“However the Pennsylvania legislature chooses to fix the problem of missing and unidentified mineral owners, the bottom line is that these laws are good for oil and gas operators.”
-Emily P. Overfield
How can a state incentivize drilling when mineral owners are missing? For a typical tract of land, the mineral rights are gifted, bequeathed, and divided in countless ways over the years. This leads to the problem of missing or unidentified owners. Clearly, oil and gas companies can’t lease land when the owner is unknown.
In a pro-drilling spirit, the Pennsylvania legislature recently addressed this problem. In January 2013, the Pennsylvania Senate proposed Senate Bill 258 (“SB 258”). The bill, proposed by Senator Gene Yaw, R-Bradford County, would amend Title 42 of the Pennsylvania Consolidated Statutes by creating a rebuttable presumption that subsurface rights unclaimed for more than 50 years have been abandoned. In the event of abandonment, the subsurface rights are awarded to the surface owner of the real property.
SB 258 may sound familiar. In fact, the Pennsylvania legislature already attempted to solve this problem back in 2006 with the passage of 58 P.S. § 701.1, called the Dormant Oil and Gas Act, or DOGA. DOGA’s mechanics differ slightly from the proposed SB 258. DOGA allows an interested party to petition for the creation of a trust to hold any bonus or royalty payments until the true owner steps forward or is identified. If a period of years passes without the true owner being identified or found, the trust reverts to the state. Both laws effectively provide a method for oil and gas companies to lease land that they otherwise would be unable to.
Does Pennsylvania really need both of these laws? I, for one, agree with State Representative Robert Godshall, R-Montgomery County, who proposed in February 2013 that DOGA be amended. From a pragmatic standpoint, amending DOGA rather than passing the new SB 258 makes sense. Clearly, the legislature feels that DOGA wasn’t cutting it, perhaps because DOGA requires a diligent search for owners before a trust is created, while SB 258 is seemingly automatic. In fact, critics have pointed out this difference as a drawback of SB 258. With the current oil and gas boom in Pennsylvania, it’s unlikely that owners will neglect to come forward – unless they don’t know about their ownership. Without a search requirement, no incentive is created for anyone to attempt to seek them out. If the surface owner differs from the mineral owner, the surface owner stands to gain from a missing mineral owner because the land passes to the surface owner under SB 258. The thorough search requirement protects the property rights of missing and unknowing owners.
State Representative Godshall proposes that DOGA be shortened to just a 20 year period, after which the mineral rights would be vested in the surface owner. An amendment to DOGA, including the diligent search requirement but shortening the time period to 20 years, may be the perfect balance of these two laws. However the Pennsylvania legislature chooses to fix the problem of missing and unidentified mineral owners, the bottom line is that these laws are good for oil and gas operators.