Articles Posted in Energy, Oil & Gas Law

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In February 2012, the Pennsylvania General Assembly passed Act 13, a "sweeping" law regulating the oil and gas industry, which, inter alia, repealed parts of the existing Oil and Gas Act of 1984 codified in Title 58 of the Pennsylvania Consolidated Statutes, and created six new chapters therein. The specific provisions of two of which, Chapters 32 and 33, were at issue in this appeal. The questions raised in this appeal involved Sections 3218.1, 3222.1, and 3241 of Chapter 32, and Sections 3305 through 3309 of Chapter 33. This appeal was consolidated from the decision of the Commonwealth Court following the Supreme Court's remand to that court to resolve open issues pursuant to a mandate in "Robinson Township v. Commonwealth of Pennsylvania," (83 A.3d 901 (2013) (“Robinson II”)). In that case, the Supreme Court struck the entirety of Sections 3215(b), 3215(d), 3303, and 3304 of Act 13 of Feb. 14, 2012, P.L. 87 (“Act 13”), as violative of the Pennsylvania Constitution, and the Court enjoined the application and enforcement of Section 3215(c) and (e) and Sections 3305 through 3309, to the extent that they implemented or enforced the provisions of Act 13 which was invalidated. The Supreme Court affirmed the portion of the order the Commonwealth Court issued on remand, “Robinson III”, holding that Sections 3305 through 3309 were not severable from Sections 3303 and 3304, and the Court also upheld its conclusion that the passage of Act 13 did not violate Article III, Section 3 of the Pennsylvania Constitution (the “single subject rule”). However, because the Supreme Court concluded that Sections 3218.1, 3222.1(b)(10) and 3222.1(b)(11) contravened Article III, Section 32 of the Pennsylvania Constitution, due to the Court's determination that they constituted special legislation, the Court reversed the Commonwealth Court’s order upholding these sections, and enjoined their further application and enforcement. In that regard, the Supreme Court stayed its mandate with respect to Section 3218.1 for 180 days in order to give the General Assembly sufficient time to enact remedial legislation. Further, because the Court determined that Section 3241 was unconstitutional on its face, it reversed the Commonwealth Court’s order and directed this provision be stricken as well, and enjoined from further application and enforcement. View "Robinson Twp, et al v. Public Utility Commission" on Justia Law

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In this appeal, the issue presented for the Pennsylvania Supreme Court's review was whether the Superior Court properly applied the doctrine of estoppel by deed to conclude that an oil and gas lease between Appellee, Anadarko E. & P. Co., L.P. and Appellants, Leo and Sandra Shedden, covered the oil and gas rights to 100% of the property identified in the lease, notwithstanding the fact that, unbeknownst to them, Appellants owned only a one-half interest in the oil and gas rights to the property at the time the lease was executed, and, consequently, received a bonus payment only for the oil and gas rights they actually owned. Upon review, the Supreme Court held that the Superior Court properly affirmed the trial court's grant of summary judgment in favor of Anadarko based on estoppel by deed. View "Shedden v. Anadarko E&P Co." on Justia Law

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Through Pennsylvania’s Land Recycling and Environmental Remediation Standards Act, ("Act 2"), the General Assembly created a scheme for establishing “cleanup standards” applicable to voluntary efforts to remediate environmental contamination for which a person or entity may bear legal responsibility. Appellant EQT Production Company (“EPC”), owned and operated natural gas wells in the Commonwealth. In May 2012, the company notified Appellee, the Department of Environmental Protection (the “Department” or “DEP”), that it had discovered leaks in one of its subsurface impoundments containing water that had been contaminated during hydraulic fracturing operations. Subsequently, EPC cleared the site of impaired water and sludge and commenced a formal cleanup process pursuant to Act 2. In May 2014, the agency tendered to EPC a proposed “Consent Assessment of Civil Penalty,” seeking to settle the penalty question via a payment demand of $1,270,871, subsuming approximately $900,000 attending asserted ongoing violations. EPC disputed the Department’s assessment, maintaining that: penalties could not exceed those accruing during the time period in which contaminants actually were discharged from the company’s impoundment; all such actual discharges ended in June 2012; and the Act 2 regime controlled the extent of the essential remediation efforts. The issue this case presented for the Supreme Court's review centered on whether ECT had the right to immediately seek a judicial declaration that the DEP's interpretation of the Act was erroneous. The Court held that the impact of the Department’s threat of multi-million dollar assessments against EPC was sufficiently direct, immediate, and substantial to create a case or controversy justifying pre-enforcement judicial review via a declaratory judgment proceeding, and that exhaustion of administrative remedies relative to the issues of statutory interpretation that the company has presented was unnecessary. View "EQT Production Co. v. DEP" on Justia Law

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The Third Circuit Court of Appeals certified a question of Pennsylvania law to the Pennsylvania Supreme Court. In August 2007, Appellee Wayne Harrison entered into a lease with Appellant Cabot Oil & Gas Corporation, per which Cabot obtained the exclusive right to explore oil-and-gas resources on Harrison's property. In exchange, the company agreed to pay an initial bonus plus a one-eighth royalty on oil or gas successfully produced from the land. Approximately halfway through the primary lease term, Harrison and his wife commenced a civil action against Cabot in a federal district court, seeking a declaration that the lease was invalid. The Harrisons alleged the company had fraudulently induced Mr. Harrison to enter into the lease via an agent's representation that Mr. Harrison would never receive any more than $100 per acre as a threshold bonus payment from a gas producing company. The Harrisons learned of other landowner-lessors receiving higher payments. The Pennsylvania Court accepted certification from the Third Circuit to address whether the primary term of an oil-and-gas lease should have been equitably extended by the courts, where the lessor pursued an unsuccessful lawsuit challenging the validity of the lease. In its counterclaim, Cabot sought a declaratory judgment that, in the event the Harrisons' suit failed, the primary term of the lease would be equitably tolled during the period of time during which the suit was pending, and, concomitantly, the lease would be extended for an equivalent period of time beyond what was provided by its actual terms. The district court awarded summary judgment in Cabot's favor on the suit to invalidate the lease. The court, however, resolved the counterclaim in the Harrisons' favor, concluding that Pennsylvania law does not provide for equitable extensions of oil and gas leases under the circumstances. Cabot appealed, arguing that it would be deprived of the full benefit of the bargained-for terms of its contract with the Harrisons by their "meritless lease challenges." Cabot contended Pennsylvania law provided that a party repudiates a contract, and thus effectuates an essential breach, when he makes an unequivocal statement that he will not perform in accordance with his agreement. The Pennsylvania Supreme Court disagreed with Cabot's contention, holding that the Harrisons' lease challenge was not an anticipatory breach of the lease. "Our reluctance, in this respect, is bolstered by the Harrisons' observation that oil-and-gas-producing companies are free to proceed according to their own devices to negotiate express tolling provisions for inclusion in their leases. [. . .] Certainly, in light of the voluminous decisional law, such companies are on sufficient notice of the prospect for validity challenges to warrant their consideration of such protective measures. [ . . .] Our determination is only that, consistent with the prevailing substantive law of this Commonwealth, the mere pursuit of declaratory relief challenging the validity of a lease does not amount to such." View "Harrison v. Cabot Oil & Gas Corp." on Justia Law

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In an appeal by allowance, the issue this case presented for the Supreme Court's review was, inter alia, the scope of the authority of the Department of Environmental Protection (“DEP”) to issue administrative orders under the Bituminous Coal Mine Safety Act. The Court found that the DEP acted within its authority with respect to the orders it issued regarding certain failures to report accidents, but that it improperly issued other orders with respect to requiring fire extinguishers on certain mining vehicles. Thus, the Court reversed in part, and affirmed in part, the order of the Commonwealth Court. The case was thereafter remanded for further proceedings. View "DEP, Aplt. v. Emerald Coal Resources, et al" on Justia Law

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The issue before the Supreme Court in this case centered on whether a deed executed in 1881 reserving the subsurface and removal rights of "one half of the minerals and petroleum oils" in the grantor included any natural gas contained within the shale formation beneath the subject land. The trial court, relying on the 1882 Supreme Court decision "Dunham & Shortt v. Kirkpatrick," (101 Pa. 36 (Pa. 1882)) and its progeny, held that because the deed reservation did not specifically reference natural gas, any natural gas found within the Marcellus Shale beneath the subject land was not intended by the executing parties to the deed to be encompassed within the reservation. The Superior Court reversed that decision and remanded the case with instructions to hold an evidentiary hearing complete with expert, scientific testimony to examine whether: (1) the gas contained within the Marcellus Shale was "conventional natural gas"; (2) Marcellus shale was a "mineral"; and (3) the entity that owns the rights to the shale found beneath the property also owns the rights to the gas contained within that shale. Upon review, the Supreme Court reversed, finding that the Superior Court erred in ordering the remand for an evidentiary hearing and reinstated the order of the trial court. View "Butler v. Charles Powers Estate" on Justia Law

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The issue before the Supreme Court was the determination of the proper test for evaluating whether an oil or gas lease has produced "in paying quantities," as first discussed "Young v. Forest Oil Co.," (194 Pa. 243, 45 A. 1 (1899)). Appellant Ann Jedlicka owned a parcel of land consisting of approximately 70 acres. The Jedlicka tract is part of a larger tract of land consisting of approximately 163 acres, which was conveyed to Samuel Findley and David Findley by deed dated 1925. In 1928, the Findleys conveyed to T.W. Phillips Gas and Oil Co. an oil and gas lease covering all 163 acres of the Findley property which included the Jedlicka tract. The lease contained a habendum clause which provided for drilling and operating for oil and gas on the property so long as it was produced in "paying quantities." Notably, the term "in paying quantities" was not defined in the lease. Subsequently, the Findley property was subdivided and sold, including the Jedlicka tract, subject to the Findley lease. A successor to T.W. Philips, PC Exploration made plans to drill more wells on the Jedlicka tract. Jedlicka objected to construction of the new wells, claiming that W.W. Philips failed to maintain production "in paying quantities" under the Findley lease, and as a result, the lease lapsed and terminated. After careful consideration, the Supreme Court held that when production on a well has been marginal or sporadic, such that for some period profits did not exceed operating costs, the phrase "in paying quantities" must be construed with reference to an operator's good faith judgment. Furthermore, the Court found the lower courts considered the operator's good faith judgment in concluding the oil and gas lease at issue in the instant case has produced in paying quantities, the Court affirmed the order of the Superior Court which upheld the trial court's ruling in favor of T.W. Phillips Gas and Oil Co. and PC Exploration, Inc. View "T.W. Phillips Gas and Oil Co. v. Jedlicka" on Justia Law