July 15, 2013 12:03 am
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, email@example.com
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