On June 18, 2013, the District Court for the Middle District
of Pennsylvania denied a landowners motion for reconsideration of a May
decision that found a 2007 oil and gas lease was still in effect.
In the May decision, Zupp, Plaintiff, brought suit against
Cabot, Defendant, seeking a declaration that an oil and gas lease was no longer
in effect. The lease between the two parties stipulated an initial lease term
of 5 years for Cabot to explore for oil and gas that was extended as long as
oil or gas was produced in paying quantities. In dispute were “continuous
operation” and “well shut-in” provisions that the Defendant relied on when
extending its occupation of the Plaintiff’s land.
The continuous operations provision allowed for the lease to
remain in effect so long as the well operator maintained certain operations
stipulated in the lease. These included drilling, testing, completing, working,
recompleting, deepening, plugging or repairing a well. In the event a well was
drilled and shut-in (production of oil and gas is halted), the shut-in
provision stated the lease remained in effect if the operator paid shut-in
“royalties” to the landowner. The Plaintiff argued that the operator had not
maintained continuous operations to extend the lease, and that the language of
the lease prevented a shut in from maintaining the lease if it occurred beyond
the primary term. The court disagreed with both of these arguments.
The court, in the May decision, granted the Defendant’s
motion to dismiss because Cabot demonstrated that it maintained operations
necessary to extend the lease. Further, it shut-in the well after the
operations ceased, and paid the owner the necessary royalties to keep the lease
in effect. The May court granted the Defendant’s motion to dismiss, but allowed
the Plaintiff one opportunity to amend his complaint within 21 days.
In the June 18 decision, the court denied the Plaintiff’s
motion to reconsider its May opinion. The court disagreed with the Plaintiff’s
arguments that the court had failed to adequately consider the most significant
parts of the lease and the legal arguments about those parts of the lease. The
court stated that the motion raised by the Plaintiff disregarded sections of
the May opinion that clearly examined the parts of the lease in question.
Further, the court refused to give “legal conclusions” in the Plaintiff’s
complaint the presumption of truth because legal conclusions are not the “well
plead factual allegations” required to survive a motion to dismiss for failure
to state a claim. Therefore, the motion to reconsider the May order was denied.
Written by: Garrett Lent, Research Assistant
Written by: Garrett Lent, Research Assistant
Agricultural Law Resource and Reference Center
June 2013
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