On August 13, 2013, the United States District Court for the
Middle District of Pennsylvania held that well operator’s staking, surveying
and movement of equipment onto a drilling unit extended a standard oil and gas
lease on that unit. Roe v. Chief
Exploration & Development, LLC, 2013 WL 4083326 (M.D. Pa. Aug. 13,
2013).
The plaintiffs, two landowner groups, had entered into
standard oil and gas leases with Roe Exploration in October of 2005. The lease
provided for a primary term of five years, and a secondary term held open by
delay rentals, by operations to explore for the production of oil and gas, by
production, or by storage. Further, the lease contained a pooling provision
that stated drilling, or operations in preparation for drilling occurring
anywhere in the unit would have the same effect on the lease as if it were
located on the leasehold. Both leases were brought into a drilling unit before
the primary terms expired.
Prior to the October 2010 end to the primary term of the
disputed leases, the well operator had commenced surveying and staking a well
site on the drilling unit, of which the leases were a part. The court held that the
operator had commenced “operations” to satisfy extending the lease beyond its
primary term because Pennsylvania law requires very little of operators to
satisfy the commencement obligation prior to the expiration of the primary
term. It explained that the low bar was satisfied by surveying and staking the
well because the work was necessary and incidental to drilling the well. As a
result, the Court granted the well operator’s motion for summary judgment that
the “operations” language in the lease was satisfied.
Written by: Garrett Lent, Research Assistant
Agricultural Law Resource and Reference Center
September 2013
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