Phone Scam - February 8, 2018

A local woman called this afternoon indicating she had received a voicemail from our office requesting credit card information.  I verified that nobody in our office had ever heard of this particular person, and that nobody in our office made such a call.  It would appear, then, that someone is spoofing our office's phone number in an attempt to defraud people of money.Caller ID is quite easy to manipulate.  Many smartphone apps permit a caller to select the number they appear to be calling from. The Federal Communications Commission offers this information about Caller ID "spoofing."Here, the caller poses as a law firm attempting to collect on a debt.  Some firms (particularly collection law firms) make similar, legitimate phone calls, making it difficult for the victim to discern the authenticity of the alleged debt.  This link will explain your rights as a debtor in such a situation, and may provide you with some useful information to determine if the call you are receiving is a legitimate one.If you receive a call appearing to originate from our office, please take note of the time of the call, and contact me at the information above.Be careful out there-NP

Dormant Minerals - Searching for Heirs

A previous article discusses more generally the notice requirements in Ohio's Dormant Minerals Act

Who must be notified?

Before declaring a mineral interest as abandoned, a surface owner must first provide adequate notice to the "mineral holder."  Many times, the mineral holder is deceased and has been for many years.   If that's true, the surface owner must notify the holder's heirs.

Who are a holder's heirs?

It depends on the structure of the holder's family.  It could be a surviving spouse, the holder's children, grandchildren, great-grandchildren, or even aunts and uncles depending largely on how long ago the mineral holder died.

How do I locate a mineral holder's heirs?

Unless you personally know the mineral holder (or their family), chances are you don't know the mineral holder's family tree.  Online tools such as Ancestry.com can help.  And publicly available court records might help, as well.  Consider looking through deed records as well as probate records to see who inherited the mineral holder's assets.

What if I can't find a mineral holder's heirs?

Sometimes, public record searches lead to dead-ends, even to the most skilled abstractor.  If no heirs can be identified, or if there whereabouts are unknown such that "service of notice [via certified mail] cannot be completed," the Dormant Minerals Act authorizes notice by publication.

Can I skip the heir search and simply publish notice?

Probably not. The statute defines “holder” broadly to likely include heirs of the original party who created  the mineral interest  The statute also requires an effort to serve holders via certified mail.  However, the act does not describe how big or exhaustive of an effort must be made before publishing becomes appropriate.

How hard do I have to search for heirs before publishing becomes OK?

The Dormant Minerals Act does not answer this question.   However, Ohio courts have begun to shed some light on this question.  A recent case from the Jefferson County Court of Common Pleas (Sharp v. Miller, 15-CV-108) found that a diligent but fruitless search through publicly available records in that county was sufficient to allow serving notice by publication.  That court pointed out that the statute, in regard to other issues, focused upon the county where the minerals were located.  The newspaper notice is to be published only in such county.  Moreover, any party wishing to preserve their mineral interests must record a claim in the county where the minerals are located. Accordingly, the court established a rule that, unless a landowner has actual knowledge of a holder’s name and location, it is sufficient to limit a search for holders to public records in the county where the minerals are located.Thanks for reading.-Eric

Pipeline Close-Up

Pipeline Installation Photographs

The following image is a close-up of a pipeline in Eastern Ohio that was being installed in the early fall of 2017.You can see the welded section (red), the remainder of the pipe (green), and the markings done by welding inspectors. In this instance you can see the word ‘repair’ along with some specific references to dates and inspector numbers. On my client’s properties with high pressure FERC pipelines, I require that 100% of the welds be x-rayed in advance. This is a good illustration as to why I require this. Had this weld not been inspected, the pipeline would have certainly blown out during the water pressure test. Generally, FERC pipelines are tested with water at 110% in excess of design capacity pressure prior to flowing natural gas through the pipeline. While fresh water certainly wouldn’t harm your property from an environmental standpoint, it could definitely cause damage to nearby trees, crops and structures. I have heard of a bad weld causing a barn to blow down entirely during a water pressure test. This is one of the innumerable things to watch out for during contract negotiations. Let's look at another picture:In this picture, notice the nice distance between the spoil pile and the nearby trees. Dumping excessive dirt on top of tree roots can cause rampant tree death on your property. Finally, you’ll also note the some rocks below the pipeline. Just a quick note to say that I highly recommend a rock sifting and removal clause.In general, this pipeline company did a fairly good job with installation. Reclamation is yet to come.

Pipeline Construction Issues

As a pipeline attorney, I spend a lot of time impressing upon potential clients the importance of having a rock-solid pipeline contract (this can be an Easement or Right-of-Way). The importance of a thorough, specific pipeline contract cannot be overstated. There is something else I say that often surprises landowners, and that is, “no matter how solid I make the contract, neither of us can control what happens on your property during construction.” Over the course of the last twelve years, I have seen the good, the bad and the ugly with respect to pipeline construction. I’ve seen A+ operations and F- ones. And the reality is that even the best contract in the world cannot control the physical operations. All it can do is set you up for success in dealing with problems. Let me give a few examples.This fall I was standing in knee-deep mud on a property in Eastern Ohio. Immediately in front of me was a ten-foot ditch. On the other side of the ditch was a thirty-six-inch diameter pipeline ready to be lowered into the ground. On the far side of the pipeline was my client’s “back fields” with head-high hay and waist-high beans. Oops. In this situation, we had written the contract specifically to say that the pipeline company would leave two land bridges during construction which would allow my client to take his combine and baler across the ditch to his backfields. The construction crew ignored their instructions and didn’t leave my client either land bridge. So now his crops were neglected and when he eventually got to the other side he was going to have problems getting them cut down to size without damaging his equipment. Let alone the fact that it was coming into October and he might not be able to sell the crops he was able to cut.Earlier this summer, a different pipeline company failed to close a gate behind them and let a client’s cattle out into the middle of a state route. Last year I had multiple clients who had ‘water boxes’ placed on their property outside where the pipeline company was allowed to be per the contract. I’ve seen pipeline companies fail to clean up the windrows of brush and small timber that they created during construction.  I’ve seen them block driveways where they weren’t supposed to be. I’ve seen them take trees down where they weren’t supposed to be.Despite all of the above, I’ve also seen pipeline companies go above and beyond the call of duty. I’ve seen them fill low-lying areas with extra soil to help out a landowner. I’ve seen them rise to the occasion and admit their mistake and help wrangle escaped cattle. I’ve seen them return a property to golf-course conditions.What I want to impress upon you is that no contract can prevent these “accidents.”This makes it extremely important for you, as a landowner, to work with an attorney who 1) has seen it all, 2) has an existing relationship with pipeline companies who know she means business, 3) understands the potential solutions to construction issues, and 4) doesn’t mind getting her boots dirty to come up with creative solutions.The contract is only 75% of the battle.

Things Land Agents Say - Part Two

This is a second post in a series describing common promises or other statements land agents make to entice landowners to signing leases, easements, or other agreements relating to oil and gas or pipeline transactions.  Click here to view part one.  “The crops will grow right over it, you won’t even know it’s there!” While the first part of this statement may be true, the second part is a loaded gun. True, most pipeline contracts allow farmers to plant crops on top of the easement. But trust me, the farmers will know that it’s there. Under the best case scenario circumstances a farmer will suffer yield loses in the first four years. Year one is construction. Year two is reclamation (for farm ground this should include fertilization and disc’ing, aeration, etc. to prevent compaction). Even if these methods are implemented correctly, I still usually see up to two years significant yield loss. With the worst case scenario you could see issues with compaction, erosion, snow melt, poor fertilization, and any other number of problems for years to come. Most of these issues can be addressed in your contract. Any pipeline contract worth its salt deals with specific methods for reclamation and particular fertilization methods [by the way, the same is true for non-crop lands!]. An exceptional pipeline contract will also deal with what happens when the pipeline company doesn’t follow the contract, or a perfect storm of weather circumstances causes severe compaction or erosion. Trust me, you’ll know it’s there. Please speak with an experienced pipeline attorney to plan for the worst-case scenario.“Pipelines are safe.” Pipelines are widely considered to be the safest method of transporting petroleum, natural gas and their constituents. But this is largely because a pipeline’s only competition is rail, truck and barge, which also come with fairly severe safety considerations of their own. The debate rages on inside and outside of the industry as to what ‘safe’ really means. As a landowner, what you care about is the two measures of distance: how far away from your home/business/buildings the pipeline will be, and how deep in the ground it will be. The larger these distances, the more you have set yourself up for success in the event that a catastrophe happens. Sometimes you can control (or at least have input in) where the pipeline goes across your property—sometimes you can’t. This depends on what type of pipeline is being installed. Typically, a landowner can have input into how deep the line is buried, although most pipeline companies act like you can’t. Getting good legal representation is key to understanding both these issues on your specific property.“We can’t do that because of our regulations.” This phrase is most often used when you’ve asked a pipeline company to do something that they don’t want to do because it will be expensive for them. I hear it a lot when a landowner asks for extra depth of cover. On a FERC (federally regulated) pipeline, it’s true that the company will have to follow regulations, what they don’t tell you is that often they are allowed to raise the bar above FERC regulations. For example, FERC may require three feet of cover on top of the pipeline, but there is nothing stopping the pipeline company from agreeing to five feet of cover over the line. There are innumerable examples here. Also note that non-FERC pipelines have very few regulations at all.An experienced pipeline attorney can help you translate the above statements to fit your needs.

Things Land Agents Say

Things that Land Agents Say - Part One

Part Two can be viewed here. Today I thought I would write some of the things that I’ve heard land agents say to entice landowners to sign oil and gas documents. Part One will cover things that are not specific to a particular type of oil and gas contract, meaning that you could hear these phrases in lease, well-pad, pipeline, or other oil and gas negotiations.“Don’t worry, we will just call most of your payment ‘damages’ so that you don’t have to pay taxes.” When I hear this phrase, it makes me want to scream. First, please don’t ever take tax advice from a land agent. Call an accountant—preferably a seasoned accountant who understands oil and gas contracts. Second, most damages are taxable per the I.R.S.! Third, for those non-taxable damages (a rare occurrence to begin with), they are generally limited in scope so that they can only be used one time. For those folks that live in oil and gas country it would be common to have multiple leases, pipeline rights of way and possibly even a well pad agreement. If you’ve used up your damages in some of your early transactions, you may not have any more to use! Crop and timber damages (of any kind) are generally taxable at ordinary income levels no matter what you do. Lease bonus money is also taxable at ordinary income levels because it is considered rent by the I.R.S. Sales of mineral rights can be capital gains (lower tax rate) in the right circumstances. Pipeline and well-pad damages can sometimes be considered damages to the residue of your property, which could mean not paying taxes, but can only be used one time. I have seen too many people take tax advice from land agents and they end up almost losing the farm by the time April 15 rolls around. Please call a knowledgeable accountant and oil and gas attorney to help minimize your tax burden.“Hurry up and sign today, I can only give you this price through today.” This phrase comes in a bunch of different flavors, so you can use your imagination here. The point is the land agent is trying to entice you to hurry up and sign before you ask too many questions. I call these ‘used car salesman tactics.’ Now just like car salesmen, there are good and honest land agents—this is not intended to disparage either profession—but at the end of the day, they are in a sales job where numbers matter. I encourage landowners to remember that at the end of the day their agent has to report into his boss how many signatures he collected from landowners. No land agent wants to finish the day empty. Prices in this industry fluctuate, that’s just the way it goes. Have an attorney review your paperwork and your offer. Make your deal with the information you have in front of you at the time and don’t let yourself feel buyer’s remorse after the fact. Above all else, please don’t fall victim to land agent sales tactics. Take your time and do it right. Even if you do lose a couple dollars, you’ll still come out ahead in the end.

Will Contests in Ohio - Frequently Asked Questions

If you expected an inheritance from a loved one but did not receive it, or received less than anticipated, you may have a good reason to challenge the deceased person's last will and testament. Challenging the validity of a will is commonly called a "will contest," and the person who created the will is called the "testator."

Who may contest a testator's will?

Anyone who would have benefited from the testator's estate if the will in question did not exist. The contestant must prove they would have inherited by either the testator's prior will, or by Ohio's intestacy laws if the testator had no prior will. If the contestant would not receive an inheritance from testator's prior will or from Ohio's intestacy laws, the contestant does not have standing to proceed with the lawsuit, and it will likely be dismissed.

When does a will contest need to be filed?

Within three months of either 1) the contestant's receipt of notice that the testator's will has been admitted to the probate court, or 2) the contestant's waiving notice that the testator's will has been admitted to probate. If the contestant didn't receive notice or waive notice, the time to bring the will contest is less clear.  Ohio's relevant law is silent on this issue.

What does the contestant need to prove?

The contestant must prove that the testator's will was either 1) improperly witnessed, 2) executed under undue influence, 3) executed without testamentary capacity, or 4) executed without knowledge of its contents.Note: In Ohio, wills are presumed to be valid upon their admission to probate.  The contestant bears the burden of proof in proving the will should not be enforced. 

How is a will properly witnessed?

Wills must be "attested to" and "subscribed by" by two competent witnesses. The witnesses must actually observe the testator sign the will (or alternatively, ask the testator to acknowledge their signature), must be disinterested (i.e. the witness should not be a beneficiary of the will), and must sign the will as a witness.

When is a will executed under undue influence?

Undue influence can be found where the testator is taken advantage of, either due to fraud, or duress.  In other words, the contestant must prove the testator was pressured to create a will they would not have made otherwise.

When does a testator lack testamentary capacity?

The testator will lack testamentary capacity if they did not understand they were signing a will, if they could not generally describe their family, or if they could not generally describe the nature and extent of their property.   Testamentary capacity and competency mean two very different things.For example, a testator who can identify their wife and only some of their children likely has testamentary capacity.  Similarly, a testator who can identify only some of their assets likely has testamentary capacity.  These standards are designed to encourage the creation and enforcement of wills.

When does a testator lack knowledge of the will's contents?

A testator will lack knowledge of the will's contents if the will distributes their property differently than they believed it did at the time of signing.Note: Proving the testator's beliefs at the time of signing is difficult, especially since the testator is likely deceased. 

If the testator's will is found invalid, do I inherit?

It depends. If the testator had previously executed another will, then this older will will describe how the assets will be distributed. If the testator's only will has been found invalid, Ohio's laws of intestacy will describe how the assets will be distributed.

What if the will disinherits me if I contest it?

Some wills contain provisions that disinherit individuals who contest its validity (sometimes called in terrorem clauses).  Ohio courts generally enforce these clauses.

What if the will is lost?

Lost wills are presumed to be revoked by the testator.  Accordingly, a contestant alleging a lost will must prove the testator's intent NOT to revoke it, and must also prove the lost will's contents.

How much does a will contest cost?

Attorneys typically charge a contingency fee to pursue will contest actions. In that arrangement, the attorney will typically take 1/3 of the assets the contestant recovers. Alternatively, the attorney may bill a flat fee, or proceed with an hourly rate.

Oil and Gas Protection Leases - A Good Idea?

What's a Protection Lease?

Suppose there is an issue with the title to minerals under a 100 acre farm and it is clear that either Party A owns those minerals or Party B owns them.  Suppose further that this farm sits in the middle of a planned unit for a horizontal Utica shale well.  What can an oil and gas producer do to fix that situation?  More frequently, producers are using ‘protection’ leases to address this situation.In the above example, the producer would obtain leases from both Party A and Party B, paying only a nominal amount upon signing of the lease.  A side agreement is also signed where all agree that any production royalties due on the acreage will be escrowed by the producer.  It then becomes necessary for Party A or Party B to file a lawsuit to have a judge determine who owns the minerals.  After such a determination, the escrowed royalties are paid to the prevailing party; also, the prevailing party is entitled to receive a signing bonus.

What are their real consequences?

At first blush, the above arrangement seems practical.  It allows the producer to proceed with a planned well and ultimately compensates the winning mineral claimant by giving him what he would have received if he had clearly owned the minerals in the first place.  Such an arrangement allows the subject land to be placed into a production unit and avoids the producer ‘working around’ the tainted acreage by relocating the planned well.  I recall an earlier case I handled where a horizontal well had been stopped short of a large parcel where the mineral rights were disputed.  Protection leases were executed and this allowed the well to be extended under the subject lands.

What are the downsides?

There are definitely some downsides with protection leases, however.  Frequently, the lessee is allowed to escrow royalties until litigation is commenced and resolved.  Not all mineral owners (or landowners) are in a financial position to initiate such a case.  Moreover, sometimes only a small tract is involved – the attorney fees and title work related to establishing ownership of minerals underlying a small tract could well exceed the amount of royalties that would ultimately be collected.  Remember, once the producer has the protection leases and agreements in hand, it has absolutely no motivation to resolve the issue of who is entitled to the royalties – it can simply escrow them.

What if a well has already been drilled?

Another issue I have seen with protection leases is that sometimes they are requested after a well has already been drilled.  This is significant because the party requested to sign may well have a claim for mineral trespass against the producer.  That is, the producer drilled a well without having obtained a lease from the proper mineral owner.  A mineral owner in that situation would be releasing any rights held concerning the trespass if he executed a protection lease.  For that reason, it would seem that additional compensation is in order.

How do protection leases relate to Ohio's Dormant Minerals statute?

The above discussion has much interplay with Ohio’s dormant mineral statute.  In the fall of 2016, the Ohio Supreme Court made clear that landowners must follow the new version of the statute to recapture their minerals and that the 1989 version of the statute could not be used for such purpose.In an earlier article, I wrote that there were many unanswered questions about how the dormant mineral statute operates.  It seems apparent that oil and gas producers, who obtained leases from landowners claiming mineral ownership via the dormant mineral statute, have similar concerns.  This seems particularly true in light of the fact that landowners may not use the 1989 dormant mineral statute to reclaim their minerals.  If such a landowner did not properly follow the process set out under the current statute, they would not own their minerals and the producer would need to get a lease from the family that previously reserved the minerals.

Conclusion

I believe that producers are going back through their files to verify that they did obtain a lease from the proper party.  In situations where they are nervous about that issue, they are tracking down mineral owners, or their heirs, and trying to get protection leases.  Probably best to reach out to competent counsel before signing same.