Dormant Minerals Acts And The Marcellus And Utica Shale Plays

Ohio, Pennsylvania, and West Virginia are currently home to one of the most impressive natural resource developments in our history: the unconventional hydrocarbon resources from the Marcellus and Utica shale plays. For years, the immense value contained in these formations eluded capture due to inadequate technology, but with the combination of horizontal drilling and hydraulic fracturing, production is now occurring where never possible before. One challenge to development and production, however, stems from property law. The long-standing practice of partially or completely severing surface and mineral estates, combined with years of devise, descent, and conveyance, has left many oil and gas rights highly fragmented with little or no connection to surface estate ownership. As a result, the owners of these minerals are oftentimes unaware of their rights, too remote to care, or perhaps too many in number to work out an acceptable development arrangement.

These realities—first considered in the context of traditional mineral resources, but equally applicable to unconventional shale plays—have led many states to adopt dormant minerals acts, also known as dormant oil and gas acts or mineral lapse statutes. Dormant minerals acts are statutory mechanisms designed to facilitate the development of mineral resources generally in one of two ways: (i) by identifying unknown or unlocated mineral owners so that they might receive the benefits of mineral development, or (ii) by declaring mineral interests abandoned after a requisite period of time and reuniting the surface and mineral estates. The former approach, exemplified by Pennsylvania's dormant minerals act, works to protect the interests of the owners of mineral rights while allowing a known interest owner to develop the estate. The latter approach, exemplified by Ohio's dormant minerals act, embodies a use-it-or-lose-it mentality requiring owners to act lest their rights transfer to another party, usually the owner of the surface estate. West Virginia's statute takes a hybrid approach, working initially to protect unknown or unrepresented mineral owners and later working a reunification of the estates to the extent the rightful mineral owners have not been found.

Dormant minerals acts, no matter their style, have the power to significantly affect property rights and mineral development. Landowners believing their property sits atop unconventional resources must be sure to confirm not only that they own the mineral rights, but also that their rights have not been lost pursuant to a dormant minerals act. Similarly, oil and gas developers must be aware of potential title defects caused or cured by dormant minerals acts that may affect leasing rights. This Commentary will briefly examine the legal history of dormant minerals acts before examining more closely the laws in...