Severances, Reservations, Cake, & Sticks: Are we talking about minerals in Ohio?
The Pegasus - Lex et Lux: The Law, Illuminated
Have you ever dreamed of winning the lottery? Or having the Publishers Clearing House Prize Patrol knock on your door (when it was a possibility)? Do you ever receive emails or phone calls that sound too good to be true? Maybe from a Nigerian prince?
For the last fifteen years or so, it has not been unusual for people all over the United States, or anywhere in the world, to be contacted by a landman and told they are an oil heiress – okay, I don’t know that they used the term “heiress” but certainly people were contacted and told they were a long-lost heir of an Ohio landowner who had the foresight, or maybe luck, to reserve mineral interest in eastern Ohio. Usually, these landmen are looking for a lease from the heir or maybe even to purchase their share of a reserved, inherited interest, and you guessed it – we then get calls from these heirs because they are concerned it may be too good to be true.
Sometimes it is not too good to be true, and this is the first time someone learns of an asset kept for them by their great-great grandparents or some ancestor. Especially in eastern and southeastern Ohio where coal and oil and gas production was prevalent, landowners often reserved or severed mineral interests when they transferred property. I like to think of this as the landowner standing in the middle of their woods or field with his arms wrapped around a huge bundle of sticks, symbolizing all the rights he holds to the land he stands on. When he sells the property to a buyer, he hands over all those sticks except (for example) the sticks that represent all mineral rights under that piece of land. When he does this, he is severing those rights from the rest of the property rights, handing over everything else, except those mineral rights that he reserved. Mixing metaphors, sometimes a severance or reservation may be a reservation of only a particular layer of the layered cake the gentleman stands on in his woods – landowners would sometimes only reserve a particular seam of coal (one layer of the million-layered cake). Similarly, modern leases are often formation-specific and only lease a particular layer of shale for oil and gas production – another layer in the cake.
If you’ve ever talked with me about minerals rights, read about Ohio’s Dormant Mineral Act or Marketable Title Act, and bought or sold property in Ohio, you’ve probably been subjected to a speech about all the ways mineral severances are not always clean, clear, and simple. We have seen situations where multiple people have made multiple severances for the same mineral rights under the same property over a hundred years; we’ve seen situations where the main dispute is over the interpretation of the fractions reserved by a prior owner; we’ve seen situations where past owners severed interest and that interest has been passed down through inheritances and may now be owned by hundreds of cousins (and anyone else someone may have named in a Last Will & Testament); and sometimes reservations are affected by the Ohio Dormant Mineral Act and/or the Ohio Marketable Title Act. To top it off, most reservations are not identical – people making reservations often used various language and may have reserved portions of interest, only some types of interest, and most other configurations you can imagine (and some maybe you wouldn’t even imagine). All of those are different sticks being kept by the owner standing in his woods.
We plan to write posts for The Pegasus on all of the topics referenced in this post related to mineral severances and reservations and the cake and sticks related to those severances. Stay tuned for more!
