Court Denies Motion to Dismiss for Lack of Service

On August 13, 2013, the United States District Court for the Middle District of Pennsylvania denied a motion by Statoil Onshore Properties, Inc. (Statoil) to dismiss a case due to insufficient service of process.  Instead, the court granted the plaintiff, Valley Rod & Gun Club (Valley), a thirty day extension to properly serve Statoil. 

Valley named Statoil, as well as Chesapeake Appalachia, LLC and Anadarko E & P Company (Anadarko), as co-defendants in a recent case.  Valley did not directly serve Statoil in the action.  Nevertheless, Valley asserted that it satisfied all service requirements because Valley did serve Anadarko who Valley alleged was 1) partners in a joint venture with Statoil and 2) was Statoil’s authorized agent. 

The court ruled that Anadarko and Statoil were not partners in a joint venture and that Anadarko was not Statoil’s authorized agent.  Thus, it was determined that Statoil was not properly served in the action.  Nevertheless, the court found that Statoil would not be prejudiced by allowing Valley an additional thirty days to effect service. 

Written by M. Sean High – Research Fellow

The Penn State Agricultural Law Resource and Reference Center

August 22, 2013

Lincoln v. Magnum Land Services, LLC., No. 3:12-CV-576, 2013 WL 2443926 (M.D. Pa. June 5, 2013)

On June 5, 2013, the United States District Court for the Middle District of Pennsylvania ruled on a gas producer’s motion to dismiss a landowner’s claims to quiet title and for slander of title involving a leasing dispute in Wyoming County, PA. Plaintiff Robert Lincoln was approached by Defendant Magnum Land Services in February of 2008. Defendant offered to lease Plaintiff’s sub-surface oil and gas rights. Plaintiff altered the terms of the lease, signing and returning it to Defendant. In March, Plaintiff contacted the Defendant and stated he was withdrawing the lease, having not heard from Defendant. Two months later, Defendant sent Plaintiff a check for $71,362.50, which plaintiff voided and returned.

In August, 2008, Plaintiff leased their oil and gas rights to a third party, Chief Exploration, and recorded the lease with the county recorder. In August of 2009, Defendant recorded the altered February 2008 lease, and subsequently assigned the oil and gas rights to Belmont Resources, who assigned to Sinclair, and further Chesapeake and Statoil. In September of 2009, Plaintiff learned Defendant had recorded the altered agreement as a lease, and believing it would cast a cloud on his title and prevent participation in a Wyoming County Landowner’s Group deal, filed an Affidavit affecting title. In December, Plaintiff mailed the Affidavit and a quitclaim deed to Chesapeake. In September of 2011, Chesapeake and Statoil released the oil and gas rights via the quitclaim deed.

The court granted the motion to dismiss Plaintiff’s claim of quiet title, because Chesapeake and Statoil released and surrendered the oil and gas rights of the property. The court explained that because this release had occurred prior to the filing of the complaint there was no cloud of title on the property.

Further, the court granted the motion to dismiss Plaintiff’s claim of slander of title because the statute of limitations for slander of title had expired. A claim of slander of title has a statute of limitations of one year from when the cloud of title arises. Here, when Defendant filed the counteroffer as a lease, the period began. Plaintiff did not include the slander of title claim until amending his complaint three months after the statutory period elapsed, therefore, it was dismissed.

Written by: Garrett Lent, Research Assistant
Penn State Law, Agricultural Law Center
June 2013

Valley Rod & Gun Club v. Chesapeake Appalachia, LLC., No. 3:CV-13-0725, 2013 WL 2393003 (M.D. Pa. June 3, 2013).

On June 3, 2013, the United States District Court for the Middle District of Pennsylvania ruled on a gas well operator’s motion to dismiss a landowner’s claims of trespass and conversion/misappropriation by the company. Defendant operator Chesapeake and Plaintiff landowner Valley Rod & Gun Club executed a lease that contained provisions allowing Defendant access to the Plaintiff’s property, granting a right of entry, permission to construct a well pad, the privilege to install and use roads, and utilize oil, gas and non-domestic water for the storage of gas. Defendant and Plaintiff, disagreed on the location of the well, and Defendant chose a location against the owner’s requests that damaged the Plaintiff’s surface property. Defendant, via its sub-contractor, utilized stone, fill, rock, trees and mulch on the Club’s property to construct the access roads to the pad, without permission of the owner. The court dismissed the trespass claim because the lease granted Defendant a right of entry to the Plaintiff’s land, an absolute defense to trespass. The court explained that the lease provisions privileged the Defendant to install and use roads on the surface estate, and lacked provisions that restricted access where the Defendant’s otherwise had a right to be. The court, however, denied Defendant’s motion to dismiss the conversion and misappropriation claim. The court explained the Plaintiff plead facts sufficient to demonstrate that the stone, fill, rock, trees and mulch were not utilized by Defendant in sitework incidental to the extraction of oil and gas, but rather in the construction of access roads.

Written by: Garrett Lent, Research Assistant

Penn State Law, Agricultural Law Center

June 2013

Good Will Hunting Club v. Range Resources, No. 4:1cv1152, 2013 WL 2297170 (M.D. Pa. May 24, 2013).

On May 24, 2013, the United States District Court for the Middle District of Pennsylvania upheld the continuation of a five year lease where the actions of a gas company were sufficient to commence a well during the primary term. The lease contained provisions which allowed the Defendant to extend the lease by producing paying quantities of oil or gas during the primary term or commencing a well during the primary term and thereafter drilling with due diligence. The lease was negotiated by an agent acting on behalf the Plaintiff, Good Will. The president and vice president of Good Will, who signed the lease, had no knowledge of the commencement language. However, the Court construed the lease against the Plaintiff because the lease had been negotiated and drafted by an agent who held himself out to be an expert. Accordingly, the Court held the Plaintiff was bound by the commencement language. In addition, the Court held because the Defendant has staked a drill site, obtained permits and easements, cleared timber and began construction of a pad site the Defendant had successfully commenced a well during the primary term.


Written by: Clara Conklin, Research Assistant
Penn State Law, Agricultural Law Center
May 2013

Court grants Defendant's motion to dismiss in a pipline case

On August 8^th, the District Court for the Western District of Pennsylvania granted Defendant’s motion to dismiss two of Plaintiff’s counts in an oil pipeline case.

Written by Joseph Negaard, Research Assistant
Penn State Law, Agricultural Law Center

August 16, 2012

Click Here for the original Midwest opinion

The District Court for the Western District of Pennsylvania granted Plaintiffs motion to remand a gas lease dispute to the Court of Common Pleas

On August 1st, the District Court for the Western District of Pennsylvania remanded Rice v. Chesapeake Energy Corporation to the Court of Common Pleas. The Rices signed a natural gas lease with Dale Property Services (Dale), who sold the lease to Chesapeake Energy Corp. (Chesapeake).  The Rices filed suit in state court and Defendants removed to Federal Court based on diversity.  The Rices filed a motion to remand the case back to the Court of Common Pleas because Dale was a citizen of Pennsylvania.  Defendants argued that under Pennsylvania oil and gas law Dale must be disregarded as a party based on fraudulent joinder because the Rices' lease-based claims were against Chesapeake alone. The Rices counter that Dale should be a party, because reassignment of oil and gas leases is treated the same as other leases under Pennsylvania law. The Court was not certain that reassignment of oil and gas leases under Pennsylvania law released Dale as a party.  Because of the high threshold the moving party must meet in a fraudulent joinder claim, the court remanded the case back to state court.

Written by Joseph Negaard, Research Assistant
Penn State Law, Agricultural Law Center

August 8, 2012

Click here for the Rice Opinion.

Pennsylvania appeals the Commonwealth Court‘s decision to overturn the Zoning Section of Act 13.

On July 27th, Governor Corbett announced that the state has appealed the Commonwealth Court decision in Robinson Township. v. Commonwealth, which declared the zoning portion of Act 13, codified as 58 P.S. § 3304, unconstitutional.

Written by Joseph Negaard, Research Assistant
Penn State Law, Agricultural Law Center

August 6, 2012

 

Click here for the Governor’s official press release.

Click here for the Robison Township blog post.

Click here for the original Robinson Township opinion.

Heasley v. KSM Energy, Incorporated – The Superior Court of Pennsylvania affirmed the trial court’s decision, in an oil and gas lease dispute.

On July 27^th, the Superior Court of Pennsylvania affirmed the trial court’s decision, granting judgment in favor of Heasley after he refused to accept payment from his flat-rate oil and gas leases. The two flat-rate leases, both from 1942, were effective “for the term of twenty years from this date, and as long thereafter as oil or gas … is produced.” Both parties agreed that neither oil nor gas was being produced. However, KSM argued that Heasley was estopped from denying the validity of the leases because he had negotiated and accepted payments of $100 until February 2009, and that acceptance of annual rental payments was sufficient to maintain the leases.  Heasley countered that he terminated the leases in 2009, when he stopped accepting payments. The court held that the leases were no longer in effect because the flat-rate leases ended when production ended.  The court reasoned that the secondary term of the leases were terminated because there was no longer any production of gas or oil. Once production had ended the leases were subject to an at-will tenancy and could be terminated by either party at any time.  A lessee cannot maintain a flat-rate lease by continuing to pay as though gas was being produced.

Written by Joseph Negaard, Research Assistant
Penn State Law, Agricultural Law Center

August 1, 2012

Click here for the full Heasley opinion. 

Robinson Township v. Commonwealth - The Commonwealth Court of Pennsylvania Overturns the Zoning Section of Act 13.

On July 26^th, the Commonwealth Court of Pennsylvania declared the zoning portion of Act 13, which had been codified as 58 P.S. § 3304, unconstitutional.  In March, Robinson Township challenged the constitutionality of Act 13’s statutory regulation of oil and gas operations which they allege overrides local regulations, preventing communities from fulfilling their constitutional obligation to protect the health, safety, and welfare of their citizens. The Commonwealth responded by alleging that Robinson Township lacks standing, that the question posed is a non-justiciable political question, and that Robinson Township fails to state a claim on which relief may be granted. The Court held the zoning portion of Act 13 unconstitutional because it gave DEP the power to make legislative policy judgments and did not provide sufficient guidance when granting waivers.

Written by Joseph Negaard, Research Assistant
Penn State Law, Agricultural Law Center

July 31, 2012

Click here for the Robinson Township Opinion.

EXCO Resources v. New Forestry, LLC - District Court holds that mineral rights may not include disposal wells

On July 25^th, the United States District Court for the Middle District of Pennsylvania granted Defendant New Forestry's motion for summary judgment and denied Plaintiff EXCO's motion for summary judgment. New Forestry is the owner of the surface estate of the property in question and EXCO has control of the subsurface.  The court reasoned that EXCO cannot use the well for disposal for two reasons. First, the original deed which severed the estate did not grant property rights beyond extracting resources. Second, EXCO did not properly renew the license.

Written by Joseph Negaard, Research Assistant
Penn State Law, Agricultural Law Center

July 30, 2012

Click here for the full EXCO Opinion.

Fay v. Dominion Transmission, Inc. – District Court Grants Motion for Summary Judgment in Takings Case.

On July 24th, the United States District Court for the Middle District of Pennsylvania granted Defendant Dominion Transmission’s motion for summary judgment. Plaintiff Scott Allen Fay filed a complaint against Dominion Transmission, alleging that the company violated the Pennsylvania Eminent Domain Code by storing natural gas under Fay's property and contaminating his property and groundwater. After discovery revealed that the property was located outside the storage field and buffer zone, Dominion Transmission filed a motion for summary judgment. The court held that Fay’s claim failed as a matter of law and granted the motion for summary judgment because there was no evidence that Dominion Transmission stored natural gas under Fay’s property or that Dominion Transmission’s actions prevented Fay from using his property.

Written by Joseph Negaard, Research Assistant
Penn State Law, Agricultural Law Center

July 30, 2012

Click here for the full Fay opinion.

Dillon v. Antero Resources – Court grants Motion for Confidentiality Order in discovery dispute.

On July 10^th, the United States District Court for the Western District of Pennsylvania granted Defendant’s “Motion for a Confidentiality Order” (Motion). Dillon v. Antero Res., 2012 WL 2899710 (W.D. Pa. July 10, 2012). This action was brought by two families alleging damages to their property from nearby hydraulic fracturing. Defendant filed the Motion and Plaintiffs opposed it on the basis that Defendant did not shown good cause. The court held that the Motion would be granted. The court reasoned that the Motion was consistent with the Federal Rules of Civil Procedure requirement of being “just, speedy, and inexpensive” because it allows either side to call on the court to resolve a dispute between the two parties, places the burden of proof on the party asserting the need for confidentiality, and allows the court to ultimately decide if any information should be confidential or not. Because the court is the deciding authority, disputes can be quickly and efficiently settled. However, if the parties generate an unreasonable number of requests for judicial intervention the court will appoint someone to resolve discovery disputes at the shared expense of the parties, increasing costs for both parties.

Written by Joseph Negaard, Research Assistant
July 16, 2012

 Click here for the full Dillion opinion.

Roman v. Chesapeake Appalachia, L.L.C. - U.S. District Court for the Middle District of Pennsylvania upholds arbitration in lease extensions

On June 8^th, the U.S. District Court for the Middle District of Pennsylvania upheld Defendant’s motion to compel arbitration. The oil and gas lease Plaintiffs executed on their property included an arbitration clause which provided that a “unanimous decision of the arbitrators…shall be final.” After the primary term of the lease expired, Plaintiffs’ attempted to get a declaration from the court saying their oil and gas lease was no longer in effect because the gas company had failed to conduct any operations to trigger a lease extension. Defendant responded with a motion to compel arbitration. The court held that the arbitration clause in the oil and gas lease required arbitration in this case. The court reasoned that the arbitration provision, applying to “disagreement[s] between Lessor and Lessee concerning this lease,” is a broad provision, and includes disagreements of the lease term. 

Written by Joseph Negaard, Research Assistant
June 9, 2012

Click here to read the Roman opinion

Commonwealth Court of Pennsylvania rules that a compressor station is considered gas production under zoning ordinances

On May 9^th the Commonwealth Court of Pennsylvania reversed the Court of Common Pleas of McKean County.  New Century Pipeline had appealed after the Court of Common Pleas had affirmed the Bradford Township Zoning Board’s decision that the compressor station, located at the wellhead, was not permitted because zoning ordinances only allowed gas production, which the zoning board had interpreted as drilling and pumping operations. The Commonwealth Court held that a “compressor station is gas production…and, as such, a permitted use” under the zoning ordinance. The Court reasoned that a compressor station was part of gas production because without a compressor station, the gas collected at the wellhead could not be placed into a pipeline and moved from the site.

Written by Joseph Negaard, Research Assistant
May 24, 2012

Click here to read the Commonwealth Court opinion 

PA Supreme Court Grants Petition for Allowance of Appeal in Butler v. Charles Powers Estate

On April 3, the Pennsylvania Supreme Court granted the petition for allowance of appeal in Butler v. Charles Powers Estate.  In the case, the Superior Court remanded the case to the trial court to determine whether natural gas contained in the Marcellus Shale constitutes a mineral more similar to coal or natural gas for purposes of a previous mineral reservation.  The case involves the interpretation of a mineral reservation implicating the intersection of the rules set out in the decisions of Dunham v. Kirkpatrick, 101 Pa. 36 (1882) and U.S. Steel Corp. v. Hoge, 503 Pa. 140 (1983).  The issue on appeal is: "In interpreting a deed reservation for “minerals,” whether the Superior Court erred in remanding the case for the introduction of scientific and historic evidence about the Marcellus shale and the natural gas contained therein, despite the fact that the Supreme Court of Pennsylvania has held (1) a rebuttable presumption exists that parties intend the term “minerals” to include only metallic substances, and (2) only the parties’ intent can rebut the presumption to include non-metallic substances."

Click here to read the grant of petition for allowance of appeal

Click here to read the Superior Court opinion

Written by Dan McGraw, Research Assistant
April 4, 2012

Case Law Update: Butler v. Powers Estate Appealed to PA Supreme Court

On October 7, 2011, attorneys representing John E. and Mary Josephine Butler in the Butler v. Powers Estate case filed a petition for allowance of appeal with the Supreme Court of Pennsylvania. The original quiet title action, brought by the Butlers against heirs of the Charles Powers estate, was remanded by the Superior Court of Pennsylvania in early September 2011 to determine whether Marcellus shale constitutes a mineral more similar to conventional natural gas or coal.

Click here to see the docket sheet

Click here to here read the Superior Court Decision

Written by Andy Schwabenbauer, Research Fellow
October 18, 2011

Case Law Update: Devonian Program v. Commissioner of Internal Revenue

No. 10–4062.; 2011 WL 3417103; (C. A. 3)
Decided: August 5, 2011

The IRS issued a Final Partnership Administrative Adjustment (FPAA) asserting adjustments to the 1999 partnership tax return of Devonian Program ("Devonian"), an oil and gas company. Basin Gas Corporation ("Basin") and Carl Valeri, sole officer, director and shareholder of Basin, both filed separate readjustment petitions with the Tax Court. The IRS Commissioner filed a motion to dismiss Valeri’s petition for lack of jurisdiction, claiming that "I.R.C. s 6226(b)(1) permits Valeri to challenge an FPAA only if Basin has not already done so." The Tax Court agreed with the Commissioner and held that Basin was Devonian’s general partner and qualified as TMP.  Valeri’s petition for lack of jurisdiction was dismissed.

On appeal, Valeri challenged the Tax Court’s finding and argued that Basin could not be Devonian’s TMP because the relationship was one of agency, not partnership. When considering what entities fall within the IRS' broad definition of “partnership,” the Court stated that it must consider “the agreement, the conduct of the parties, their statements, the testimony of disinterested persons, the relationship of the parties, their respective abilities and capital contributions, the actual control of income and the purposes for which it is used, and any other facts throwing light on their true intent.” Comm’r v. Culbertston, 337 U.S. 733, 742 (1949). When reviewing these factors the court noted that Basin had acquired a 17% interest in Devonian and that on Basin's 1999 tax return this was treated as an investment.  Additionally, Devonian's 1999 tax return and other forms filed by Valeri with the IRS identified Basin as Devonian's TMP. The court determined that there was "more than enough evidence" to support the Tax Court’s finding that the relationship between Basin and Devonian was one of partnership and that Basin was Devonian’s TMP.

Written by Andy Schwabenbauer, Research Fellow
October 4, 2011

Case Law Update: In re Graff

No. 10–21820–BM; 2011 WL 3702382; (Bkrtcy. W. D. Pa., 2011)
Decided: August 23, 2011

In March of 2010, Cloyd J. and Wanda Graff, "debtors”, filed for Chapter 7 bankruptcy protection. The debtors exempted certain property under U.S.C. s 522(d)(1), which provides an exemption for “the debtor’s aggregate interest... in real property or personal property that the debtor... uses as a residence.” The debtors claimed a personal residence exemption that was made up of two parts; $35, 395.44 was assigned to their residence and $1,500.00 was assigned to oil and gas rights separate from the realty. A trustee, Charles Zebley, filed a motion to clarify the exemption and claimed the only property that could be exempted as a personal residence under 522(d)(1) was the debtors’ mobile home.

The court noted that the term “residence” is not defined anywhere in the Bankruptcy Code. Relying on two other areas of the Code, 11 U.S. C. s 101(13A) and 11 U.S.C. s 101 (27B), the court concluded, as a matter of law, that a debtor’s residence can include: “a) a mobile home; b) the underlying land upon which the mobile home is situated, regardless of the whether such home is attached to such land; c) the land that surrounds such mobile home, which land can be many acres thereof if it is located in a rural rather than urban area, which legal conclusion is warranted given that (i) such surrounding land would commonly be conveyed with a structure located thereon, and (ii) the language of 522(d)(1) limits only the value of a debtor’s interest in a residence that can thereby be exempted, not the size of such residence; and d) oil and gas rights that accompany such realty. “

Written by Andy Schwabenbauer, Research Fellow
October 3, 2011

Case Law Update: Morgantown Misses Deadline to Appeal the Overturn of its Hydraulic Fracturing Ban

The city of Morgantown has missed its window to appeal the August 12, 2011 Monongalia County Circuit Court decision to overturn the City's ban on hydraulic fracturing (read blog post here). A recent amendment, as of December 1, 2010, to the West Virginia Rules of Civil Procedure, requires that Notice of Appeal be filed within 30 days of entry of the judgment being appealed. Under the new rules, the City's deadline for Notice filing passed on September 11, 2011. Hydraulic fracturing has now full regained its legal status in Morgantown.

Written by Tanya J. Cramoy, Research Assistant

Case Law Update: Butler v. Powers Estate

2011 PA Super 198, No. 1795 MDA 2010
Filed: September 7, 2011

John E. and Josephine Butler (the Butlers) are the owners in fee simple of 244 acres in Susquehanna County, Pennsylvania. The deed to their land contained a reservation for “one half of the minerals and Petroleum Oils to said Charles Powers, his heirs and assigns…” The Butlers filed a complaint to quiet title naming “Charles Powers’ estate and the estate’s heirs and assigns” as defendants. Heirs to the Powers estate, William H. Pritchard and Craig L. Pritchard (the Pritchards), responded to a motion for publication and filed for declaratory judgment. The Pritchards claimed the reservation of rights in the deed includes Marcellus shale gas. This motion was dismissed by the trial court. On appeal, the Pritchards raised the issue of whether the trial court “erred in determining that the… reservation in the chain of title to the surface land…did not include a reservation of one half of such unconventional Marcellus shale gas...”

The Court mentions the precedent established in Dunham v. Kirkpatrick, 101 Pa. 36 (1882), and Highland v. Commonwealth, 400 Pa. 261 (1960), (a reservation or exception in a deed reserving “minerals,” without any specific mention of natural gas or oil, creates a rebuttable presumption that the grantor did not intend for “minerals” to include natural gas or oil). The Court also discusses U.S. Steel Corp. v. Hoge, 503 Pa. 140 (1983), (subterranean gas is owned by whoever has title to the property in which the gas is resting) but determines that it cannot resolve the dispute based on the record presented.

The court concluded that it was unable to say with certainty whether the Pritchards have a cognizable claim based on the facts. The case was then remanded to determine (1) whether Marcellus shale constitutes a “mineral”; (2) whether Marcellus shale gas constitutes the type of conventional natural gas contemplated in Dunham and Highland; and (3) whether Marcellus shale is similar to coal to the extent that whoever owns the shale owns the shale gas.

Click here to view the entire opinion

Written by Andy Schwabenbauer, Research Fellow
September 27, 2011