Leasing property for oil and gas development is complicated by the inability to identify or locate heirs who own record title to all or a fraction of the oil and gas. This presentation reviews the current Dormant Oil and Gas Act law in Pennsylvania, as well as pending legislation to address this thorny issue.

1. Development of Oil and Gas
in Pennsylvania When Subsurface Owners
Are Unknown or Unlocatable
Lisa C. McManus, Attorney at Law
lisamcmanus616@gmail.com | 814.781.1319

2. How Do Subsurface Interests Come to Be Owned By
Unknown or Unlocatable Owners?
Surface ownership is usually clear based on possession and payment of
taxes. Not so severed oil and gas interests.
Dormant oil and gas interests can arise in a number of ways:
•Grantor reserves ½ of O/G in an 1890 deed, but he and his heirs never file
further instruments regarding the interest
•O/G owner dies owning interest in O/G, but his heirs are not aware of the
interest
•Defective tax and judicial sales leave the interest in the original owner
•Improper conveyancing or estate administration

3. Is It Necessary to Lease a Missing Owner?
• Oil and gas owned in fee comprise a separate
estate in realty and can be the subject of
trespass. Under common law, no lease with
owner = no development.
• Co-tenant can lease without consent of
remaining co-tenants provided 1) no attempt
to exclude unleased co-tenant, and 2) no
waste.
• Co-tenant cannot bind unleased co-tenant
• Accounting to an unleased co-tenant is
required. Who is responsible for accounting in
typical proportionate reduction lease?

4. Why Not Just File a QTA?
• QTA requires plaintiff to establish title by a fair
preponderance of the evidence. Moore v.
Commonwealth, Dep’t of Environmental Resources, 129
Pa. Commw. 628, 566 A.2d 905 (1989); Proctor v.
Sagamore Big Game Club, 166 F.Supp. 465 (W.D. Pa.
1958)
• You can’t quiet title to something you don’t own

5. Adverse Possession & Abandonment
• May seek to QTA based on adverse possession through
development > 21 years but only if plaintiff is not a co-tenant
 Adverse possession requires actual, continuous, exclusive, visible,
notorious, distinct, and hostile possession for 21 years
 Upon severance, no action upon surface can impact ownership of
subsurface
• Abandonment requires an actual and voluntary relinquishment of
possession and ownership; mere non-use does not constitute
abandonment
• QTAs with default judgments are being improperly utilized to wrest
subsurface ownership from owners under these theories

6. Pennsylvania DOGA
• Facilitates the development of the subsurface estate
by providing a means to lease the interests of
“Unknown or Unlocatable Owners” of Oil and Gas
• Protects the interests of the Unlocatable Owners
• Unlike other states’ dormant mineral acts, the PA
DOGA does not vest the surface owner with title to
the oil and gas interests that have been severed from
the surface estate
• Does NOT apply to coal or coal bed methane

7. Benefits of the DOGA
• Provides developer with protection from suit from unleased
owner.
o What if the missing co-tenant is found and doesn’t like the
lease terms?? 58 P.S. § 701.6 provides protection to
lessees.
o Increased cost of development may militate against “taking
a business risk” and developing in the absence of lease
approval from a disinterested party.
o DOGA provides protection from liability to an operator.

8. Who Benefits from the DOGA?
• The Missing Heirs
• The Operator
• The Commonwealth
And practically, the co-tenant who may not be able to lease otherwise

9. Drawbacks to the DOGA
• Lack of Clear Standard of Diligence Regarding Efforts to
Locate “Unlocatable” Owners
– Reasonable efforts v. Diligent Efforts – What does that mean?
– Can the Pa. R. Civ. P. 430 and Deer Park standard survive a constitutional
challenge?
• Difficulty in Locating and Leasing Heirs
– How much effort is required before filing a DOGA petition? After? What if
administration costs of a multitude of interests consumes the res?
• Standing and Inalienable Interests
– Must have an interest in fee, by lease, as royalty or through ownership of
correlative rights in the oil and gas
– “Correlative Rights” are not defined. At least one court has allowed an
operator to claim a “correlative rights” as to a tract wholly owned by a
missing owner based on the tract’s location in a drilling unit, In re D.L.
O’Neill, Bradford Co., 35 Orphans 2012, but PA law would seem to suggest
that no one has standing under DOGA if the interest is wholly owned by a
missing owner.

10. Approaches in the Appalachian Basin
Trust Approach Lapse Approach Hybrid Approach
Pennsylvania – 58 P.S. §
701.1 “Dormant Oil and
Gas Act”
Ohio – Ohio Rev. Code
Ann. § 5301.56
West Virginia – W. Va. Code
§ 55-12A-1
Creation of Trust for
the benefit of unknown
owners
Reunites severed estate
after a period of non-use
Two step approach: Step
one creates Trust; Step two
allows possible reversion to
surface owner if after time
owners do not appear
Three basic approaches to solving the Dormant Interest problem in the Marcellus
and Utica Regions of the Appalachian Basin:

11. Constitutionality of Lapse Statutes
• Texaco, Inc. v. Short, 454 U.S. 516 (1982)
 USSC upheld constitutionality of Indiana Mineral Lapse Act that automatically vested
surface owner with subsurface mineral interests unused in prior 20 years.
 State may enact legislation causing retention of property right to be contingent upon
performance of an act within specified time period; failure to exercise ownership over
property for specified period of time is abandonment.
 Mineral interest was not taken without just compensation because the interest was
"abandoned".
• Illinois, Nebraska, and Wisconsin have declared lapse statutes to be
unconstitutional at a state level.
• How can Texaco v. Short be reconciled with PA law governing
abandonment, requiring intentional act?

12. Current Alternatives to DOGA
Surface owners or owners of rights in the corresponding
hydrocarbon (e.g., oil v. gas) may file an action pursuant to
the Inalienable Property chapter of the PEF Code, which
would appear to be appropriate to allow for the sale of the
interest, the receipt of the Commonwealth of the proceeds
of escheated property (see Links Estate, 319 Pa. 513; 180
A. 1 (1935)), and the subsequent exploitation of the mineral
estate.
• N.B. The petitioner may not be the winning bidder at
sale. Time and expense could be for nothing.

13. Proposed Solutions to the Dormant Interest Problem
• SB 258 of 2013SB 258 of 2013
 Introduced by Senators Yaw, Erickson, Vulakovich,
and Vogel
 Referred to the Environmental Resources and
Energy Committee
 Public Hearing on March 19, 2013
• HB 97 of 2013HB 97 of 2013
 Introduced by Representative Robert Godshall
 Previously introduced as HB 375
 Referred to the Environmental Resources and
Energy Committee
• HB 1444 of 2013HB 1444 of 2013
 Introduced by Representative Jesse White
 Referred to the Environmental Resources and
Energy Committee

14. •Would amend the Action to Quiet Title law to provide for a ‘rebuttable presumption’ that
OGMs have been abandoned in favor of a surface owner after a 50-year period if “the
subsurface ownership is unclear or unknown.” Exempts fee interests reserved or
acquired by a recorded conveyance.
•Primary purpose appears to be to vest ownership in the surface owner, rather than the
Commonwealth, where living individual owners or existing entity owners have not been
identified for a period of 50 years.
•Three potential drawbacks exist with regard to SB 258:
• immediate retroactive application resulting in loss of property rights without prior
notice;
• impact upon quiet title law effecting a change in established law regarding
abandonment;
• numerous and consequential interpretive issues associated with and
necessarily raised by the Bill.
•Opposed as drafted by NARO, the Pennsylvania Bar Association Section of Real
Property, Probate and Trust Law (RPPT), and the PBA Environmental and Energy Law
Section
SB 258 of 2013SB 258 of 2013

15. •Would amend the DOGA to provide for the vesting of O&G ownership in the surface
owner, rather than the Commonwealth, after a period of 20 years of nonuse, which
would constitute statutory abandonment.
•Allows O&G owner to preserve interest by filing notice in the Recorder of Deeds office
setting forth the owner’s desire to preserve the interest.
•Three potential drawbacks exist with regard to HB 97:
• immediate retroactive application resulting in loss of property rights without prior
notice;
• change in established law of abandonment, requiring intent;
• fundamental shift in view as to “abandoned” property, which is traditionally
escheated to the Commonwealth and not to the finder of the property or other
non-owner claimant.
•Act could be feasible if grace period for filing statement of claim were incorporated and
if “abandonment” of property is limited to oil and gas rights, thereby avoiding a conflict
with the Fiscal Code.
HB 97 of 2013HB 97 of 2013

16. •Provides for judicial process whereby a property owner may petition the courts to have
mineral rights rejoined with surface rights based on a deemed abandonment after a
period of 10 years of non-use.
•Allows O&G owner to preserve interest by filing notice in the Recorder of Deeds office
setting forth the owner’s desire to preserve the interest.
•Contains a grace period for the filing of the statement of claim of subsurface rights,
which may establish the necessary constitutional protections.
•A ten-year limitation period may be considered too short.
HB 1444 of 2013HB 1444 of 2013

17. Conclusion
DOGA v. Mineral Lapse
 Traditional notions of holding property in trust for missing owner and escheat
to the Commonwealth compete with certainty of title and ease of
administration
 Cost of administration of DOGA trust can undermine DOGA’s usefulness
and desirability.
Due Diligence
 Under any approach, the standard for locating missing owners and serving
process upon them must be updated to account for modern search
techniques and must be further elucidated to preserve constitutional
protections.

18. Questions?