Jeremy A. Mercer
Lessees of oil and gas leases in Pennsylvania who have been assigned or are assigning less than all of the geologic strata under lease should give careful attention to whether those leases have been severed vertically by unilateral actions. A lease may not be held by production if that production is in a geologic strata not included in the assignment of rights. This article explains a recent decision on the issue.
By its 2-to-1 non-precedential decision that an oil and gas lease unilaterally can be severed horizontally and vertically, the Superior Court of Pennsylvania appears to have split from its own published precedent and created new law in Pennsylvania—leaving lessees in limbo, possibly giving unscrupulous lessors a unilateral tool to terminate oil and gas leases, and ultimately harming both lessors and lessees in the process. Continue reading “Under Scrutiny: PA Superior Court Splits from Own Precedent and Allows Unilateral Oil & Gas Lease Severance in Montgomery“
Jeremy A. Mercer, Amy L. Barrette, and Elizabeth E. Klingensmith
Under Pennsylvania law, a defined primary term of an oil and gas lease may actually be longer than that stated term of year. In a September 12, 2017, unreported decision, the Pennsylvania Superior Court remanded a case to the trial court for consideration of whether a “limitation of forfeiture” provision, which required notice and opportunity to cure, extended the primary term by the length of the cure period. See L.D. Oil & Gas Enters., Inc. v. Loop, No. 1883 WDA 2016, 2017 WL 4001655 (Pa. Super. Ct. Sep. 12, 2017). In overturning the trial court’s grant of judgment on the pleadings to the lessor, the Superior Court returned the case to allow the trial court to take parol evidence of the impact of the “limitation of forfeiture” provision on the length of the primary term. Continue reading “Not So Fast—Your Oil and Gas Lease Primary Term May Be Longer Than You Thought”
Frederick M. Lowther
On August 18, 2017, the U.S. Court of Appeals for the Second Circuit issued a long-awaited decision in Constitution Pipeline Company LLC v. New York State Department of Environmental Conservation et al., Docket No. 16-1568 (“Constitution”). At issue—once again—was whether a single State (in this case, New York) has the power under §401 of the Federal Clean Water Act, 33 U.S.C. §1341 (“CWA”), to deny a water quality certification for an interstate pipeline previously certificated by the Federal Energy Regulatory Commission (“FERC”), when the effect of the denial is to veto a pipeline project that would serve multiple States. In 2008, the 2d Circuit determined that such a veto power exists. Islander East Pipeline Co. v. McCarthy, 525 F.3d 141 (2d Cir, 2008) (“Islander East”). Although the factual situation in Constitution differs in some respects (noted below) from that in Islander East, the end result is the same: if a State determines that a FERC-approved pipeline is not consistent with its water quality standards approved by the Environmental Protection Agency, and the Court finds (as it did here) that the determination was not arbitrary and capricious (i.e., is supported by “sufficient evidence to provide rational support” for the denial, Constitution, sl. op. at 24), the federally-approved interstate pipeline cannot proceed. Continue reading “CONSTITUTION PIPELINE: The 2d Circuit Reaffirms a State’s Right to Veto a FERC-Approved Interstate Pipeline Project”
Liz E. Klingensmith, Jeremy A. Mercer, Amy L. Barrette
In Samson Exploration, LLC v. T.S. Reed Properties, Inc., the Texas Supreme Court affirmed the decision by the Ninth Court of Appeals siding with royalty owners in concluding that the operator of a well within two overlapping units had to pay twice.
Samson’s leases contractually authorized unilateral pooling. Samson created Unit 1, which had boundaries of 6,000 to 13,800 feet subsurface, and obtained production from two wells within Unit 1’s boundaries, Well No. 1 and Well No. 2. Well No. 1 produced from 12,304 feet to 12,332 feet subsurface. Well No. 2 produced from 13,150 to 13,176 feet. Samson then unilaterally amended Unit 1 to reduce the surface acreage and change the depth to 12,400 feet subsurface and below (the “Amended Unit”). No production from Well No. 1 was attributed to the Amended Unit. Continue reading “You Made Your Bed, Now Lie in It: Samson Exploration, LLC v. T.S. Reed Properties, Inc.“
Margaret Anne Hill, Michael L. Krancer, Frank L. Tamulonis III, and Stephen C. Zumbrun
On June 20, the Pennsylvania Supreme Court issued its opinion in Pennsylvania Environmental Defense Foundation (PEDF) v. Commonwealth, 2017 Pa. LEXIS 1393 (Pa. June 20), in connection with the so-called Environmental Rights Amendment or ERA (Article 1, Section 27 of the Pennsylvania Constitution). Suffice it to say, the opinion has reopened the debate as to the meaning of the ERA, and more importantly, how the ERA is implemented as a practical and legal matter. In brief, the court ruled that amendments to the state’s fiscal code (which sought to address budgetary shortfalls by redirecting money from a fund containing rents and royalties from oil and gas leases on commonwealth land to the general fund) violated the ERA. While the facts before the court were narrowly drawn, the court used the opportunity to revisit the decades old “test” applied in evaluating ERA claims, an issue it first addressed in its 2013 plurality opinion in Robinson Township v. Commonwealth, 83 A.3d 901 (Pa. 2013). It abruptly rejected the well-established Payne v. Kassab test and roughly 45 years of ERA-related case law, thereby placing the ERA, and industry, back into legal limbo. Despite some legal uncertainty, this opinion should not be interpreted as a major stumbling block to key energy and infrastructure projects.
Continue reading “ERA Revisited: Solutions For Navigating An Uncertain Legal Landscape”
Jeremy A. Mercer, Margaret Anne Hill, and Frank L. Tamulonis III
Consistent with a line of recent Commonwealth Court decisions, the Commonwealth Court once again held that a township did not violate the Pennsylvania Constitution by passing an ordinance that allowed oil and gas development in various zoning districts, including residential-agricultural (R-A) districts. In Delaware Riverkeeper Network, et al. v. Middlesex Township Zoning Hearing Board, 2017 Pa. Commw. Unpub. LEXIS 415 (Pa. Cmwlth. June 7, 2017), the Court upheld an ordinance and the zoning hearing board’s approval of an oil and gas permit in an R-A district over the objections of numerous entities, including the Clean Air Council (“CAC”) and the Delaware Riverkeeper Network (“Riverkeepers”), who claimed that the township and/or board actions violated several provisions of the Pennsylvania Constitution. Continue reading “Robinson Rejected: Zoning Ordinance Permitting Oil and Gas Development in Residential-Agricultural Districts Is Constitutional”
Elizabeth E. Klingensmith, Jeremy A. Mercer, and Amy L. Barrette
The Texas Supreme Court annunciated two critical points in Lightning Oil Co. v. Anadarko E&P Onshore: (1) unauthorized interference may be a trespass only when it impacts the mineral lessee’s ability to exercise its rights to explore, obtain, produce, and possess the leased minerals; and (2) the trespass injury must outweigh the interests of the industry as a whole and society in maximizing oil and gas. Continue reading “Drill on Through to the Other Side: No Trespass When Drilling Through Mineral Estate with Surface Use Agreement”