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Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer
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Understanding Legal Issues Related to Marcellus Shale by Ross H. Pifer

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Ross Pifer, the Director of the Penn State Agricultural Law Resource and Reference Center at the Dickinson College of Law, addresses the myriad of legal aspects involved in deep gas drilling issues …

Ross Pifer, the Director of the Penn State Agricultural Law Resource and Reference Center at the Dickinson College of Law, addresses the myriad of legal aspects involved in deep gas drilling issues for those who choose to lease land, for neighbors and citizens who don't own land or gas rights but whose properties are leased for drilling, and for farmers, landowners, and citizens who may be impacted by the drilling in other ways.

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  • State sales tax revenue goes entirely to the state. Except in the Pittsburgh area, there is no local or regional sales tax with revenues going to local governments.
  • Rights, Royalty & Patent income includes Royalties & lease payments that landowners receive. The Dept of Revenue considers the county of origin where the taxpayer lives who files the return– NOT where the royalties necessarily are generated. So the increases of income in non-Marcellus counties includes leasing and royalty payments from Marcellus that are going to taxpayers who live in those counties but who own leased land in Marcellus counties. This is NOT subject to the local earned income tax
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  • Transcript

    1. Understanding Legal Issues Related to Marcellus Shale Pennsylvania Association for Sustainable Agriculture Marcellus Shale Choices: Information to Action Series August 2011 Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    2. <ul><ul><li>Overview of Presentation </li></ul></ul><ul><ul><li>Introduction </li></ul></ul><ul><ul><li>Marcellus Shale Background </li></ul></ul><ul><ul><li>Statutory and Regulatory Overview </li></ul></ul><ul><ul><li>Leasing Issues </li></ul></ul><ul><ul><li>General Oil and Gas Law Concepts </li></ul></ul><ul><ul><li>Surface Owner Issues </li></ul></ul><ul><ul><li>Recent Legal Developments </li></ul></ul><ul><ul><li>Legal Issues on the Horizon </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    3. <ul><ul><li>History of the </li></ul></ul><ul><ul><li>Agricultural Law Center </li></ul></ul><ul><li>Established through enactment of the Agricultural Law Resource and Reference Center Act on January 29, 1998 </li></ul><ul><ul><li>House Bill 1345 (Act 11 of 1998) </li></ul></ul><ul><ul><li>Codified at 3 Pa. Stat. 2201 to 2209 </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    4. <ul><ul><li>Act 11 of 1998 </li></ul></ul><ul><ul><li>Legislative Findings </li></ul></ul><ul><li>“ The legal issues affecting agriculture . . . are becoming increasingly complex” </li></ul><ul><li>“ At present there exists no central and effective system for compiling agricultural law materials . . . and disseminating this information to affected parties . . .” </li></ul><ul><li>“ The alliance between [DSL and PSU CAS] . . . creates a unique opportunity.” </li></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    5. <ul><ul><li>Purpose of </li></ul></ul><ul><ul><li>Agricultural Law Center </li></ul></ul><ul><li>Section 2205 </li></ul><ul><ul><li>“ to serve as a resource on agricultural law and related issues for farmers and agribusinesses, attorneys, officials at all levels of government, community groups, and the public.” </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    6. <ul><ul><li>Dissemination of Information </li></ul></ul><ul><li>Presentations </li></ul><ul><li>Educational Programs </li></ul><ul><li>Publications </li></ul><ul><li>The Agricultural Law Brief </li></ul><ul><li>Website </li></ul><ul><li>Blogs </li></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    7. <ul><ul><li>Web-based Resources </li></ul></ul><ul><li>www.law.psu.edu/aglaw </li></ul><ul><ul><li>Resource Areas </li></ul></ul><ul><ul><ul><li>ACRE </li></ul></ul></ul><ul><ul><ul><li>Right to Farm </li></ul></ul></ul><ul><ul><ul><li>Clean and Green </li></ul></ul></ul><ul><ul><ul><li>Agricultural Area Security Law </li></ul></ul></ul><ul><ul><li>Center Publications Library </li></ul></ul><ul><ul><li>Agricultural Law Brief </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    8. <ul><ul><li>Web-based Resources </li></ul></ul><ul><li>www.law.psu.edu/marcellus </li></ul><ul><li>Marcellus Shale Resource Area </li></ul><ul><ul><li>Penn State Resources </li></ul></ul><ul><ul><li>Case Law </li></ul></ul><ul><ul><li>Statutes </li></ul></ul><ul><ul><li>Regulations </li></ul></ul><ul><ul><li>Legal-related links </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    9. <ul><ul><li>Blogs </li></ul></ul><ul><li>Agricultural Law </li></ul><ul><ul><li>www.pennstateaglaw.com </li></ul></ul><ul><li>Marcellus Shale </li></ul><ul><ul><li>www.pennstatelawmarcellusblog.com </li></ul></ul><ul><li>Chesapeake Bay </li></ul><ul><ul><li>www.pennstatelawbayblog.com </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    10. <ul><ul><li>Overview of Presentation </li></ul></ul><ul><ul><li>Introduction </li></ul></ul><ul><ul><li>Marcellus Shale Background </li></ul></ul><ul><ul><li>Statutory and Regulatory Overview </li></ul></ul><ul><ul><li>Leasing Issues </li></ul></ul><ul><ul><li>General Oil and Gas Law Concepts </li></ul></ul><ul><ul><li>Surface Owner Issues </li></ul></ul><ul><ul><li>Recent Legal Developments </li></ul></ul><ul><ul><li>Legal Issues on the Horizon </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    11. Pennsylvania Oil and Gas – The Early Years <ul><li>August 27, 1859 – Drake well </li></ul><ul><li>Nov. 3, 1878 – Haymaker well </li></ul><ul><li>January 1883 – Natural gas pipeline constructed to Pittsburgh </li></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    12. <ul><ul><li>Pennsylvania Oil and Gas </li></ul></ul><ul><ul><li>Early 20 th Century (1900-01) </li></ul></ul><ul><ul><ul><li>43% of total value of natural gas extracted in United States </li></ul></ul></ul><ul><ul><ul><li>37% of active gas well in United States </li></ul></ul></ul><ul><ul><ul><li>42% of pipeline miles in United States </li></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    13. <ul><ul><li>Pennsylvania Oil and Gas </li></ul></ul><ul><ul><li>Early 21 st Century (2005) </li></ul></ul><ul><ul><ul><li>16 th nationally in annual natural gas production </li></ul></ul></ul><ul><ul><ul><li>3 rd nationally in number of active natural gas wells (11% of national total) </li></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    14. <ul><ul><li>Pennsylvania Oil and Gas Law </li></ul></ul><ul><ul><li>1859 to 2005 </li></ul></ul><ul><ul><ul><li>Late 1800s to Early 1900s – national leader </li></ul></ul></ul><ul><ul><ul><li>Mid 1900s to Early 2000s – relatively small development of oil and gas case law </li></ul></ul></ul><ul><ul><ul><li>Early 2000s – statutory and regulatory framework for oil and gas development based upon historic production methods </li></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    15. <ul><ul><li>Marcellus Shale Development </li></ul></ul><ul><ul><li>Renz #1 (2005) – Marked Beginning of Transformation of Industry in PA </li></ul></ul><ul><ul><ul><li>Increased activity </li></ul></ul></ul><ul><ul><ul><li>Expansion into new areas of PA </li></ul></ul></ul><ul><ul><ul><li>Use of new techniques / technologies </li></ul></ul></ul><ul><ul><ul><li>$$$$$$$$ </li></ul></ul></ul><ul><ul><ul><li>Entry of international companies </li></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    16. <ul><ul><li>What is Marcellus Shale? </li></ul></ul><ul><ul><li>Natural gas contained with shale rock </li></ul></ul><ul><ul><li>Extremely large shale formation </li></ul></ul><ul><ul><li>Extraction relies upon adaptation of two key technologies: </li></ul></ul><ul><ul><ul><li>Hydraulic fracturing </li></ul></ul></ul><ul><ul><ul><li>Horizontal drilling </li></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    17. Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    18. Source: PickensPlan.com Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    19. <ul><ul><li>Why Marcellus Shale? </li></ul></ul><ul><ul><li>Large size – 95,000 square miles </li></ul></ul><ul><ul><li>Productivity </li></ul></ul><ul><ul><li>Low break-even market price </li></ul></ul><ul><ul><li>Proximity to market </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    20. Marcellus Wells Drilled <ul><li>Pennsylvania Marcellus wells </li></ul><ul><ul><li>2005 – 2 </li></ul></ul><ul><ul><li>2006 – 11 </li></ul></ul><ul><ul><li>2007 – 34 </li></ul></ul><ul><ul><li>2008 – 210 </li></ul></ul><ul><ul><li>2009 – 768 </li></ul></ul><ul><ul><li>2010 – 1454 </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    21. Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    22. Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    23. Marcellus Production Data
    24. Marcellus – acreage locations NY PA WV Legend APC / Mitsui Atlas COG CHK Chief / Enerplus CNX / CXG East Resources EnerVest EOG Epsilon EQT EXCO Hess / NFX NFG (Seneca) PDC Range Rex / Williams Samson Stone SWN TLM UPL XOM / XTO NJ OH MD DE Columbia Dauphin Perry Huntingdon Forest Northumberland Jefferson Warren Cameron Bedford Wayne Lackawanna Susquehanna Pike Potter Allegheny Washington Fayette Lebanon Lycoming Clearfield Somerset Westmoreland Elk Tioga Armstrong Centre Clinton Garrett Monongalia McKean Bradford Tioga Indiana Sullivan Mercer Butler Lawrence Greene Wetzel Marshall Doddridge DC Adams Berks Bucks Carbon Clarion Crawford Mifflin Beaver Chester Cumberland Erie Fulton Lehigh Luzerne Montour Philadelphia Snyder Cambria Delaware Franklin Lancaster Monroe Schuylkill Wyoming Montgomery Northampton Venango York Juniata Union Chemung Steuben Brooke Hancock Harrison Marion Ohio Preston Tyler Erie Taylor Berkeley Grant Hampshire Hardy Jefferson Lewis Mineral Morgan Pleasants Ritchie Tucker Wirt Wood Barbour Allegany Broome Cattaraugus Chautauqua Chenango Cortland Delaware Erie Livingston Otsego Schoharie Schuyler Sullivan Tompkins Ulster Wyoming Yates Blair Carbon Fulton Luzerne Monroe Montour Schuylkill Snyder Union Source: Credit Suisse, company filings, company presentations and Wall Street research . Antero Carrizo REXX Drilling Range Res. (RRC) 13 Rigs (6 spudder) IPs up to 26 MMcfe / d EQT: 30-Day Rates 15.8 MMcfe / d 14.3 MMcfe / d CXG: 30-Day Rates 1.6 MMcfe / d 0.8 MMcfe / d CHK: 3 rigs ATLS Drilled 17 Horizontals IPs: 3 - 10 MMcfe/d 170+ Verticals Avg IP: 2.2 MMcfe/d REXX Drilling Recent well: 3.3 MMcfe/d (14-day) XCO Drilling EOG / NFG JV: 2 rigs running NFG Drilling UPL: 2 rigs running IPs Avg: 7.5 MMcf / d Range: 3-4-10.4 MMcf / d TLM: 6 rigs running IPs: 2.3-6.0 MMcfe / d (30-day ) NFG (Seneca) 3 IPs: 5–10 MMcf / d 7 wells drilled APC: 3 rigs running RRC: 2 wells 13.5 MMcfe / d (7-day ) SWN Drilling CHK: 14 rigs Epsilon (EPS) CHK Farm-out CHK: 8.7 MMcfe / d CHK: 8.7 MMcfe / d CHK: 8.7 MMcfe / d COG: 5 rigs running Recent IPs: 2.6-16.1 MMcf / d CRZO vert activity ECA
    25. Change in State Sales Tax Collections, by County Level Marcellus Drilling Activity July, 2007- June, 2010 Source: PA Department of Revenue ‘Statistical Supplements for the Tax Compendium Counties by Number of Marcellus Wells Between 2007 and December, 2010 <ul><li>Sales tax dollars go to the state - none remains at the local level (except in a few urban counties) </li></ul><ul><li>Counties with more than 150 wells since 2007 include: </li></ul><ul><li>Bradford (482 wells) </li></ul><ul><li>Tioga (387 wells) </li></ul><ul><li>Washington (305 wells) </li></ul><ul><li>Greene (179 wells) </li></ul><ul><li>Susquehanna (174 wells) </li></ul>
    26. Change in Rights, Royalties & Patents- State Personal Income Tax Collections, by County Level Marcellus Drilling Activity, 2007-08 Source: PA Department of Revenue ‘Statistical Supplements for the Tax Compendium, Tim Kelsey - PSU Counties by Number of Marcellus Wells Between 2007 and 2008
    27. <ul><ul><li>Negative Impacts from </li></ul></ul><ul><ul><li>Marcellus Activity </li></ul></ul><ul><ul><li>Strain on local infrastructure </li></ul></ul><ul><ul><li>Increased demand on local services </li></ul></ul><ul><ul><li>Increased housing costs </li></ul></ul><ul><ul><li>Perceived decline in quality of life </li></ul></ul><ul><ul><li>Environmental concerns </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    28. <ul><ul><li>Overview of Presentation </li></ul></ul><ul><ul><li>Introduction </li></ul></ul><ul><ul><li>Marcellus Shale Background </li></ul></ul><ul><ul><li>Statutory and Regulatory Overview </li></ul></ul><ul><ul><li>Leasing Issues </li></ul></ul><ul><ul><li>General Oil and Gas Law Concepts </li></ul></ul><ul><ul><li>Surface Owner Issues </li></ul></ul><ul><ul><li>Recent Legal Developments </li></ul></ul><ul><ul><li>Legal Issues on the Horizon </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    29. <ul><ul><li>Pennsylvania Oil and Gas Laws </li></ul></ul><ul><li>58 Pa. Stat. §§ 1-701.7 </li></ul><ul><ul><li>Chapter 1: Oil and Gas Wells </li></ul></ul><ul><ul><li>Chapter 2: Test of Illuminating Oil </li></ul></ul><ul><ul><li>Chapter 5: Interstate Conservation Compact </li></ul></ul><ul><ul><li>Chapter 7: Oil and Gas Conservation Law </li></ul></ul><ul><ul><li>Chapter 8: Underground Storage Act </li></ul></ul><ul><ul><li>Chapter 9: Pennsylvania Used Oil Recycling Act </li></ul></ul><ul><ul><li>Chapter 10: Coal and Gas Resource Coordination Act </li></ul></ul><ul><ul><li>Chapter 11: Oil and Gas Act </li></ul></ul><ul><ul><li>Chapter 12: Dormant Oil and Gas Act </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    30. <ul><ul><li>Pennsylvania Oil and Gas Act </li></ul></ul><ul><li>Organization of Oil and Gas Act </li></ul><ul><ul><li>Chapter 1: Preliminary Provisions </li></ul></ul><ul><ul><li>Chapter 2: General Requirements </li></ul></ul><ul><ul><li>Chapter 3: Underground Gas Storage </li></ul></ul><ul><ul><li>Chapter 4: Eminent Domain </li></ul></ul><ul><ul><li>Chapter 5: Enforcement and Remedies </li></ul></ul><ul><ul><li>Chapter 6: Miscellaneous Provisions </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    31. <ul><ul><li>OGA – Preliminary Provisions </li></ul></ul><ul><li>Declaration of Purpose – Section 102 </li></ul><ul><ul><li>Permit optimal development . . . consistent with protection of health, safety, environment, and property; </li></ul></ul><ul><ul><li>Protect safety of employees and facilities; </li></ul></ul><ul><ul><li>Protect safety and property of those near development; and </li></ul></ul><ul><ul><li>Protect natural resources, environmental rights and values secured by PA Constitution </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    32. <ul><ul><li>OGA – General Requirements </li></ul></ul><ul><li>Section 201 – Well permits </li></ul><ul><li>Section 202 – Permit objections </li></ul><ul><li>Section 203 – Well registration and identification </li></ul><ul><li>Section 205 – Well location restrictions </li></ul><ul><li>Section 206 – Well site restoration </li></ul><ul><li>Section 207 – Casing requirements </li></ul><ul><li>Section 208 – Protection of water supplies </li></ul><ul><li>Section 210 – Plugging requirements </li></ul><ul><li>Section 212 – Well reporting requirements </li></ul><ul><li>Section 215 – Bonding </li></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    33. <ul><ul><li>General Requirements </li></ul></ul><ul><li>Permitting Requirements – Section 201 </li></ul><ul><ul><li>DEP permit is required prior to drilling. </li></ul></ul><ul><ul><li>Notice must be provided to: </li></ul></ul><ul><ul><ul><li>Surface owner; </li></ul></ul></ul><ul><ul><ul><li>Surface landowner or water purveyors who have water supply within 1000 feet of proposed well location; and </li></ul></ul></ul><ul><ul><ul><li>Owner / operator of underlying coal seams. </li></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    34. <ul><ul><li>General Requirements </li></ul></ul><ul><li>Permitting Objections – Section 202 </li></ul><ul><ul><li>Surface owner has right to object to permit. </li></ul></ul><ul><ul><li>Objection must be filed with DEP within 15 days of receipt of notice and plat. </li></ul></ul><ul><ul><ul><li>Objection can be based upon improper location of well or inaccurate information in permit application. </li></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    35. <ul><ul><li>General Requirements </li></ul></ul><ul><li>Well Location Restrictions – Section 205 </li></ul><ul><ul><li>Wells cannot be drilled: </li></ul></ul><ul><ul><ul><li>Within 200 feet from building or water well </li></ul></ul></ul><ul><ul><ul><li>Within 100 feet from spring, stream, body or water, or wetland larger than one acre </li></ul></ul></ul><ul><ul><li>Waiver from location restrictions can be granted. </li></ul></ul><ul><ul><ul><li>DEP may impose conditions to protect people, property, and waters. </li></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    36. <ul><ul><li>General Requirements </li></ul></ul><ul><li>Well Site Restoration – Section 206 </li></ul><ul><ul><li>Surface estate must be restored from disturbances caused by drilling activities. </li></ul></ul><ul><ul><li>Well operator must follow erosion and sediment control plan at all times during drilling. </li></ul></ul><ul><ul><li>Equipment must be removed and well site restored within nine months of completion of activity. </li></ul></ul><ul><ul><ul><li>Time period can be extended for six months. </li></ul></ul></ul><ul><ul><ul><li>Equipment can be stored on-site with landowner permission. </li></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    37. <ul><ul><li>General Requirements </li></ul></ul><ul><li>Ground Water Protection – Section 207 </li></ul><ul><ul><li>Casing is required when: </li></ul></ul><ul><ul><ul><li>Drilling through fresh water strata; </li></ul></ul></ul><ul><ul><ul><li>Certain coal seams; </li></ul></ul></ul><ul><ul><li>Brines must be disposed of in compliance with Clean Streams Law. </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    38. <ul><ul><li>General Requirements </li></ul></ul><ul><li>Protection of Water Supplies – Section 208 </li></ul><ul><ul><li>Well operator must restore or replace a water supply that is polluted or diminished. </li></ul></ul><ul><ul><li>Presumption of liability </li></ul></ul><ul><ul><ul><li>Well is presumed to have caused pollution of water supply located within 1000 feet of well. </li></ul></ul></ul><ul><ul><ul><li>Presumption can be rebutted by demonstrating pollution existed prior to drilling. </li></ul></ul></ul><ul><ul><ul><li>Presumption also is rebutted if landowner refuses permission to perform a predrill test. </li></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    39. <ul><ul><li>General Requirements </li></ul></ul><ul><li>Reporting Requirements – Section 212 </li></ul><ul><ul><li>Completion report must be filed with 30 days of the completion of drilling. </li></ul></ul><ul><ul><li>Production Reports: </li></ul></ul><ul><ul><ul><li>Report containing production data must be filed with DEP every six months. </li></ul></ul></ul><ul><ul><ul><li>Report is published on DEP Web site. </li></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    40. <ul><ul><li>Oil and Gas Conservation Law </li></ul></ul><ul><li>Declaration of Purpose </li></ul><ul><ul><li>“ [F]oster, encourage, and promote the development, production, and utilization” of Pennsylvania’s oil and gas resources; </li></ul></ul><ul><ul><li>Prevent the waste of oil and natural gas; </li></ul></ul><ul><ul><li>Permit the Commonwealth to “realize and enjoy the maximum benefit of these natural resources.” </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    41. <ul><ul><li>Oil and Gas Conservation Law </li></ul></ul>Image by: Robert Milici and Christopher Swezey, 2006, Assessment of Appalachian Basin Oil and Gas Resources: Devonian Shale–Middle and Upper Paleozoic Total Petroleum System. Open-File Report Series 2006-1237. United States Geological Survey. The Oil and Gas Conservation Law does not apply to wells that do not penetrate the Onondaga horizon, meaning wells drilled into the Marcellus Shale generally are not covered by this law. Depth of Marcellus Shale Depth of Ondaga Horizon Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    42. <ul><ul><li>Oil and Gas Conservation Law </li></ul></ul><ul><li>Well Spacing </li></ul><ul><ul><li>When a well is drilled into, or below, the Onondaga horizon, those “directly and immediately affected by the drilling” of the well can apply to DEP for a well spacing order. </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    43. <ul><ul><li>Dormant Oil and Gas Act </li></ul></ul><ul><li>Enacted July 11, 2006 </li></ul><ul><li>Purpose </li></ul><ul><ul><li>“ facilitate the development of subsurface properties by reducing the problems caused by fragmented and unknown or unlocatable ownership of oil and gas interests . . .” </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    44. <ul><ul><li>Guarantee of Minimum Royalties </li></ul></ul><ul><li>58 Pa. Stat. § 33 </li></ul><ul><ul><li>“ A lease . . . shall not be valid if such lease does not guarantee the lessor” a one-eighth royalty. </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    45. <ul><ul><li>State Regulatory Agencies </li></ul></ul><ul><li>Department of Environmental Protection (DEP) </li></ul><ul><ul><li>Bureau of Oil and Gas Management </li></ul></ul><ul><li>Department of Conservation and Natural Resources (DCNR) </li></ul><ul><li>Public Utility Commission (PUC) </li></ul><ul><li>Department of Transportation (PennDOT) </li></ul><ul><li>Department of Agriculture (PDA) </li></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    46. <ul><ul><li>Federal Regulatory Agencies </li></ul></ul><ul><li>Susquehanna River Basin Commission (SRBC) </li></ul><ul><li>Delaware River Basin Commission (DRBC) </li></ul><ul><li>Federal Energy Regulatory Commission (FERC) </li></ul><ul><li>Environmental Protection Agency (EPA) </li></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    47. <ul><ul><li>Overview of Presentation </li></ul></ul><ul><ul><li>Introduction </li></ul></ul><ul><ul><li>Marcellus Shale Background </li></ul></ul><ul><ul><li>Statutory and Regulatory Overview </li></ul></ul><ul><ul><li>Leasing Issues </li></ul></ul><ul><ul><li>General Oil and Gas Law Concepts </li></ul></ul><ul><ul><li>Surface Owner Issues </li></ul></ul><ul><ul><li>Recent Legal Developments </li></ul></ul><ul><ul><li>Legal Issues on the Horizon </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    48. <ul><ul><li>The Leasing Process </li></ul></ul><ul><li>Energy company presents landowner with STANDARD lease agreement. </li></ul><ul><li>Landowner negotiates additional terms to be included as addenda to lease agreement. </li></ul><ul><li>Lease agreement will govern nearly all aspects of relationship between landowner and energy company. </li></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    49. <ul><ul><li>Terms of the Lease Agreement </li></ul></ul><ul><li>Parties to lease agreement </li></ul><ul><li>Property description </li></ul><ul><li>Length of lease agreement </li></ul><ul><li>Payment terms </li></ul><ul><li>Rights granted by landowner to energy company & limitations on those rights </li></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    50. <ul><ul><li>Parties to the Lease Agreement </li></ul></ul><ul><li>Lessor – Owner of natural gas rights </li></ul><ul><li>Lessee </li></ul><ul><ul><li>Lessee could be an independent landman, an energy company, a drilling company, or other. </li></ul></ul><ul><ul><li>Lessee will change if lease agreement is later assigned. </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    51. <ul><ul><li>Property Description </li></ul></ul><ul><li>Property will be described by one or more of the following: </li></ul><ul><ul><li>County and township </li></ul></ul><ul><ul><li>Metes and bounds </li></ul></ul><ul><ul><li>Acreage </li></ul></ul><ul><ul><li>Tax assessment parcel number </li></ul></ul><ul><ul><li>Neighboring properties </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    52. <ul><ul><li>Length of the Lease Agreement </li></ul></ul><ul><li>Primary term </li></ul><ul><ul><li>Primary term is the number of years defined in lease agreement. </li></ul></ul><ul><ul><li>Lease agreement ends if production activities do not begin by expiration of primary term. </li></ul></ul><ul><ul><li>If production activities begin, lease agreement is converted to secondary term. </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    53. <ul><ul><li>Extension of the Primary Term </li></ul></ul><ul><li>Renewal at option of lessee </li></ul><ul><ul><li>Terms of current lease agreement will continue. </li></ul></ul><ul><li>Right of first refusal </li></ul><ul><ul><li>Lessee has opportunity to match contract offers from other companies. </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    54. <ul><ul><li>Length of the Lease Agreement </li></ul></ul><ul><li>Secondary term </li></ul><ul><ul><li>Secondary term begins upon the initiation of production activities. </li></ul></ul><ul><ul><li>Subject to the specific provisions in lease agreement, secondary term can extend far into the future. </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    55. <ul><ul><li>Payment Terms </li></ul></ul><ul><li>Bonus Payment </li></ul><ul><ul><li>This is a one-time payment to landowner. </li></ul></ul><ul><ul><li>It is paid at execution of lease agreement or within a short time thereafter. </li></ul></ul><ul><ul><li>The amount is negotiable. </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    56. <ul><li>Delay Rental Payments </li></ul><ul><ul><li>These are payments to landowner at times specified in lease agreement. </li></ul></ul><ul><ul><li>The obligation to make scheduled payments terminates when a well is drilled. </li></ul></ul><ul><ul><li>The amount and number of payments is negotiable. </li></ul></ul>Payment Terms Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    57. <ul><ul><li>Payment Terms </li></ul></ul><ul><li>Royalty Payments </li></ul><ul><ul><li>These are paid to landowner when natural gas is removed from the land. </li></ul></ul><ul><ul><li>Pennsylvania law requires that landowner be paid royalties of at least 1/8. </li></ul></ul><ul><ul><li>Landowner can negotiate for a higher royalty rate. </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    58. <ul><ul><li>Payment Terms </li></ul></ul><ul><li>Shut-In Royalty Payments </li></ul><ul><ul><li>These are payments made to landowner when a well is drilled, but gas is not yet marketed. </li></ul></ul><ul><ul><li>The amount and circumstances under which payments are made is negotiable. </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    59. <ul><ul><li>Payment Terms </li></ul></ul><ul><li>Free Natural Gas </li></ul><ul><ul><li>Lease agreement may provide for landowner to receive a specified amount of extracted natural gas at no cost. </li></ul></ul><ul><ul><li>Landowner is generally responsible for transportation of gas from wellhead to residence. </li></ul></ul><ul><ul><li>Landowner can negotiate to receive a payment in lieu of free natural gas. </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    60. <ul><ul><li>Other Payment Opportunities </li></ul></ul><ul><li>Storage rights </li></ul><ul><li>Transportation of foreign gas / installation of pipelines </li></ul><ul><li>Well siting fee </li></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    61. <ul><li>Mineral Estate </li></ul><ul><li>Surface Estate </li></ul>Rights Granted by Landowner Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    62. <ul><li>Mineral estate is severable from surface estate. </li></ul><ul><li>Mineral estate is dominant over surface estate. </li></ul>Mineral Estate vs. Surface Estate Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    63. <ul><li>Lease agreement will specify what products within mineral estate are subject to grant. </li></ul><ul><ul><li>Horizontal severance clause can limit gas development to a specific strata (Marcellus, Utica, etc.) </li></ul></ul>Mineral Estate Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    64. <ul><li>Energy company will seek broad use of surface estate. </li></ul><ul><li>Landowner may want to limit energy company’s use of surface estate. </li></ul>Surface Estate Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    65. <ul><li>Landowner may limit use of surface estate by: </li></ul><ul><ul><li>Requiring that landowner approve well sites and access roads </li></ul></ul><ul><ul><li>Specifying the conditions under which the land will be reclaimed </li></ul></ul><ul><ul><li>Defining the permitted activities and structures </li></ul></ul><ul><ul><li>Requiring the installation of fencing or gates </li></ul></ul>Surface Estate Limitations Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    66. <ul><li>Landowner may be able to negotiate lease agreement that does not permit use of surface estate. </li></ul><ul><li>Landowner may or may not receive lower payment terms in exchange for a no surface rights lease. </li></ul>No Surface Rights Lease Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    67. <ul><li>Examples: </li></ul><ul><ul><li>Property damages </li></ul></ul><ul><ul><li>Liability to third parties </li></ul></ul><ul><ul><li>Increased taxes, penalties, or damages from violation of farmland preservation-type programs </li></ul></ul>Protection Against Adverse Financial Events Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    68. <ul><li>Landowners should seek protection through: </li></ul><ul><ul><li>Lease terms </li></ul></ul><ul><ul><li>Insurance coverage </li></ul></ul><ul><ul><li>Establishment of financial reserve </li></ul></ul>Protection Against Adverse Financial Events Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    69. <ul><li>Lease agreement should address potential damage to: </li></ul><ul><ul><li>soils, crops, trees, buildings, roads, water, etc. </li></ul></ul><ul><li>Lease agreement should provide method of valuing damages. </li></ul><ul><li>Landowner should consider inclusion of arbitration clause. </li></ul>Property Damage Provisions Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    70. Indemnification Provisions <ul><li>Landowner should require indemnity provision in lease agreement. </li></ul><ul><li>Indemnity provision should include all costs of litigation. </li></ul><ul><li>Indemnity provision should encompass environmental harms. </li></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    71. <ul><li>Participation in Clean and Green or other farmland preservation program may limit drilling activities or result in imposition of penalties. </li></ul><ul><li>Landowner should seek to shift all potential financial liabilities to lessee. </li></ul>Farmland Preservation Provisions Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    72. <ul><li>Landowner should avoid granting storage rights in lease agreement. </li></ul><ul><li>The grant of storage rights can effectively extend the lease term. </li></ul><ul><li>The grant of storage rights should be separately negotiated for additional compensation. </li></ul>Storage Rights Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    73. <ul><li>Landowner should avoid granting transportation rights (installation of pipelines) in lease agreement. </li></ul><ul><li>The grant of transportation rights should be separately negotiated for additional compensation. </li></ul>Transportation of Foreign Gas Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    74. <ul><li>Landowner should inquire about attorney’s experience with gas leasing. </li></ul><ul><li>Landowner should understand the basis of all fees charged by attorney. </li></ul><ul><li>Landowner should receive a written fee agreement from attorney. </li></ul>Considerations in Hiring an Attorney Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    75. <ul><ul><li>Overview of Presentation </li></ul></ul><ul><ul><li>Introduction </li></ul></ul><ul><ul><li>Marcellus Shale Background </li></ul></ul><ul><ul><li>Statutory and Regulatory Overview </li></ul></ul><ul><ul><li>Leasing Issues </li></ul></ul><ul><ul><li>General Oil and Gas Law Concepts </li></ul></ul><ul><ul><li>Surface Owner Issues </li></ul></ul><ul><ul><li>Recent Legal Developments </li></ul></ul><ul><ul><li>Legal Issues on the Horizon </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    76. <ul><li>Dunham’s Rule </li></ul><ul><ul><li>Reservation of mineral estate may not include reservation of right to natural gas. </li></ul></ul>Ownership of Mineral Estate Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    77. <ul><ul><li>“ Held By Production” </li></ul></ul><ul><ul><li>When a well is commenced during the primary term, the leasehold is said to be “held by production.” </li></ul></ul><ul><ul><li>So long as a leasehold is held by production, the energy company holds all rights granted through the lease agreement. </li></ul></ul><ul><ul><ul><li>Thus, the landowner will be limited or prevented from acquiring additional lease bonus payments. </li></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    78. <ul><ul><li>Pooling / Unitization </li></ul></ul><ul><ul><li>Pooling – “combining . . . tracts for the purpose of sharing production and expenses.” </li></ul></ul><ul><ul><li>Unitization – “consolidating multiple tracts and interests into a single unified block to allow for orderly development and efficient operations to prevent surface, underground, and economic waste.” </li></ul></ul><ul><ul><ul><li>John S. Lowe et al., Cases and Materials on Oil and Gas Law </li></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    79. <ul><ul><li>Pooling / Unitization </li></ul></ul><ul><ul><li>Royalties are paid on a proportional basis within drilling unit. </li></ul></ul><ul><ul><li>Example: </li></ul></ul><ul><ul><ul><li>If drilling unit is 640 acres; </li></ul></ul></ul><ul><ul><ul><li>and landowner owns 64 acres within drilling unit; </li></ul></ul></ul><ul><ul><ul><li>and landowner’s lease agreement provides for a royalty rate of 15%; </li></ul></ul></ul><ul><ul><ul><li>Then landowner will receive royalty of 1.5% of gas extracted. </li></ul></ul></ul><ul><ul><li>The composition of a drilling unit is determined by the energy company pursuant to lease agreement. </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    80. <ul><ul><li>Pooling / Unitization </li></ul></ul><ul><ul><li>Where only a portion of a leasehold is included in a drilling unit, generally all of the leasehold will be held by production. </li></ul></ul><ul><ul><li>A Pugh Clause in the lease agreement can provide for the release of portions of the leasehold that are not included within a drilling unit. </li></ul></ul><ul><ul><ul><li>Pugh Clause can release land vertically or horizontally. </li></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    81. <ul><ul><li>Rule of Capture </li></ul></ul><ul><li>“ The owner of a tract of land acquires title to the oil and gas which he produces from wells drilled thereon, though it may be proved that part of such oil and gas migrated from adjoining lands.” </li></ul><ul><ul><li>Robert E. Hardwicke (1935) </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    82. <ul><li>Rule of Capture is generally applicable in Pennsylvania. </li></ul><ul><li>The impact of the Rule of Capture may be minimized by lack of porosity and permeability in Marcellus Shale. </li></ul>Rule of Capture Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    83. <ul><ul><li>Overview of Presentation </li></ul></ul><ul><ul><li>Introduction </li></ul></ul><ul><ul><li>Marcellus Shale Background </li></ul></ul><ul><ul><li>Statutory and Regulatory Overview </li></ul></ul><ul><ul><li>Leasing Issues </li></ul></ul><ul><ul><li>General Oil and Gas Law Concepts </li></ul></ul><ul><ul><li>Surface Owner Issues </li></ul></ul><ul><ul><li>Recent Legal Developments </li></ul></ul><ul><ul><li>Legal Issues on the Horizon </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    84. <ul><li>Natural gas extraction necessarily involves some disturbance of the surface estate. </li></ul><ul><li>Marcellus wells vs. traditional wells </li></ul><ul><ul><li>Larger well pad sites </li></ul></ul><ul><ul><ul><li>Increased use of water </li></ul></ul></ul><ul><ul><ul><li>Multiple wells on single well pad </li></ul></ul></ul><ul><ul><li>Fewer well pad sites </li></ul></ul><ul><ul><ul><li>Use of horizontal drilling </li></ul></ul></ul><ul><ul><ul><li>Surface use not necessary on all parcels. </li></ul></ul></ul>Surface Impacts Generally Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    85. <ul><li>Mineral estate is severable from surface estate. </li></ul><ul><li>Mineral estate is dominant over surface estate. </li></ul><ul><ul><li>Owner of surface estate is entitled to certain notifications </li></ul></ul><ul><ul><li>Owner of mineral estate is entitled to reasonable use of surface estate. </li></ul></ul>Mineral Estate vs. Surface Estate Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    86. <ul><li>Gas company must send permit application to owner of surface estate. </li></ul><ul><li>Surface owner has 15 days after receipt of application to object to grant of permit. </li></ul><ul><li>Objection can be based upon: </li></ul><ul><ul><li>Location of the well; or </li></ul></ul><ul><ul><li>Inaccurate information contained in the permit application. </li></ul></ul>Notification Requirement Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    87. <ul><li>Surface owner must receive notice of request for drilling permit renewal. </li></ul><ul><li>Surface owner must be provided with 24 hours notice prior to commencement of drilling. </li></ul>Notification Requirement Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    88. <ul><ul><li>Surface Owner Rights </li></ul></ul><ul><ul><li>Belden & Blake v. DCNR (Pa. Apr. 29, 2009) </li></ul></ul><ul><ul><ul><li>Facts: </li></ul></ul></ul><ul><ul><ul><ul><li>Belden had rights to extract oil and gas within Oil Creek State Park. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>DCNR would not permit surface access without coordination agreement. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Belden filed suit, claiming implied easement to use surface estate. </li></ul></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    89. <ul><ul><li>Surface Owner Rights </li></ul></ul><ul><ul><li>Supreme Court Ruling: </li></ul></ul><ul><ul><ul><li>DCNR could not require Belden to execute coordination agreement. </li></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    90. <ul><ul><li>Surface Owner Rights </li></ul></ul><ul><ul><li>Supreme Court Reasoning: </li></ul></ul><ul><ul><ul><li>Subsurface estate is dominant over surface estate. </li></ul></ul></ul><ul><ul><ul><ul><li>Chartiers Block Coal Co. v. Mellon (Pa. 1893) </li></ul></ul></ul></ul><ul><ul><ul><li>Subsurface owner entitled to reasonable use of surface estate. </li></ul></ul></ul><ul><ul><ul><li>Burden is on surface owner to challenge reasonableness of use. </li></ul></ul></ul><ul><ul><ul><li>Government holds no greater rights than private landowner re: surface use. </li></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    91. <ul><li>What is reasonable use? </li></ul><ul><ul><li>How does the ability to horizontally drill affect reasonable use? </li></ul></ul><ul><li>How can surface owner enforce reasonable use? </li></ul><ul><ul><li>Surface use agreement </li></ul></ul><ul><ul><li>Litigation – Burden is on surface owner to initiate court proceeding. </li></ul></ul>Mineral Estate vs. Surface Estate Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    92. <ul><ul><li>Compensation for Damages to Surface Estate </li></ul></ul><ul><ul><li>Obligation of natural gas rights holder to compensate surface owner for damages is not clear. </li></ul></ul><ul><ul><ul><li>There are no statutory provisions addressing this topic. </li></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    93. <ul><ul><li>Damages for Devaluation of Surface Estate </li></ul></ul><ul><ul><li>Gates v. Exco Resources, 2010 WL 1416740 (W.D. Pa. Apr. 8, 2010) </li></ul></ul><ul><ul><ul><li>Landowners executed lease agreement and pipeline rights of way. </li></ul></ul></ul><ul><ul><ul><li>Landowners sought damages for devaluation of property due to improper reclamation after installation of pipelines. </li></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    94. <ul><ul><li>Gates v. Exco Resources </li></ul></ul><ul><ul><li>Court opinion </li></ul></ul><ul><ul><ul><li>Court found that 20 acres was “rendered almost unable to be used again.” </li></ul></ul></ul><ul><ul><ul><li>Court awarded $16,000 in damages due to diminution of property value. </li></ul></ul></ul><ul><ul><ul><li>Court did not rely on contract as basis for recovery. </li></ul></ul></ul><ul><ul><ul><li>Court awarded damages despite evidence that devalued land was typical of gas production activities. </li></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    95. <ul><ul><li>Overview of Presentation </li></ul></ul><ul><ul><li>Introduction </li></ul></ul><ul><ul><li>Marcellus Shale Background </li></ul></ul><ul><ul><li>Statutory and Regulatory Overview </li></ul></ul><ul><ul><li>Leasing Issues </li></ul></ul><ul><ul><li>General Oil and Gas Law Concepts </li></ul></ul><ul><ul><li>Surface Owner Issues </li></ul></ul><ul><ul><li>Recent Legal Developments </li></ul></ul><ul><ul><ul><li>Case Law </li></ul></ul></ul><ul><ul><ul><li>Municipal Regulation </li></ul></ul></ul><ul><ul><ul><li>Statutory Enactments </li></ul></ul></ul><ul><ul><li>Legal Issues on the Horizon </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    96. <ul><ul><li>Validity and Duration of Lease Agreement </li></ul></ul><ul><li>Minimum Royalty Act litigation </li></ul><ul><li>Fraudulent Inducement </li></ul><ul><li>Untimely Tender of Lease Payment </li></ul><ul><li>Failure to Obtain Management Approval of Lease </li></ul><ul><li>Enforcement of Arbitration Clauses </li></ul><ul><li>Expiration of Primary Term </li></ul><ul><li>Expiration of Secondary Term – “Produced in Paying Quantities” </li></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    97. <ul><ul><li>Minimum Royalty Act Litigation </li></ul></ul><ul><li>Hundreds, possibly thousands, of landowners sought to terminate their lease agreements in suits before state and federal courts. </li></ul><ul><li>General Issue: Did reduction of royalty to pay for post-production costs violate Pennsylvania minimum royalty statute? </li></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    98. <ul><ul><li>58 P.S. § 33 – </li></ul></ul><ul><ul><li>Guarantee of Minimum Royalties </li></ul></ul><ul><ul><li>A lease or other such agreement conveying the right to remove or recover oil, natural gas or gas of any other designation from lessor to lessee shall not be valid if such lease does not guarantee the lessor at least one-eighth royalty of all oil, natural gas or gas of other designations removed or recovered from the subject real property. </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    99. <ul><ul><li>Kilmer v. Elexco Land Services </li></ul></ul><ul><li>Susquehanna Co. Court of Common Pleas </li></ul><ul><ul><li>March 3, 2009 – Order ruled in favor of gas company. </li></ul></ul><ul><ul><li>March 16, 2009 – Opinion issued. </li></ul></ul><ul><li>On June 16, 2009, Supreme Court granted Petition for Extraordinary Relief. </li></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    100. <ul><ul><li>Kilmer v. Elexco Land Services </li></ul></ul><ul><li>Issue accepted by Supreme Court </li></ul><ul><ul><li>“ Whether 58 P.S. § 33 precludes parties from contracting that post-production costs be factored into the determination of the amount of royalty payable under an oil or natural gas lease.” </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    101. <ul><ul><li>Kilmer v. Elexco Land Services </li></ul></ul><ul><li>Supreme Court opinion issued on March 24, 2010 </li></ul><ul><ul><li>GMRA “should be read to permit the calculation of royalties at the wellhead, as provided by the net-back method used in the lease.” </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    102. <ul><ul><li>Fraudulent Inducement </li></ul></ul><ul><ul><li>Kropa v. Cabot Oil & Gas Corp., 2010 WL 2346587 (M.D. Pa. June 8, 2010). </li></ul></ul><ul><ul><ul><li>Facts: </li></ul></ul></ul><ul><ul><ul><ul><li>Susquehanna County landowner paid $25 per acre lease bonus. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Allegation that landman stated that Cabot would never pay more than $25 per acre. </li></ul></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    103. <ul><ul><li>Kropa v. Cabot Oil & Gas Corp. </li></ul></ul><ul><ul><li>Cabot filed motion to dismiss claim </li></ul></ul><ul><ul><ul><li>Argued that parol evidence rule precluded consideration of evidence outside terms of contract </li></ul></ul></ul><ul><ul><li>Court denied motion to dismiss </li></ul></ul><ul><ul><ul><li>Parol evidence rule only applies to valid contract. </li></ul></ul></ul><ul><ul><ul><li>Evidence of fraud permitted to contest contract validity. </li></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    104. <ul><ul><li>Untimely Tender of Lease Bonus </li></ul></ul><ul><ul><li>Sylvester v. Southwestern Energy Production , 2009 WL 3633835 (M.D. Pa. Nov. 2, 2009). </li></ul></ul><ul><ul><ul><li>Facts: </li></ul></ul></ul><ul><ul><ul><ul><li>December 2007 – ten-year lease agreement executed </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Payment to be made within sixty days of lease agreement. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Payment received by landowners twenty-three days after deadline. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Landowners returned check to gas company. </li></ul></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    105. <ul><ul><li>Sylvester v. Southwestern Energy </li></ul></ul><ul><ul><li>Landowners sought declaration that lease was unenforceable. </li></ul></ul><ul><ul><li>Court granted gas company’s motion to dismiss. </li></ul></ul><ul><ul><ul><li>Delay did not constitute material breach. </li></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    106. <ul><ul><li>Sylvester v. Southwestern Energy </li></ul></ul><ul><ul><li>No material breach: </li></ul></ul><ul><ul><ul><li>Landowners could receive benefit of bargain. </li></ul></ul></ul><ul><ul><ul><li>Ninety days notice of default was to be provided. </li></ul></ul></ul><ul><ul><ul><li>No provision stating that time was of the essence. </li></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    107. <ul><ul><li>Breach of Contract – </li></ul></ul><ul><ul><li>Failure to Accept Lease </li></ul></ul><ul><ul><li>Hollingsworth v. Range Resources , 2009 WL 3601586 (M.D. Pa. Oct. 28, 2009). </li></ul></ul><ul><ul><ul><li>Facts: </li></ul></ul></ul><ul><ul><ul><ul><li>June – Hollingsworth received Dear Property Owner letter “offering” lease bonus of $2,500 per acre. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>August – Hollingsworth signs lease and returns to Range. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>December – Range returns lease to Hollingsworth stamped ‘void.’ </li></ul></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    108. <ul><ul><li>Hollingsworth v. Range Resources </li></ul></ul><ul><ul><li>Contract did not exist. </li></ul></ul><ul><ul><ul><li>Dear Property Owner letter did not constitute an offer. </li></ul></ul></ul><ul><ul><ul><li>Range did not sign lease agreement. </li></ul></ul></ul><ul><ul><ul><li>By voiding and returning lease, Range was rejecting Hollingsworth offer. </li></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    109. <ul><ul><li>Breach of Contract – </li></ul></ul><ul><ul><li>Failure to Accept Lease </li></ul></ul><ul><ul><li>Lyco Better Homes v. Range Resources – Docket No. 4:09-cv-249 (M.D. Pa. May 21, 2009). </li></ul></ul><ul><ul><li>Pigeon Creek Presbyterian Church v. Range Resources – Appalachia , 2010 WL 256580 (W.D. Pa. Jan. 19, 2010). </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    110. <ul><ul><li>Valentino v. </li></ul></ul><ul><ul><li>Range Resources – Appalachia </li></ul></ul><ul><ul><li>Facts: </li></ul></ul><ul><ul><ul><li>Lease agreement and side agreement provided for bonus payment of $456,800. </li></ul></ul></ul><ul><ul><ul><li>Lease not valid until approved by management. </li></ul></ul></ul><ul><ul><li>Court opinion </li></ul></ul><ul><ul><ul><li>Documents did not define management approval </li></ul></ul></ul><ul><ul><ul><li>Breach of contract claim was facially plausible </li></ul></ul></ul><ul><ul><ul><li>Motion to Dismiss denied </li></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    111. <ul><ul><li>Enforcement of Arbitration Clauses </li></ul></ul><ul><ul><li>Eisenberger v. Chesapeake Appalachia, LLC – 2010 WL 457139 (M.D. Pa. Feb. 4, 2010). </li></ul></ul><ul><ul><ul><li>Husband, but not wife, signed lease. </li></ul></ul></ul><ul><ul><ul><li>Landowners sought to revoke lease. </li></ul></ul></ul><ul><ul><ul><li>Landowners sought declaration that lease was invalid. </li></ul></ul></ul><ul><ul><ul><li>Chesapeake sought to compel arbitration. </li></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    112. <ul><ul><li>Eisenberger v. Chesapeake </li></ul></ul><ul><ul><li>Court ruling: </li></ul></ul><ul><ul><ul><li>Validity of lease agreement was at issue. </li></ul></ul></ul><ul><ul><ul><ul><li>Distinct from GMRA claims </li></ul></ul></ul></ul><ul><ul><ul><li>Since contract formation was in dispute, underlying claims would not be decided by arbitrator. </li></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    113. <ul><ul><li>Extension of Primary Term </li></ul></ul><ul><ul><li>Hite v. Falcon Partners, 13 A.3d 942 ( Pa. Super. Ct. Jan. 4, 2011). </li></ul></ul><ul><ul><ul><li>“ Lessee has the right to enter upon the Property to drill [for one year] . . . or as Lessee shall continue to pay Lessors two dollars per acre as delayed rentals.” </li></ul></ul></ul><ul><ul><ul><li>Lessors sought to terminate leases. </li></ul></ul></ul><ul><ul><ul><li>Court affirmed grant of summary judgment to Lessors. </li></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    114. <ul><ul><li>Extension of Primary Term </li></ul></ul><ul><ul><li>Lauchle v. The Keeton Group, LLC, 2010 WL 78924 (M.D . Pa. Mar. 8, 2011). </li></ul></ul><ul><ul><ul><li>Court declined to extend primary term of leases due to lease termination litigation asserted by landowners. </li></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    115. <ul><ul><li>Expiration of Secondary Term </li></ul></ul><ul><ul><li>T.W. Phillips v. Jedlicka , 964 A.2d 13 (Pa. Super. Ct. Dec. 29, 2008). </li></ul></ul><ul><ul><ul><li>Facts: </li></ul></ul></ul><ul><ul><ul><ul><li>Lease was executed in 1928. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Lease extended so long as “oil or gas is produced in paying quantities.” </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Wells were drilled in 1929, 1986, 2004, and 2005. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Jedlicka argued that lease terminated in 1959 because lease was not profitable in that year. </li></ul></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    116. <ul><ul><li>T.W. Phillips v. Jedlicka </li></ul></ul><ul><ul><li>Superior Court opinion </li></ul></ul><ul><ul><ul><li>Court relied upon Young v. Forest Oil Co. (Pa. 1899) to apply subjective test. </li></ul></ul></ul><ul><ul><ul><li>Court ruled that Jedlicka had failed to carry burden of establishing lack of good faith. </li></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    117. <ul><ul><li>T.W. Phillips v. Jedlicka </li></ul></ul><ul><ul><li>Issue before Supreme Court: </li></ul></ul><ul><ul><ul><li>Did the Superior Court misapply [ Young v. Forest Oil ] by holding that Pennsylvania employs a purely subjective test to determine whether an oil or gas lease has produced “in paying quantities.” </li></ul></ul></ul><ul><ul><li>Argument held on April 13, 2010. </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    118. <ul><ul><li>Overview of Presentation </li></ul></ul><ul><ul><li>Introduction </li></ul></ul><ul><ul><li>Marcellus Shale Background </li></ul></ul><ul><ul><li>Statutory and Regulatory Overview </li></ul></ul><ul><ul><li>Leasing Issues </li></ul></ul><ul><ul><li>General Oil and Gas Law Concepts </li></ul></ul><ul><ul><li>Surface Owner Issues </li></ul></ul><ul><ul><li>Recent Legal Developments </li></ul></ul><ul><ul><ul><li>Case Law </li></ul></ul></ul><ul><ul><ul><li>Municipal Regulation </li></ul></ul></ul><ul><ul><ul><li>Statutory Enactments </li></ul></ul></ul><ul><ul><li>Legal Issues on the Horizon </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    119. <ul><ul><li>Oil and Gas Act § 602 </li></ul></ul><ul><li>“ Except with respect to ordinances adopted pursuant to the . . . Municipalities Planning Code, and the . . . Flood Plain Management Act, all local ordinances and enactments purporting to regulate oil and gas well operations regulated by this act are hereby superseded. No ordinances or enactments adopted pursuant to the aforementioned acts shall contain provisions which impose conditions, requirements or limitations on the same features of oil and gas well operations regulated by this act or that accomplish the same purposes as set forth in this act.” </li></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    120. <ul><ul><li>Oil and Gas Act § 602 </li></ul></ul><ul><li>“ Except with respect to ordinances adopted pursuant to the . . . Municipalities Planning Code, and the . . . Flood Plain Management Act, all local ordinances and enactments purporting to regulate oil and gas well operations regulated by this act are hereby superseded. No ordinances or enactments adopted pursuant to the aforementioned acts shall contain provisions which impose conditions, requirements or limitations on the same features of oil and gas well operations regulated by this act or that accomplish the same purposes as set forth in this act.” </li></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    121. <ul><ul><li>Oil and Gas Act Preemption of Municipal Regulation </li></ul></ul><ul><ul><li>Huntley & Huntley v. Borough of Oakmont </li></ul></ul><ul><ul><ul><li>Zoning restriction was permitted in R-1 district. </li></ul></ul></ul><ul><ul><ul><li>Example of permissible municipal regulation. </li></ul></ul></ul><ul><ul><li>Range Resources v. Salem Township </li></ul></ul><ul><ul><ul><li>Comprehensive regulatory scheme was not permitted. </li></ul></ul></ul><ul><ul><ul><li>Example of impermissible municipal regulation. </li></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    122. <ul><ul><li>Municipal Regulation </li></ul></ul><ul><ul><li>Penneco Oil Co. v. County of Fayette </li></ul></ul><ul><ul><ul><li>Commonwealth Court opinion </li></ul></ul></ul><ul><ul><ul><ul><li>Issued on July 22, 2010 </li></ul></ul></ul></ul><ul><ul><ul><li>Facts: County zoning ordinance allowed wells only by special exception in residential, industrial, and airport zones. </li></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    123. <ul><ul><li>Penneco Oil Co. v. County of Fayette </li></ul></ul><ul><ul><li>Conditions for grant of special exception: </li></ul></ul><ul><ul><ul><li>Well not located in flight path </li></ul></ul></ul><ul><ul><ul><li>Well not located within 200 feet of residence </li></ul></ul></ul><ul><ul><ul><li>Well not located within 50 feet of property line or right-of-way </li></ul></ul></ul><ul><ul><ul><li>Fencing and shrubbery required </li></ul></ul></ul><ul><ul><ul><li>Zoning Hearing Board may attach conditions to protect public health, safety, and welfare </li></ul></ul></ul><ul><ul><ul><ul><li>Conditions may include increased setbacks </li></ul></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    124. <ul><ul><li>Penneco Oil Co. v. County of Fayette </li></ul></ul><ul><ul><li>Court opinion </li></ul></ul><ul><ul><ul><li>Ordinance was reflection of traditional zoning principles rather than a comprehensive regulatory scheme. </li></ul></ul></ul><ul><ul><ul><li>Although there was some overlap with purposes of Oil and Gas Act, primary purpose of ordinance was to encourage compatible land use. </li></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    125. <ul><ul><li>Penneco Oil Co. v. County of Fayette </li></ul></ul><ul><ul><li>Application for reargument denied on September 14, 2010. </li></ul></ul><ul><ul><li>Supreme Court appeal proceeding </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    126. <ul><ul><li>Oil and Gas Act Preemption of Municipal Regulation </li></ul></ul><ul><ul><li>Range Resources – Appalachia v. Blaine Township </li></ul></ul><ul><ul><ul><li>Attempted regulation of oil and gas operations through corporate disclosure ordinance. </li></ul></ul></ul><ul><ul><ul><li>Attempted regulation through other than MPC authority. </li></ul></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    127. <ul><ul><li>Overview of Presentation </li></ul></ul><ul><ul><li>Introduction </li></ul></ul><ul><ul><li>Marcellus Shale Background </li></ul></ul><ul><ul><li>Statutory and Regulatory Overview </li></ul></ul><ul><ul><li>Leasing Issues </li></ul></ul><ul><ul><li>General Oil and Gas Law Concepts </li></ul></ul><ul><ul><li>Surface Owner Issues </li></ul></ul><ul><ul><li>Recent Legal Developments </li></ul></ul><ul><ul><ul><li>Case Law </li></ul></ul></ul><ul><ul><ul><li>Municipal Regulation </li></ul></ul></ul><ul><ul><ul><li>Statutory Enactments </li></ul></ul></ul><ul><ul><li>Legal Issues on the Horizon </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    128. <ul><ul><li>Enacted Legislation </li></ul></ul><ul><li>2009-2010 Legislative Session </li></ul><ul><ul><li>Marcellus Shale Reporting Requirements (SB 297) </li></ul></ul><ul><ul><li>Clean and Green Amendments (SB 298) </li></ul></ul><ul><ul><li>Coal Bed Methane Review Board (HB 1847) </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    129. <ul><ul><li>Reporting Requirements </li></ul></ul><ul><li>Senate Bill 297 (Act. No. 15) </li></ul><ul><ul><li>Approved by Governor on March 22, 2010 </li></ul></ul><ul><ul><li>Marcellus production data must be reported to DEP every six months. </li></ul></ul><ul><ul><li>DEP is required to publish production data on website. </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    130. <ul><ul><li>Clean and Green Background </li></ul></ul><ul><li>Pennsylvania Farmland and Forest Land Assessment Act of 1974 </li></ul><ul><ul><li>Eligible land is assessed at use value rather than fair market value resulting in lower property taxes. </li></ul></ul><ul><ul><li>Program is active in 55 of 67 counties. </li></ul></ul><ul><ul><li>Counties were treating impact of natural gas drilling differently. </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    131. <ul><ul><li>Clean and Green Amendment </li></ul></ul><ul><li>Senate Bill 298 (Act. No. 88) </li></ul><ul><ul><li>Approved by Governor on October 27, 2010 </li></ul></ul><ul><ul><li>Leasing permitted on C&G land. </li></ul></ul><ul><ul><li>Development activities permitted on C&G land. </li></ul></ul><ul><ul><li>Roll-back taxes imposed on portion of C&G land. </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    132. <ul><ul><li>Clean and Green Amendment </li></ul></ul><ul><li>What lands are subject to roll-back tax? </li></ul><ul><ul><li>Restored well site, and </li></ul></ul><ul><ul><li>Land incapable of being immediately used for agricultural use, ag reserve, or forest reserve </li></ul></ul><ul><li>Roll-back taxes due when county assessor receives initial production report. </li></ul><ul><ul><li>The result of 2011 legislative amendment </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    133. <ul><ul><li>Clean and Green Amendment </li></ul></ul><ul><li>What lands are specifically excluded from roll-back tax? </li></ul><ul><ul><li>Pipelines </li></ul></ul><ul><ul><li>Surface owners who do not own gas rights </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    134. <ul><ul><li>Coal Bed Methane Review Board </li></ul></ul><ul><li>House Bill 1847 (Act. No. 4) </li></ul><ul><ul><li>Approved by Governor on February 1, 2010. </li></ul></ul><ul><li>Purpose </li></ul><ul><ul><li>“ To establish an alternative procedure to court action for consideration and resolution of objections to the locations of certain coal bed methane wells or roads. . .” </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    135. <ul><ul><li>Coal Bed Methane Review Board </li></ul></ul><ul><li>Three member board appointed by Governor </li></ul><ul><ul><li>One member from list submitted by Farm Bureau </li></ul></ul><ul><ul><li>One member from list submitted by industry associations </li></ul></ul><ul><ul><li>One member with petroleum expertise from list submitted by Penn State Deans </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    136. <ul><ul><li>Coal Bed Methane Review Board </li></ul></ul><ul><li>General Procedure </li></ul><ul><ul><li>Notification </li></ul></ul><ul><ul><li>Filing of objections </li></ul></ul><ul><ul><li>Conference convened </li></ul></ul><ul><ul><li>Attempt to reach resolution </li></ul></ul><ul><ul><li>Determination by Board </li></ul></ul><ul><ul><li>Appeal to Court of Common Pleas </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    137. <ul><ul><li>Overview of Presentation </li></ul></ul><ul><ul><li>Introduction </li></ul></ul><ul><ul><li>Marcellus Shale Background </li></ul></ul><ul><ul><li>Statutory and Regulatory Overview </li></ul></ul><ul><ul><li>Leasing Issues </li></ul></ul><ul><ul><li>General Oil and Gas Law Concepts </li></ul></ul><ul><ul><li>Surface Owner Issues </li></ul></ul><ul><ul><li>Recent Legal Developments </li></ul></ul><ul><ul><ul><li>Case Law </li></ul></ul></ul><ul><ul><ul><li>Municipal Regulation </li></ul></ul></ul><ul><ul><ul><li>Statutory Enactments </li></ul></ul></ul><ul><ul><li>Legal Issues on the Horizon </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    138. <ul><ul><li>Current Legal Issues </li></ul></ul><ul><ul><li>Marcellus Shale Impact Fee (SB 1100) </li></ul></ul><ul><ul><li>Compulsory pooling </li></ul></ul><ul><ul><li>Local regulation of drilling operations </li></ul></ul><ul><ul><li>Regulation of hydraulic fracturing </li></ul></ul><ul><ul><li>Expiration of primary term </li></ul></ul>Agricultural Law Resource and Reference Center Professor Ross H. Pifer
    139. <ul><li>The Agricultural Law Resource and Reference Center </li></ul><ul><li>Prof. Ross Pifer, Director </li></ul><ul><li>Phone: (814) 865-3723 </li></ul><ul><li>Email: rpifer@psu.edu </li></ul><ul><li>Web: www.law.psu.edu/aglaw </li></ul><ul><li>Other Resources: </li></ul><ul><li>www.law.psu.edu/marcellus </li></ul><ul><li>www.pennstatelawmarcellusblog.com </li></ul>

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