or their descendants). 2. If no descendants, then to father. 3. If no descendants or father, then equally to mother, siblings (or their descendants).

1/3 Life Estate

January 1, 1931 to May 28, 1957

1. To children (or their descendants). 2. If no descendants, then 1/2 to mother and 1/2 to father. 3. If no descendants and mother or father deceased, then 1/2 to surviving parent and 1/2 to spouse and siblings (or siblings' descendants) 4. If no descendants or parents, then to spouse and siblings (or their descendants).

1/3 Life Estate

May 29, 1957 to June 4, 1992

1. To children (or their descendants). 2. If no descendants, then to spouse. 3. If no descendants or spouse, then to parents equally or to the surviving parent. 4. If no descendants, spouse or parents, then to siblings (or their descendants).

1/3 Life Estate

June 5, 1992 to Current

1. All to spouse, unless: a. Intestate has children (or their descendants) that don't belong to spouse , then 1/2 to spouse and 1/2 to intestate's children (or their descendants) in the case of deceased children); or b. Spouse has children (or their descendants) that do belong to intestate and spouse has children (or their descendants) that don't belong to intestate, then 3/5 to spouse and 2/5 to intestate's children (or their descendants) 2. If no spouse, then to children (or their descendants) 3. If no spouse or descendants, then to parents equally or to the surviving parent 4. If no spouse, descendant or parent, then to siblings (or their descendants)

None

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James R. Nicas, Of Counsel

Steptoe & Johnson PLLC

Views and comments stated in this presentation are solely those of the presenter and are NOT◦ Views of presenter’s firm◦ Views of any clients of presenter’s firmViews of any clients of presenter s firm◦ Legal Advice as to any specific matter, or◦ Necessarily the views of the presenter tomorrow

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Apportionment v. Non-Apportionment◦ Who: Division Order, Title Landmen, Field Landmen◦ What: Royalty allocation – Lease v. Tract basis ◦ Where: Apportionment: PA, MS, CA and where specified in pp p

lease Non-Apportionment: All other states and where

specified in lease◦ When: When leased acreage is subsequently

subdivided into multiple tracts

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Apportionment – Royalty Interest is calculated on a lease basis. (PA, CA, MS or as provided in lease):◦ Lease Wells – Apportion the ownership of each individual

lease a portion of which overlies the drill site.◦ Unit Wells – Apportion the ownership of each individual

lease a portion of which is included within the unit/poollease a portion of which is included within the unit/pool before applying the unit participation factor.

◦ Non-Participating Royalty normally subtracted from tract royalty owner then apportioned.

◦ Overriding Royalties not apportioned. Non-apportionment – Royalty Interest is

calculated on a tract basis. (All states except PA, CA & MS unless specified in lease.)

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APPORTIONMENT occurs when the oil & gas rights subject to a lease are subsequently subdivided into the multiple tracts with different ownership.◦ A lease subject to multiple tracts owned by

different parties upon execution will be treated as adifferent parties upon execution will be treated as a community lease in most states. ◦ Subdivision of the WI does not result

apportionment. NOTE: In an Apportionment situation, the

royalty is apportioned to all leased tracts even when the WI has been subdivided.

Division Order Analysts:◦ Existing Leases: Watch all ownership changes for

creation of apportionment situations.◦ New Leases: Watch for apportionment or non-

apportionment provisions.◦ Conveyed Leases: Also watch for letter agreements

between lessors. NOTE: If lease is producing and apportionment/non-

apportionment distribution of royalty does not match state rule, the distribution alone may be sufficient to put you on notice of investigation into possibileexistence of unrecorded letter agreement.

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Title Landman, Field Landmen, etc.◦ In an “Apportionment state”: Your title opinion should cover the entire lease

regardless of WI ownership. Check all tracts previously leased for production.◦ An “Affidavit of Non-Payment of Rents & Royalties” or

an “Affidavit of Non Production” may be insufficientan Affidavit of Non-Production may be insufficient in Appalachia. Many active leases are 80-120+ years old. Parties literally aren’t aware that their property is leased. In Apportionment states the original assignee may never

have been told the tract was leased and never gave the Lessee notice.

In Non-Apportionment states they aren’t due any payments.

Jenny owns 80 acres and leases to NADOA retaining a 1/8 royalty.◦ Jenny conveys Tract 1 containing 60 acres to Jessica.◦ Jenny conveys Tract 2 containing 20 acres to Janie.

NADOA grants a farmout of Tract 2 to NALTA retaining a 1/16 ORR.

If a well is drilled on Tract 2:◦ NALTA has a 100% WI (20 net acres/20 gross acres) in both PA & WV. NALTA has an 81.25% NRI WI x [100% - (Royalty + ORR)] in both PA & WV = 100 x [100 – (12.5 + 6.25)]

◦ NADOA has a 6.25% NRI in both PA & WV (ORR is not apportioned)◦ In WV: Janie owns a 12.5% NRI (WI x .125)◦ In PA: Janie owns a 3.125% NRI & Jessica owns a 9.375% NRI Jenny: [(20 net acres/80 gross acres) x royalty)] = .25 x 12.5% = 3.125% Jessica: [(60 net acres/80 gross acres) x royalty)] = .75 x 12.5% = 9.375%

Note the significant difference in royalty distribution.

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Bob owns 100% of tracts 1 & 2 and 50% of tract 3.◦ Bob conveys 100% of tract 1 and 25% of tract 2 to Bill.◦ Bob conveys 25% of tract 2 and 50% of tract 3 to Russ.◦ Bob conveys 50% of tract 2 to Jim.

Bill leases to Frac Gas Inc. retaining a 1/8 royalty.◦ Bill conveys tract 2 to Lee.

Russ leases to Hachi-ko. Retaining a 3/16 royalty.◦ Russ conveys tract 3 to SharonRuss conveys tract 3 to Sharon

Jim leases to S&J Exploration retaining a ¼ royalty. Using the “lease” plat what is everyone’s interest if a lease well is

drilled on tract 2 in:◦ PA◦ WV

Tract 1:◦ Bill 100% - Leased to Frac Gas, Inc. 1/8 royalty

Tract 2:◦ Lee 25% - Leased to Frac Gas, Inc. 1/8 royalty◦ Russ 25% - Leased to Hachi-ko 3/16 royaltyRuss 25% Leased to Hachi ko 3/16 royalty◦ Jim 50% - Leased to S&J Exploration ¼ royalty

Tract 3:◦ Sharon 50% - Leased to Hachi-ko 3/16 royalty◦ N/A for this example

NOTE: The oil & gas subject to the Frac Gas and Hachi-ko leases have been subdivided.

The WI is the same in both states. Only the royalty attributable to leases is apportioned. WI is not apportioned.

The NRI attributable to the WI party is the The NRI attributable to the WI party is the same in both states.

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WI: (interest x net acres)/gross acres ◦ Frac Gas: (.25 x 100)/100 = 25%◦ Hachi-ko: (.25 x 100)/100 = 25%◦ S&J Exploration: (.50 x 100)/100 = 50%

NRI: WI x (100% - royalty)◦ Frac Gas: .25 x (100% - 12.5%) = 21.875%◦ Hachi –ko: .25 x (100% - 18.75%) = 20.3125%◦ S&J Exploration: .5 x (100% - 25%) = 37.5%

PA NRI◦ Apportion each tract covered by the lease then

apply the tract ownership for the drill site.◦ FRAC lease royalty owners◦ Bill: (Party net acres/Lease net acres) x Drill Site WI x royalty = NRI [(tract 1 NA + tract 2 NA)/lease NA] x WI x royalty = NRI[(tract 1 NA + tract 2 NA)/lease NA] x WI x royalty NRI [{(100% x 50 NA) + (0% x 100 NA)}/75] x 25% x 1/8 = NRI 50/75 x 25% x 1/8 = 2.083333% NRI◦ Lee: (Party NA/Lease NA) x Drill Site WI x royalty = NRI [(tract 1 NA + tract 2 NA)/lease NA] x WI x royalty = NRI [{(0% x 50 NA) + (25% x 100 NA)}/75] x 25% x 1/8= NRI 25/75 x 25% x 1/8 = 1.041667% NRI

◦ Check: 2.083333% + 1.041667% = 25% x 1/8 = 3.125% NRI

PA NRI◦ Hachi-ko lease royalty owners◦ Russ: (Party net acres/Lease net acres) x Drill Site WI x royalty = NRI [(tract 2 NA + tract 3 NA)/lease NA] x WI x royalty = NRI [(25% x 100 NA) + (0% x 50 NA)]/50 x 25% x 3/16 = NRI 25/50 x 25% x 3/16 = 2.34375% NRI◦ Sharon: (Party NA/Lease NA) x Drill Site WI x royalty = NRI [(tract 2 NA + tract 3 NA)/lease NA] x WI x royalty = NRI [{(0% x 100 NA) + (50% x 50 NA)}/50] x 25% x 3/16= NRI 25/50 x 25% x 3/16 = 2.34375% NRI

◦ Check: .783125% + .783125% = 25% x 3/16 = 4.6875% NRI

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PA NRI◦ S&J Exploration lease royalty owners◦ Jim: (Party net acres/Lease net acres) x Drill Site WI x royalty = NRI (tract 2 NA/lease NA) x WI x royalty = NRI (50% x 100 NA)/50) x 50% x 1/4 = NRI 50/50 x 50% x 1/4 = 12.5% NRI

◦ Check: 25% = 50% x 1/4 = 12.5% NRI

WV NRI◦ Non-Apportionment: Based on drill site tract only. Bill: 0% NRI. Interest in tract 1 only. Lee: (25% x 100 net acres)/100 gross acres x 1/8 royalty =

25 net acres/100 gross acres x 1/8 = 3.125% NRI Russ: (25% x 100 net acres)/100 gross acres x 3/16 royalty Russ: (25% x 100 net acres)/100 gross acres x 3/16 royalty =

25 net acres/100 gross acres x 3/16 = 4.6875% NRI Sharon: 0% NRI. Interest in tract 3 only. Jim: (50% x 100 net acres)/100 gross acres x 1/8 royalty =

50 net acres/100 gross acres x 1/4 = 12.5% NRI

PA WVFrac Gas WI = 25.000000% WI = 25.000000%

NRI = 21.875000% NRI = 21.875000%Hachi-ko WI = 25.000000% WI = 25.000000%

NRI = 20.312500% NRI = 20.312500%S&J Exploration WI = 50.000000% WI = 50.000000%

NRI = 37.500000% NRI = 37.500000%Bill NRI = 2.083333% NRI = 0%Lee NRI = 1.041667% NRI = 3.125000%Russ NRI = 2.343750% NRI = 4.687500%Sharon NRI = 2.343750% NRI = 0%Jim NRI = 12.500000% NRI = 12.500000%

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Bob owns 100% of 023456, 034567 & 045678. Leased to Frac Gas Inc. retaining a 1/8 royalty.

Bill owns tracts 1,2 & 3 and leases to S&J Exploration (lease 012345) retaining a 1/8 royalty.◦ Bill conveys 25% of tracts 1 & 2 to Russ.◦ Bill conveys 25% of tracts 2 & 3 to Jim.

Bill conveys 25% of tracts 1 & 3 to Sharon◦ Bill conveys 25% of tracts 1 & 3 to Sharon.

Using the “unit” plat what is everyone’s interest if a unit well is drilled on tract 2 in:◦ PA◦ WV

WI: (interest x unit net acres)/unit gross acres ◦ Frac Gas: (1.00 x 450)/600 = 75%◦ S&J Exploration: (1.00 x 150)/600 = 25%

NRI: WI x (100% - royalty) NRI: WI x (100% royalty)◦ Frac Gas: .75 x (100% - 12.5%) = 65.625%◦ S&J Exploration: .25 x (100% - 12.5%) = 21.875%

PA NRI◦ Apportion each tract covered by the lease then

apply the tract ownership for the unit.◦ FRAC lease royalty owners◦ Bob: (Party net acres/Lease net acres) x Unit WI x royalty = NRI 023456: 175 NA/175 NA x 150 UNA/600 UGA x 1/8 = NRI023456: 175 NA/175 NA x 150 UNA/600 UGA x 1/8 NRI 1.0 x 25% x 1/8 = 3.125% NRI 034567: 150 NA/150 NA x 150 UNA/600 UGA x 1/8 = NRI 1.0 x 25% x 1/8 = 3.125% NRI 045678: 300 NA/300 NA x 150 UNA/600 UGA x 1/8 = NRI 1.0 x 25% x 1/8 = 3.125% NRI

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◦ Lease 012345 Bill: 50% tracts 1, 2 & 3

(Party NA/Lease NA) x Unit WI x royalty = NRI [(.5 x 200)/200 NA] x (150 UNA/600 UGA) x 1/8 = NRI 100/200 x .25 x 1/8 = 1.5625% NRI

Russ: 25% tracts 1 & 2 (Party NA/Lease NA) x Unit WI x royalty = NRI [(TR 1 .25 x 50 NA) + (TR 2 .25 x 100 NA)]/200 NA] x (150 UNA/600 UGA) x 1/8 = NRI 12.5 + 25/200 x .25 x 1/8 = .5859375% NRI

Jim: 25% tracts 2 & 3 (Party NA/Lease NA) x Unit WI x royalty = NRI [(TR 2 .25 x 100 NA) + (TR 3 .25 x 50 NA)]/200 NA] x (150 UNA/600 UGA) x 1/8 = NRI 25 + 12.5/200 x .25 x 1/8 = .5859375% NRI

Sharon: 25% tracts 2 & 3 (Party NA/Lease NA) x Unit WI x royalty = NRI [(TR 1 .25 x 50 NA) + (TR 3 .25 x 50 NA)]/200 NA] x (150 UNA/600 UGA) x 1/8 = NRI 12.5 + 12.5/200 x .25 x 1/8 = .390625% NRI

◦ Check: 3.125% + 3.125% + 3.125% + .78125% + .5859375% +

5859375% + 390625% = 12 5%.5859375% + .390625% = 12.5%

◦ NOTE: Tract 3 isn’t in the unit, but is apportioned royalty in PA.

WV NRI◦ Non-Apportionment: Based on unit. Bob: (100% x 450 UNA)/600 UGA x 12.5% = 9.375% NRI Bill: 50% x 150 UNA/600 UGA x 12.5% = 1.5625% NRI Russ: 25% x 150 UNA/600 UGA x 12.5% = .78125% NRI

Ji 25% 100 UNA/600 UGA 12 5% 520833% NRI Jim: 25% x 100 UNA/600 UGA x 12.5% = .520833% NRI Sharon: 25% x 50 UNA/600 UGA x 12.5% =.260417% NRI Check: 9.375% + 1.5625% + .78125% + .520833% + .260417%

= 12.5%

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PA WVFrac Gas WI = 75.000000% WI = 75.000000%

NRI = 65.625000% NRI = 65.625000%S&J Exploration WI = 25.000000% WI = 25.000000%

NRI = 21.875000% NRI = 21.875000%Bob NRI = 9 375000% NRI = 9 375000%Bob NRI 9.375000% NRI 9.375000%Bill NRI = 1.562500% NRI = 1.562500%Russ NRI = .5859375% NRI = .781250%Jim NRI = .5859375% NRI = .520833%Sharon NRI = .3906250% NRI = .260417%

Apportionment is the law in PA, MS & CA. Leases or amendments may reverse the

presumption in WV and PA. (I have not reviewed other states, but presume lessorswill by allowed to separately agree )will by allowed to separately agree.)

Only royalty (including Non-participating royalty) will be apportioned.

Note: NPR should normally be charged to the granting party before being apportioned.

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Curing “SOME” Title DefectsIn

W t Vi i i & PAWest Virginia & PAPresented by:

Robert J. Andre

ONCE UPON A TIME…Where do title defects come from?

Once upon a time…• Title was perfect, without defects

• Then, man encountered land

• And, title was no longer perfect

• Suddenly, boundaries became badly describedy, y

• Ownership became divided, tenant against tenant

• And, worst of all, people started dying off –without wills

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So, now we deal with…

• Unleased missing heirs we can’t find

• Bad‐tempered hold‐out co‐tenants we can findtenants we can find

• Conflicting claims of ownership

• Incoherent property descriptions

• Rights arising from defective instruments

DIVIDED OWNERSHIP

Divided Ownership

• Tenants in common

– Land owned by more than one person

• Joint tenants with the right of survivorship

• Tenants by the entirety

– Like survivorship, but it only exists between husband and wife

– Abolished in W. Va. and Ky.

– Default method in PA. However, during the 1940s, community property was briefly recognized

• Life tenant and remainderman

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Open Mines Doctrine

• Life estate created before lease is executed

– “Mine” has not been “opened”

– Life tenant not entitled to all of the royalty

Royalty must be paid into interest bearing account– Royalty must be paid into interest‐bearing account and life tenant receives the interest

– When life tenant dies, the money in the account is paid to the remainderman

– Remainderman receives all of the royalty

Open Mines Doctrine

• Life estate created after lease is executed

– “Mine” has been “opened”

– Life tenant receives all of the royalty during his lifetimelifetime

– When life tenant dies, remainderman receives all of the royalty

Open Mines Doctrine

• What about bonus payments?

– Probably belongs to life tenant only

– Realistically, remainderman will want signing bonus toobonus, too

• Delay rentals?

– Pay to the life tenant

• Can life tenant and remainderman get around the Open Mines Doctrine?

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Consent of Co‐tenants

• West Virginia

– Developing minerals without the consent of all co‐tenants is waste (W.Va. 37‐7‐2)

– Non‐consenting co‐tenant can sue for damagesNon consenting co tenant can sue for damages (3x the amount if committed wantonly) and seek an injunction

– Law v. The Heck Oil Co., 106 W. Va. 296, 145 S. E. 601 (1928)

Open Mines Doctrine• For life estates created on or after July 15, 2002, the Pennsylvania Uniform Principal and Income Act (“PUPIA”) provides that if the governing instrument is silent, royalty, delay rental and bonus are 2/3 to the principalrental, and bonus are 2/3 to the principal (remainderman) and 1/3 to income (life tenant)

• An official comment to PUPIA states its intent was to abolish the traditional Open Mine Doctrine allocation rule

• However, there are no cases on the issue

Consent of Co‐tenants

• Pennsylvania

– While it is possible to lease with less than all the co‐tenants, it is advisable to get all co‐tenants to lease

– Non‐consenting co‐tenant a tenant cannot restrain a co‐tenant from developing underlying minerals Lichtenfels v. Bridgeview Coal Co., 344 Pa. Super. 257, 263, 496 A.2d 782, 785 (1985).

– The right to develop is only subject to the duty to account to the remaining tenants for their proportional share Id. at 263, 786

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PA’S DORMANT OIL AND GAS ACT

Dormant Oil and Gas Act

• When is it used?

– You need to take a lease from an unknown heir

• Why is it used?

C d l i l d ’ il d– Courts and legislatures don’t want oil and gas to go undeveloped because no one can find that last (unknown) owner

• Who can use it?

– Any party who owns an interest in oil or gas

Dormant Oil and Gas Act • How is it used?

– File a civil action

– Demonstrate to the court the following actions:

• Petitioner has made a diligent effort to locate owner

• Despite diligent effort, petitioner was unable to identify or locate owner

• Appointment of a trustee will be in the best interest of all owners of interests in the oil and gas

– If all of the above criteria have been me the court shall appoint a trustee

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Dormant Oil and Gas Act • Pennsylvania

– 58 P.S. § 701.1, et seq.

– All bonuses, rental payment, royalties, and other income due shall be paid to trustee until trust terminated

– Trust to remain in force until unknown owners have been identified to the satisfaction of the trustee

– A lessee who pays the trust is not responsible for further claims by the unknown owners for any other income produced subject to the trust

– Failure to pay can make lessee liable for all attorney fees and court costs of collection, with interest to the date of payment

MISSING HEIRS PETITIONW.VA. CODE § 55‐12A‐1 ET SEQ.

Missing Heirs Petition

• When is it used?

– You need to take a lease from an unknown heir

• Why is it used?

C d l i l d ’ il d– Courts and legislatures don’t want oil and gas to go undeveloped because no one can find that last (unknown) owner

• Who can use it?

– Any party who plans to develop the oil and gas

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Missing Heirs Petition

• How is it used?

– File a civil action

– Explain to the court how you diligently tried to find the missing heirfind the missing heir

– Publish legal notices

– Wait for a response from the missing heir

– Court orders a special commissioner to execute lease on behalf of missing heir

• Where does the money go?

Due diligence includes but is NOT limited to: All county records where property located All county records in missing person’s last

known county of residence

Due Diligence to Find Missing HeirsWhen is enough enough? When the judge says so!

Online resources Newspapers, especially obituaries Interviews with relatives DOCUMENT all efforts in sworn affidavit If you don’t make a diligent effort, the judge

will send you back for a re-do

Missing Heirs PetitionPetition MUST contain, among other things:

• Standing of petitioner to file

• Identity of defendants and ownership interest of each

• Legal description of land at issue• Legal description of land at issue

• Nature of proposed development

• Efforts to locate unknown or missing owners, usually by affidavit

• Petitioner must sign and verify accuracy of petition

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• After filing and serving, the petitioner must wait SIX MONTHS before the Court can appoint a Special

Waiting is the Hardest Part…

appoint a Special Commissioner to execute the lease on behalf of the missing heirs.

After Six Long Months….…it’s time to go to Court for the first hearing

– HOPEFULLY, the GAL will have done his/her due diligence and filed a report recommending the lease.

– Petitioner may have to testify about efforts to locate missing heirs.missing heirs.

– If the Court is satisfied that the Petitioner searched diligently for the missing heirs, it should appoint the Special Commissioner to sign the lease.

– If the Court is NOT satisfied with the Petitioner’s search, it can require additional due diligence.

– Petitioner will have to post bond for Special Commissioner.

Lucky Sevens

After 7 years:

• missing or unknown heir is barred from recovering royalty paid into court

• missing or unknown heir’s interest becomes vested in th f b t d d i lthe surface owner by court order and special commissioner’s deed

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PARTITIONW.VA. CODE § 37‐4‐1 ET SEQ.

What is Partition?

• Division of property among multiple parties who own it as co‐ownersparties who own it as co owners

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Partition

• IN WV a co‐tenant in a mineral estate needs the consent of ALL of the other co‐owners before he can develop the minerals (South Penn Oil co. v. Haught, 71 W.Va. 720, 78 S.E. 759 (1913).

• Minority owners can wield great power by refusing to leaseMinority owners can wield great power by refusing to lease their interest or execution pooling modification agreements.

• Mineral extraction without consent constitutes irreparable injury to real estate

• Subject to injunctive relief, intentional trespass and treble damages

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• Who May Bring Partition

– By Tenants in Common, Joint Tenant (inc. Mineral Owners, Lessees of Mineral Rights).

EXCEPT L f il d–EXCEPT Lessees of oil and gas minerals.

What kind of partition?

• Partition in kind

– Court divides land into equal parts for each co‐tenant

• Partition by sale• Partition by sale

– Court orders land sold at public auction and divides proceeds amongst co‐tenants

• Partition by allotment

– Court orders one co‐tenant to sell interest to other co‐tenant

Issues with Partition of Minerals

• Courts prefer in kind partition.

• Will generally partition by allotment or sale only if property cannot be conveniently divided.

– PROBLEMS: Tracts of land, timber, coal, oil and gas are not uniform in quality or quantity.

– WV adheres to long held notion of the transient nature of oil and gas.

– Topography, water, access, existing structure limiting mineral development, etc. all impact in kind partition.

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• Party desiring partition by sale has burden:

– of establishing property cannot be conveniently partitioned in kind

– that the interest of one or more parties will be promoted b th lby the sale

– That interest of other parties will not be prejudiced by sale.


• If parties cannot agree on value of land, courts will appoint commissioners to determine value

– How will this value be determined?– How will this value be determined?

• If land is partitioned by sale, who will bid at the public sale?

• Who will win the auction?

Partition

• Pennsylvania

– a subsequent partition sale may terminate an oil and gas leasehold from less than all co‐tenants. See Lichtenfels v. Bridgeview Coal Co., 344 Pa. f g ,Super. 257, 496 A.2d 782 (1985) (holding that sale passed property free of coal lease from less than all cotenants).

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ADVERSE POSSESSION

Adverse Possession is:

• Possession of land that is:

– Hostile

– Actual

Exclusive– Exclusive

– Continuous

– Open and notorious

– Under a claim of right or color of title

– For a period of time set by statute

Adverse Possession

• West Virginia

– Time period: 10 years (W.Va. Code § 55‐2‐1)

– Somon v. Murphy Fabrication & Erection Co., 160 W Va 84 232 S E 2d 524 (1977)W. Va. 84, 232 S.E.2d 524 (1977)

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Adverse Possession

• Pennsylvania

– Pennsylvania cases have recognized that title to the oil and gas estate can be established through adverse possession of that estate for twenty one p yyears. See Morrison v. Coleman, 50 Pa. D. & C.3d 333 (C. P. Warren 1988).

PRESCRIPTIVE EASEMENT

Prescriptive Easement is:

• Open

• Continuous and uninterrupted

• Use of another’s surface

• Under claim of right or color of title

• Without objection from true owner, but without the true owner’s permission

• For statutory period of time

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Prescriptive Easements

• West Virginia

– Time period: 10 years (W.Va. Code § 55‐2‐1)

– Keller v. Harman, 175 W.Va. 418, 333 S.E.2d 89 (1985)(1985)

– Use of prescriptive easement is limited to however the easement was used during the 10‐year period

• See Crane v. Hayes, 187 W.Va. 198, 417 S.E.2d 117 (1992)

Prescriptive Easements

• Pennsylvania

– Time period: 21 years 42 Pa. C.S.A. § 5530

– The scope of the use during the prescriptive period determines the scope of the easementperiod determines the scope of the easement obtained Waltimyer v. Smith, 383 Pa. Super. 291, 295, 556 A.2d 912, 914 (1989)

ACTION TO QUIET TITLEW. VA. CODE § 55‐2‐1 ET SEQ.

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Actions to Quiet Title

• When do you use this?

– Conflicting mineral reservations

– Conflicting boundary lines

To perfect claims of adverse possession and– To perfect claims of adverse possession and prescriptive easement

– Conflicting claims of ownership


• Who can bring such an action?

• Where do you file this?

• How long does it take?

• Who decides? The judge? Or a jury?


• Pennsylvania

– Pa. R.C.P. No. 1061

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ADDITIONAL WV CURATIVE PROVISIONS

§36‐3‐4. Distinctions between various kinds of deeds abolished.All distinctions in legal effect between deeds of grant, deeds ofbargain and sale, deeds of lease and release, and deeds ofcovenant to stand seized, are hereby abolished. Any instrumentwhich shows on its face a present intent to pass the title to, or anyi t t t f t i l t h ll if linterest, present or future, in real property, shall, if properlyexecuted and delivered, be given effect according to its manifestintent. No instrument purporting to convey land, or any interesttherein, shall fail of effect merely for lack of conformity with thelanguage of sections five, six, seven, eight or nine of this article

§36-1-10.Operation of conveyance in excess of actual interest.A deed which purports to convey a greater right or interest inreal property than the person making it may lawfully conveyshall operate as an alienation of such right or interest in suchreal property as such person might lawfully convey Thereal property as such person might lawfully convey. Theapplication of the doctrine of estoppel by deed, and theliability of the grantor, his heirs and personal representativesupon the covenants, if any, contained in such conveyanceshall be determined according to the rules of law applicable toother deeds.

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§37-11-2. Validation of instruments, acknowledgments and records.(b) If a period of five years has elapsed from the date of recordation of any deed or other writing, and if said deed or other writing has an acknowledgment considered defective for any reason, then every such deed or other writing shall be as good, valid and effectual in law as if the law with respect to acknowledgments and seals, in force at the date of such acknowledgment had been fully complied with; and the record of the same duly made in the proper office for recording deeds in the state of West Virginia or in the state of Virginia before formation of West VirginiaWest Virginia, or in the state of Virginia before formation of West Virginia, and exemplifications of the same duly certified, shall be legal evidence in all cases in which the original would be competent evidence: Provided, That this section shall not apply to suits now pending and undetermined insofar as it amends laws existing at the time such pending suits were instituted, nor to any suit that may be brought within one year after the day this section takes effect, insofar as it amends laws existing at the time this section takes effect; nor shall this section apply to any deed or other writing which has heretofore been declared or held invalid by any court of competent jurisdiction.

§55-2-5. Enforcement of liens reserved by conveyance or created by deed of trust or mortgage on real estate.(a) Any lien reserved by any conveyance of real estate or created by any deed of

trust or mortgage on real estate expires after the following periods of time,unless suit to enforce the lien is instituted prior to expiration of the time periodor unless the lien is extended as specified in subsection (b) or (e) of thissection:

(1) If the final maturity date of the obligation is ascertainable from the lieninstr ment the lien e pires fi e ears after that dateinstrument, the lien expires five years after that date.

(2) If the final maturity date of the obligation is not ascertainable from the lieninstrument, the lien expires thirty-five years after the date of the lien instrument.

However, if the lienholder rerecords the lien instrument prior to thirty-five yearsfrom the date of the lien instrument and includes a copy of the obligation securedby the lien so that the final maturity is ascertainable, the lien expires five years afterthe date of maturity.

THANK YOU!

robert.andre@steptoe‐johnson.com

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Ohio Title Issues

A tour of famous Ohioans guided by a decidedly less famous Ohioan, Tim McKeen

A little bit of background on Ohio

• Ohio is the 17th State in the Union

• It is the 34th Largest State and the 7th most populous

• Ohio comes from the Iroquois word for “Great River”

It is the birthplace of 7 Presidents• It is the birthplace of 7 Presidents

• It has 88 Counties

• The first state in the Union under the Northwest Ordinance

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What is a buckeye?

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What is a buckeye?

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4

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In the beginning…

John D. Rockefeller

ClevelandStandard Oil Refinery No. 1 Cleveland, c. 1897

We’re not new to oil and gas

• Ohio has 64,000 producing oil and gas wells

• Production has been established in 70 counties

• Over 250,000 wells have been drilled

• Limited Cases

Wells drilled and completions received by county 2009

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Ohio’s two unique title issues

Dormant Mineral Act Dower

Pro Football Hall of Fame ‐ Canton Rock and Roll Hall of Fame ‐ Cleveland

Ohio’s Dormant Mineral Act

• ORC 5301.56• Process for reuniting

severed oil and gas interests with surfaceinterests with surface

• Two Versions• 20 year requirement

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Neil Armstrong ‐Wapakoneta

The Old Version of the Act

1989 Version

• Automatic divestiture if

• In the last 20 year:

• No title transaction

• No production (or pooled production)

• No Storage

• No separate assessment

• No claim to preserve

• Not owned by stateJohn Havlicek – Bridgeport

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The New Version of the Act

2006 Version

• All criteria of old act must be met, plus new notice requirements

• Effective June 30, 2006

Lebron James ‐ Akron


Unlike 1989 Version, 2006 Version has detailed “notice” requirements:

• Surface owner sends notice by certified mail, return receipt requested, to mineral interest owner

l k ddat last known address• If such notice not received, publish once in paper

of general circulation• At least 30 but not later than 60 days after service

or publication, surface owner files affidavit of abandonment in recorder’s office

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• Mineral interest owner has 60 days from service of notice by mail or publication to either file a claim to preserve interest or an affidavit identifying one of the saving events in the 20 years prior to notice

• After 60 days with no filing by mineral interest owner, surface owner directs the county recorder to memorialize the abandonment on the record for the mineral interest being abandoned

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CONCLUSION

This is a very sticky area of Ohio Law

• No Ohio Supreme Court case on point

• Remember July 1, 1986 is an important date

• Minerals severed before this date are likely subject to old version of the act

Bobby Knight‐ Orrville, also home of Smucker’s Jelly

The Power of Dower

Ohio still recognizes statutory dower

ORC 2103.01

All married peopleMust release dower

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Thomas Edison ‐Milan

Common Dower Mistakes

• Jason Lucas, a married man dealing in his sole and separate property

• Lack of marital status

• Ohio is a separate property state

• I owned this property before I got married

George Armstrong Custer – New Rumley

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Joint Ownership

• Tenants in common is default rule

• Also recognize Joint Tenancy

• Affidavit re: Joint Tenancy

• Tenancy by the Entireties from 1972 to 1985

• Special rules about joint tenancy

Steven Spielberg – CincinnatiJoint owner of Dreamworks

Death in Ohio

• Certificate of Transfer

• Wills

• Probate Process

• Affidavits• Affidavits

• Transfer on Death Deeds 2000‐2009

• Affidavits of Death

William Henry Harrison – North Bend

32 day term as President

Trusts in Ohio

• To take a lease from a trust, you need:

• Signed by trustee

• Memo of Trust of Record

• Or Affidavit of Facts along with relevant trust provisions

• Related: Power of Attorneys

Jim Tressel – Mentor

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New Foreclosure ProtectionDon’t bank on it

• ORC 1509.31

• Enacted June 30, 2010

• Super priority for leases

Salmon P. Chase Cincinnati

A few parting shots…

• Definition of Minerals

• Minimum Royaltyy y• Limited case law• Domestic wells

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Annie Oakley – North Star

• Ohio is more of an Appalachian title state than a mid-continent state

• Ohio has limited oil and gas lawg• Ohio has a dormant mineral act• Ohio is one of the few states that still

recognizes dower

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Any questions?

Bob Stoops ‐ Youngstown

Thank You!

Timothy McKeenSteptoe & JohnsonWheeling, WVOffice: 304.231.0473

timothy.mckeen@steptoe‐johnson.com

Tim McKeen – St. Clairsville

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