Ohio House Bill 72: Revisions to Procedures Under ORC § 5301.332 (Lease Forfeiture)

Ohio House Bill 72: Revisions to Procedures Under ORC § 5301.332 (Lease Forfeiture)

On October 31, 2013, Ohio Governor Kasich signed Substitute House Bill 72 (HB 72) [enhanced version available to lexis.com subscribers], into law. HB 72 amends various Sections of the Ohio Revised Code (the Code), in part, to modernize the county recorder requirements. Regarding Sections of the Code which set forth procedural requirements for the forfeiture of oil and gas leases (Section 5301.332) [enhanced version available to lexis.com subscribers], and the abandonment of severed mineral interests (Section 5301.56 (2006) [enhanced version available to lexis.com subscribers], also known as the Dormant Mineral Act), HB 72 adds the requirement that a Notice of Failure to File be recorded in order to effectuate the forfeiture of an oil and gas lease or the abandonment of a mineral interest under the Dormant Mineral Act. This replaces the current procedural requirement that the recorder place a marginal notation on the lease or on the record of which the severed mineral interest is based to complete a claim under these Sections of the Code. HB 72 becomes effective on January 30, 2014.

Lease Forfeiture

Section 5301.332 of the Code provides a lessor with the right to pursue the forfeiture of a lease so long as there are no producing or drilling oil or gas wells, and: (i) the lease term expired, or (ii) the lessee failed to comply with the covenants of the lease. Currently, the lessor is required to serve notice of the lessor’s intent to declare the lease forfeited, and subsequently file an affidavit of forfeiture. If the lessee, or the lessee’s successors or assigns fail to provide notice to the lessor that the lease is still effective within 60 days of the lessor’s notice, then the lessor may cause the county recorder to note upon the margin of the lease that "This lease cancelled pursuant to affidavit of forfeiture recorded in Lease Vol. …, Page …". Upon such notation, the forfeiture is complete.Beginning January 30, 2014, pursuant to the revised procedure under HB 72, instead of causing the recorder to make a marginal notation on the lease, the lessor must file a notice of failure to file. The notice must contain the following:

1.   A statement that the person filing the notice is the lessor or the lessor’s successors or assigns;

2.   The document number or volume and page of the lease record where the oil or gas lease is recorded;

3.   A general description of the land; and

4...The statement: "This lease cancelled pursuant to affidavit of forfeiture recorded as Document Number …, or Official Record/Lease Vol. …, Page …".

Once the notice is recorded, the record of the lease shall not be notice to the public of the existence of the lease or of any interest therein or rights thereunder, and the record shall not be received in evidence in any court of Ohio on behalf of the lessee, or the lessee’s successors or assigns, or against the lessor, or the lessor’s successors or assigns.

Dormant Mineral Act

Section 5301.56 of the Code, the Dormant Mineral Act, provides a surface owner with a procedure by which they can pursue ownership of previously reserved mineral interests. Currently, under the Dormant Mineral Act, the surface owner is required to serve notice to the mineral interest holder of the surface owner’s intent to declare the mineral interest abandoned and subsequently, file an affidavit of abandonment. If the mineral interest holder fails to assert a claim that the interest has not been abandoned within 60 days of the surface owner’s notice, then the surface owner may cause the recorder to note upon the margin of the record of which the mineral interest is based that "This mineral interest abandoned pursuant to affidavit of abandonment recorded in volume ...., page ....". Upon such notation, the mineral interest vests with the surface owner.

Beginning January 30, 2014, pursuant to the revised procedure under HB 72, instead of causing the recorder to make a marginal notation on the record of which the severed mineral interest is based, the surface owner must file a notice of failure to file. The notice must contain the following:

a. A statement that the person filing the notice is the owner of the surface of the lands subject to the mineral interest;

b. A description of the surface of the land that is subject to the mineral interest; and

c. The statement: "This mineral interest abandoned pursuant to affidavit of abandonment in volume .…, page....".

Immediately after the notice of failure to file a mineral interest is recorded, the mineral interest shall vest in the owner of the surface of the lands formerly subject to the interest, and the record of the mineral interest shall cease to be notice to the public of the existence of the mineral interest or any rights thereto. In addition, the record shall not be received as evidence in any Ohio court on behalf of the former holder or the former holder’s successor or assignees against the owner of the surface of the lands formerly subject to the interest. However, the abandonment and vesting of a mineral interest pursuant to Sections 5301.56(E) to (I) shall only be effective as to the property of the owner that filed the affidavit of abandonment under Section 5301.56(E).

In addition to the procedural changes outlined above with regard to Sections 5301.332 and 5301.56, HB 72 amends the terminology in these sections to gender neutralize the law.If you have any questions regarding the pursuit of forfeiture of an oil and gas lease or a claim of abandonment of a mineral interest under the Dormant Mineral Act, please contact Bruce F. Rudoy at 412-253-8815 or brudoy@babstcalland.com, Christopher J. Hall at 412-253-8820 or chall@babstcalland.com, or Matthew L. Lambach at 412-253-8825 or mlambach@babstcalland.com.

Copyright 2013 • Babst, Calland, Clements and Zomnir, P.C. • Two Gateway Center, Pittsburgh, PA 15222 • 412-394-5400 • Administrative Watch is privately distributed by Babst, Calland, Clements and Zomnir, P.C., for the general information of its clients, friends and readers. It is not designed to be, nor should it be considered or used as, the sole source of analyzing and resolving legal problems. If you have, or think you may have, a legal problem or issue relating to any of the matters discussed in the Administrative Watch, consult legal counsel.

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