Conflicting Property Rights between Conservation Easements and Oil and Gas Leases in Ohio: Why Current Law Could Benefit Conservation Efforts

By House, Nicholas R. | William and Mary Law Review, April 2014 | Go to article overview

Conflicting Property Rights between Conservation Easements and Oil and Gas Leases in Ohio: Why Current Law Could Benefit Conservation Efforts


House, Nicholas R., William and Mary Law Review


Table of Contents  INTRODUCTION I.   WHY DO CONSERVATION EASEMENTS AND OIL AND GAS      LEASES CONFLICT?      A. Conservation Easements: Purposes, Enforceability &         Deductibility         1. Common Law Negative Easements         2. Ohio's Enabling Statute         3. Internal Revenue Code Requirements.            a. Applicable Definitions            b. The Effect of Deductibility on Mineral               Extraction      B. Oil and Gas Leases         1. Ohio's Common Law Rule         2. Implied Easement to Reasonable Use of Surface         3. Right to Protect Mineral Estate from Drainage  II. THE PROBLEM      A. Scenario One: Unsevered Mineral Estate      B. Scenario Two: Severed Mineral Estate III. CONSERVATION EASEMENT LANGUAGE      A. Why Attempts to Change Current Law Should         Be Abandoned      B. How Conservation Organizations Should Change Their         Conservation Easement Language         1. No-Inconsistent Use Clause         2. Stricter Monitoring and Enforcement Clauses         3. Amendment Procedures to Retroactively Apply to Old            Easements  IV. ADDRESSING POTENTIAL CONCERNS      A. Risk of Surface Damage from Horizontal Drilling and         Fracturing Mining Techniques      B. Public Funding Concerns CONCLUSION 

INTRODUCTION

The centuries-long struggle between development and conservation has gone through numerous iterations. Most recently, the struggle has pitted conservation easements against oil and gas development in Marcellus and Utica Shale states. While conservation organizations have used conservation easements with enthusiasm for many years as a means of preserving land for future generations, (1) new technological breakthroughs and the discovery of deep natural gas deposits have led some commentators to question the continued effectiveness of conservation easements. (2) Moreover, the economic potential from oil and gas development has pressured many state governments to move away from conservation activities. (3) This recent struggle has been particularly acute in the Midwestern United States, where significant Marcellus and Utica Shale natural gas deposits have been discovered. Such discoveries have caused long-dormant property conflicts to surface as individuals and organizations compete to capitalize on the evolving oil and gas market. (4)

Although scholars have written numerous articles discussing conservation easements, addressing issues ranging from the appropriate valuation methods for determining IRS deductions (5) to whether conservation easements are an appropriate means of preserving land, (6) they have neglected to discuss the conflicting property rights between conservation easements and oil and gas leases. In fact, the Land Trust Alliance, one of the largest umbrella organizations for land trusts, is still developing methods to handle these conflicting rights. (7)

This Note will focus on both Ohio's conservation easement law and oil and gas law in order to develop a robust understanding of how conservation easements and oil and gas leases conflict. Unlike other Marcellus and Utica Shale states, Ohio's oil and gas law is largely undeveloped. (8) The undeveloped nature of Ohio's oil and gas law, coupled with its current oil and gas boom, make Ohio an ideal state to discuss these conflicting property rights. (9)

First, this Note will establish why conservation easements and oil and gas leases are likely to conflict. Second, this Note will present two scenarios under which conservation easements and oil and gas leases might conflict and then demonstrate how current law sorts out the conflicting rights. Third, it will advance several arguments for how conservation easements should be adapted, identifying specific provisions that should be altered in light of the Internal Revenue Code and Ohio's current legal structure. By doing so, this Note will elucidate how the oil and gas boom in Ohio offers conservation organizations a unique opportunity to preserve land, while benefiting from the boom themselves. …

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