Mineral Sale vs. Force Pooling vs. Oil and Gas Lease
Determining the best way to monetize minerals is a pivotal decision. Each of these alternatives can have drastically different effects and purposes.
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McCleery Law Firm
Extraordinary Legal Help for Those in Need
McCleery Law Firm was founded by Attorney Greg McCleery shortly after passing the bar, as a solo practice. From the beginning, he focused on setting an extraordinarily high bar for customer service and responsiveness. Under his leadership, the firm embarked on a program of exponential growth, opened six new branch office locations, and brought on experienced legal talent to join the McCleery Law team. He has handled hundreds of family, juvenile, and criminal law cases and worked extensively on oil and gas title research and curative matters for corporate and individual clients. One of his passions is working with local business owners to offer guidance on how to succeed, innovate, and grow their own businesses, and leverage new technology to their advantage. In addition to managing his legal practice, Greg continues to work with local agencies to address issues of domestic violence and to ensure equal access to justice.
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Practicing law requires being willing to fight other people’s battle just as hard as if they were your own. People call us when they are facing problems without easy answers. Whatever it is that they need solved, they’re looking for someone who understands what they’re up against, and can help them through that process, confidently and capably. We begin every day with the mindset that people are depending on us to do our best in their toughest situations. Putting the client’s needs first, using all our skill and energy and creativity to help solve those problems, is how we measure success.
We ask our lawyers to be down to earth, easy to work with, tough advocates in the courtroom, and to always recommend the best option for the client. If we might be able to solve a problem with a five-minute phone call instead of a five-month court case, we’ll let you know about that option. Serving our clients well starts with having attorneys whose heart is in the right place, and we’re proud to work with a team who shares that with one another.
With our main office in New Philadelphia and branches in Akron, Canton, Coshocton, Millersburg, Carrollton, and Cadiz, we are able to serve many communities across eastern Ohio. We also travel to neighboring counties to serve our clients. Our lawyers have experience with a wide range of legal issues, including divorce and family law, criminal law, personal injury, probate, trusts and estate planning, bankruptcy, business planning, and more.
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Disclaimer: As required by the Ohio Supreme Court, please be advised that every case and fact pattern is unique. Prior results do not guarantee the same result in another case.
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Landowner’s Guide to Oil and Gas Leases and Mineral Sales
It is critical for landowners to educate themselves about the lease process. These transactions can have unpredictable consequences.
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Lost Treasure: Abandonment and the Ohio Dormant Minerals Act
The year is 1880, and Mr. and Mrs. Smith own a 160 acre farm in the rolling, green hills of Harrison County, Ohio. A landman strolls up the dirt lane to their home, and offers Mr. and Mrs. Smith a a lease for their oil and gas. It doesn’t make them rich, but every bit counts on a 19th century farm. Eventually Mr. and Mrs. Smith are ready to sell the farm and move in with one of their children ten years later. They decide to sell the surface, but reserve and keep their mineral rights. No one ever approaches Mr. and Mrs. Smith after their first lease expires. Years pass, then decades. The family forgets the minerals exist. Eventually, Mr. and Mrs. Smith die. Here, as is usually the case, no one ever bothers to run a title search for any mineral rights or other real estate that they might have owned at the time of their death. Mr. and Mrs. Smith had four children, who have children of their own, who also have children of their own, and so on. And by the time the year is 2024, Mr. and Mrs. Smith have over a thousand different heirs. Most of the individual heir owns only a small fragment of the total amount. But 160 acres in Harrison County in 2024 might lease for over a million dollars as a signing bonus for a lease, or over three million dollars cash in a mineral sale. The Modern-Day Problem Mr. and Mrs. Jones own the surface of the 160 acre farm. The news hits them like a punch to the gut. How could they lose title to their minerals, due to something that happened over a hundred and forty years ago? The oil and gas company also faces a huge challenge to secure signatures from the heirs and provide proper notice. If they fail, it could delay their unit from going forward. Meanwhile, one of the heirs, Bob Smith owns a 25% interest in the minerals. What steps each of them take next, and how quickly they act, will determine who controls this long-forgotten, vulnerable multi-million dollar asset, and who is left in the cold. Two Roads to Abandonment Surface owners have two primary legal options to declare minerals abandoned. If successful, this allows them to seize the minerals back from the original owners. The two primary methods of doing so are the Ohio Dormant Minerals Act (ODMA), and the Ohio Marketable Title Act (OMTA). The first step in declaring minerals abandoned is a thorough public record search. The search covers the records in the county where the minerals are located. If the owners either know the location of the heirs, or find traces of the heirs, they must attempt to send notice via certified mail to the last known address of the owners/heirs. If they are unable to send notice via certified mail to any known owners/heirs, the surface owner may instead file a notice of publication in a local newspaper. Once the appropriate steps are complete, the surface owners can file an affidavit of abandonment. An attorney can draft and file the affidavit in the recorder’s office, taking care that it meets the technical requirements. However, either the oil and gas driller or the original owner/heirs might not recognize the affidavit. In that event, a court must approve the steps taken to declare the minerals abandoned in a quiet title action. Unfortunately, such quiet title actions can sometimes be very costly, based upon some of the problems described in the following section. Pernicious Incentives There are some obvious issues with this system. The first is that the surface owners stand to benefit most from NOT finding the heirs, the tune of to the tune of five, six, seven, or eight figures. Nevertheless, the surface owners are in charge of performing a “diligent” search. The definition of a “diligent search” is a second major problem. The court have intentionally left this issue vague and unclear. Their belief is that the legislature should act to clarify the standard, so that the courts do not exceed their authority. According to current case law, most of the time a search of the public records in that county will be sufficient. Sometimes, clues founds in the public record require an expanded search. What circumstances will trigger that obligation to search elsewhere continues to be an evolving and hotly contested area of law at the time of this writing. Another significant irony is that a capable title researcher can easily track down most of the heirs at law. The internet offers significant advantages for tracking heirs beyond the county records. However, only county records matter for abandonment. As a result, many owners/heirs are in the frustrating position of receiving a certified mail notice of a lawsuit from the surface owners, which describes how they could not possibly be sent a certified mail notice that the minerals were abandoned (through a search of the county records only). And in turn, some surface owners might be placed in the frustrating position of having to expend significant time and resources, only to notify third parties that they are now the lucky owners of some extremely valuable minerals that the surface owner had hoped to be able to reclaim for themselves. Defending Mineral Interests The Ohio Dormant Mineral Act lays out the details for how the system works. The original owners/heirs (“holders”) also have steps that they can and should take to preserve their rights. The three primary methods the original owners/heirs can use to defend their minerals are: Request a separate auditor’s tax parcel number for your minerals. Periodically file Affidavits of Preservation in the recorder’s office. Affidavits of preservation can protect minerals from abandonment for twenty years. The Affidavits must be filed on time, before the minerals are considered abandoned due to a filing by the surface owner. Put the minerals into production by signing a lease. As a practical matter, an original owner/heir could also...
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Bankruptcy FAQ
What to know before filing a bankruptcy case.
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