The Senate Environmental Resources and Energy Committee Tuesday held a hearing on Senate Bill 258 (Yaw-R-Bradford) which would provide for action to quiet property titles involving subsurface mineral rights.

Click Here to listen to the Committee hearing and for links to testimony presented.

Craig Mayer, Vice-President-General Counsel, Pennsylvania General Energy, said he believes “Senate Bill 258 alters basic property law in Pennsylvania and would destabilize subsurface land titles” and would be found unconstitutional in regards to both state and federal abridgements.

Quiet title actions also concern Mayer, who said that the plaintiff in cases of finding living heirs of “abandoned” properties has no real incentive in finding those heirs. Mayer stated that the Act would “damage confidence in that stability and certainty of oil, gas, and mineral ownership.” He urged the committee to focus on improvements to the Dormant Oil and Gas Act (DOGA) as a way of dealing with the remnant oil and gas interests rather than proceeding with SB 258.

Kevin J. Moody, Vice President Government Affairs and General Counsel, Pennsylvania Independent Oil and Gas Association, testified there are many members of PIOGA and there are many different opinions on the bill. PIOGA has four suggestions to improve the bill, said Moody; two relate to DOGA and two relate to quiet title actions. Moody suggested that the Committee add to the bill “an explicit statement that the purpose of the bill is to facilitate the development of subsurface rights.”

Dale A. Rowekamp, Vice-President of Land and Marketing, Seneca Resources Corporation, explained Seneca is in an unusual position in that they own 80 percent of the subsurface rights they control instead of having to lease them from others, although they generally do not own the surface property.

“Seneca supports a process that allows surface landowners the opportunity to acquire subsurface rights where the mineral owners simply cannot be identified or found today,” said Rowekamp. He then said that the Committee should be careful in crafting the language of the bill in order to minimize the legal risk for the loss of legitimately held subsurface rights.

Rowekamp said Seneca recommended that the Committee focus on the consistency, clarity, due diligence, and non-partition sections of Senate Bill 258 to further improve the bill, Rowekamp suggested that the committee clarify in Senate Bill 258 that “a surface landowner may acquire not only the subsurface rights, but also the rights associated with a lease that was established through an earlier DOGA action.”

Terry Bossert, Vice President, Legislative and Regulatory Affairs, Range Resources for the Marcellus Shale Coalition, testified that like PIOGA, MSC will not take a formal stance on Senate Bill 258. He reiterated that there are some improvements that can be made to the bill.

“If the purpose of the bill is to promote the development of land, companies will be very cautious as to what leases we enter into,” said Bossert. Bossert explained that a good due diligence provision in the bill could make drilling companies more willing to lease property rights.

Additionally, Bossert suggested that the bill “define the surface owner in a manner consistent with another state law dealing with the subsurface estate, the Coal Bed Methane Dispute Resolution Act of 2010.”

Bossert said that MSC appreciated the willingness of the committee to hear the concerns of the industry and accept the recommendations made to them by experts, and that MSC would like the bill to contain language that would ensure the “lessee should not be liable for claims from previously ‘unknown’ owners, should they later surface.”

Laura E. Fox, Vice President and Underwriting Counsel, PA Land Title Association, testified that she has been a title lawyer for over thirty years and has dealt with many quiet title actions that were used to clear titles and transfer interests.

“Contrary to most types of insurance, Title Insurance is not risk assumption but risk elimination,” said Fox. “Part of that process of insuring ‘good title’ is clearing any outstanding interests that can occur for a variety of reasons.” Fox explained that because Pennsylvania was a “coal” state, there have been great discrepancies in surface and subsurface property grants.

The discovery of Marcellus Shale has caused problems for property owners who are prevented from transferring subsurface rights because the owner has not been around since the coal was completely mined and cannot be found, explained Fox. “I do believe that this senate bill addresses a need in the title and real estate industry today,” said Fox.

Lester L. Greevy, Jr., Chairman, Legislative Committee of the PA Chapter of the National Association of Royalty Owners, Pennsylvania Chapter, said that he has been practicing law for 43 years and has a lot of experience with titles. Greevy said that owners of truly abandoned mineral rights have allowed themselves to become “irretrievably lost.”

Greevy explained that there are currently two ways to try to develop abandoned lands via DOGA or a quiet title action, but neither action is a true cure to the problem. Greevy said that “the problem we have with un-owned minerals is real. The problems with Senate Bill 258 are mostly imagined.”

Greevy explained that he did not believe that the bill was unconstitutional because the Supreme Court of the United States has already found other states’ dormant mineral rights act laws constitutional. “Senate Bill 258 will assure that active mineral interests are protected,” said Greevy, “the breadth of protections will ensure that the statute is fair and constitutional.”

Greevy also spoke of Mayer’s testimony saying that Mayer has listed one of his cases in the example section of his testimony claiming that the case did not have a property affidavit. Greevy said that he generally includes the affidavit right in the lawsuit, so that Mayer’s assertion of improper actions taken by title lawyers is incorrect.

Majority Chair Sen. Gene Yaw said that he appreciated the testimony that was presented and that he believes that the committee heard pros, cons, and something in the middle.

“One thing that came out of this hearing is that this is a private matter between property owners and isn’t something for the gas companies to be involved in,” said Sen. Yaw. “Landowners are of paramount importance in this legislation.”

Click Here to listen to the Committee hearing and for links to testimony presented.

Sen. John Yudichak (D-Luzerne) serves as Minority Chair of the Committee.

3/25/2013