Bankruptcy court denies motion to dismiss claims that pooling violated stay

On July 23, 2013, the United States Bankruptcy Court for the Middle District of Pennsylvania denied Defendant gas producer’s motion to dismiss claims:

1. that pooling a property and developing the shale beneath it violated a stay in the pending bankruptcy proceeding; 
2. that the Defendant engaged in civil trespass to extract the gas; 
3. and that the Defendant should pay the royalties owed for extraction to the debtor. 

In re Powell, 2013 WL 3822105 (Bkrtcy. M.D. Pa. July 23, 2013).

In earlier proceedings, the court found that the oil and gas lease in question was an unexpired lease on the file date of bankruptcy and that the Debtor’s rejection of the lease could not be approved. The court denied the motions to dismiss claim because the Defendant’s allegations that the lease was expired must be accepted as true in Rule 12 proceedings. According to the court, therefore, assuming that the lease did expire after bankruptcy was filed, whether the Defendant’s violated the stay by pooling the property in order to extract natural gas was a bona fide issue of fact.

Written by: Garrett Lent, Research Assistant

Agricultural Law Resource and Reference Center

August 2013