BRIEF OF AMICI CURIAE
TRUSTEES OF THE THOMAS E. PROCTOR HEIRS TRUST;
TRUSTEES OF THE MARGARET O.F. PROCTOR TRUST;
HOYT ROYALTY, LLC; AND THORNE HERITAGE RESOURCES, LLC
Hoyt Royalty weighed in with limited comments for this Philadelphia Inquirer piece that appeared in last Sunday’s paper. The article, by Andrew Maykuth, looks at the the Herder v Keller case and the issue of land and mineral (oil and gas) ownership rights in Pennsylvania.
While there is certainly more to be said, Mr. Maykuth did a nice job describing the history and the complex issues around this case. Here is the beginning of the article:
The Marcellus Shale natural gas discovery has triggered an associated boom in Pennsylvania land disputes, as formerly valueless mineral rights are now potentially worth millions.
The heirs of a Centre County landowner asked the Pennsylvania Supreme Court this month to resolve a case that stripped them of their 19th-century mineral rights, now claimed by a hunting club that bought the land in 1959.
The convoluted legal question affects the natural resources beneath huge expanses of timberland in the heart of the Marcellus Shale, which now accounts for nearly a quarter of the nation’s natural gas production.
“Although this case concerns a dispute over the ownership of oil and natural gas under roughly 433 acres of property, the questions presented potentially affect the mineral ownership rights of hundreds of thousands of acres of property located in this commonwealth,” Ronald L. Hicks, a Pittsburgh lawyer who represents the aggrieved heirs, wrote in an Aug. 8 Supreme Court filing.
The entire article can be seen here: Oil and Gas Mineral Rights in PA
Please click on the link above to see reaction on Herder v Keller from the Steptoe-Johnson blog.
How can one’s title be divested if natural gas was not and cannot be the subject of a proper real estate tax assessment?
With the ever-growing potential that Pennsylvania will play a significant role in the United States’ production of natural gas in the 21st Century, more lawsuits are being filed over who owns the rights to the subsurface gas. Generally, such lawsuits involve a dispute between the heirs of the early landowner who recorded a deed that severed the natural gas from the surface estate and one whose chain of title emanates from a tax sale held after the severance was recorded. Several commentators have opined that if the land was “unseated” at the time of the tax sale and the severed subsurface estate was not separately assessed, then the tax sale “washed” the prior recorded severance and passed title of the natural gas to the tax sale purchaser even though the underlying tax assessment was directed solely to the surface estate or other mineral interests.
Pennsylvania federal and state courts alike, including several from the trial courts in north-central Pennsylvania where such “title washing” was purportedly practiced at the turn of the 20th Century, have cast serious doubts on the extent to which severed natural gas titles have been lost or divested by these early tax sales.
This article summarizes Pennsylvania’s real estate tax laws and the historical taxation of natural gas interests. Also, this article discusses the concept of title washing and its proper application to the real estate taxation of natural gas interests. Finally, it addresses how title washing is being misconstrued by commentators and those claiming title via tax sales in order to improperly deprive owners or the heirs and assigns of their severed natural gas interests.
Please follow the link to see the entire article. http://www.muslaw.com/Files/Admin/Debunking%20The%20Myths%20Surrounding%20Natural%20Gas%20Title%20Washing%20-%20January%202014.pdf
Herder Spring Hunt Club v. Keller is a case currently pending before the Pennsylvania Superior Court that addresses whether tax sales can impact one’s title to subsurface oil and gas interests. The Kellers won this case in the trial court by showing that a 1935 tax sale did not “wash” their ancestors’ title to the severed subsurface interests because, among other things, the oil and gas interests were not accessed or taxable under Pennsylvania law.
As the oil and gas owners of severed estates, the Kellers have a number of similarities to Hoyt Royalty and Thorne Heritage Resources. Hoyt and Thorne have filed an Amicus brief in this case. That brief can be seen here:
When some property owners in the Marcellus Shale region want to contract with drilling companies to explore for natural gas on their land, they may find that others have laid claim to their sub-surface rights.
Disputed ownership results from Pennsylvania laws that are more than a century old and a long-dormant practice called “title washing.”
A title wash occurred when someone bought undeveloped property at a tax sale. Former Pennsylvania tax laws gave the purchaser clear title to the taxed property. According to these early tax laws, the obligation to pay taxes on undeveloped property ran with the property. An owner could therefore default on taxes and then purchase the same property at a tax sale, thereby “washing” the property’s title from any prior obligations. From 1900-1950, Pennsylvania saw a lot of “title-washing.”
Some legal scholars believe that even if the tax assessment was directed at only the surface estate, the tax sale of the unseated surface could nonetheless “wash” the title of the unassessed subsurface rights to minerals, oil and gas. These scholars rely on early court decisions which they contend ruled that tax sales “washed” the title to the subsurface interests.
Judges more recently have focused on whether subsurface rights could have been or were taxed. Pennsylvania’s highest court has now declared that oil and natural gas cannot be assessed for property taxes. With no assessment possible, courts have ruled that title to the oil and gas in question was not “washed” when the surface rights were sold for taxes.
It is imperative that property owners have a careful title search done before negotiating a drilling contract, paying close attention to any past tax sales. In some cases, the property owner may not own or will have to defend his or her right to sell the subsurface rights.
— Ronald L. Hicks, Jr., Meyer, Unkovic & Scott, firstname.lastname@example.org
Business workshop is a weekly feature from local experts offering tidbits on matters affecting business. To contribute, contact Business Editor Brian Hyslop at email@example.com.