1.
Oil and Gas Case Law Update: Recent
Decisions Impacting Oil and Gas Practice

2.
Faculty
Course Planner: Lisa C. McManus, Vice President, Legal &
General Counsel, Pennsylvania General Energy
Company, LLC
Panelists:
•Joel Burcat, Partner, Saul Ewing
•Robert J. Burnett, Director, Houston Harbaugh
•Lisa C. McManus
•Brian Pulito, Member, Steptoe Johnson
•Michael Winek, Shareholder, Babst Calland

3.
Agenda
• Sabella v. Appalachian Dev. Corp.
• Citizens for Pennsylvania’s Future v. Ultra
Resources, Inc.
• Sisson v. Stanley
• Harrison v. Cabot Oil & Gas
• Pennsylvania Environmental Defense
Foundation v. Commonwealth

4.
Sabella v. Appalachian Dev. Corp., 103 A.3d 83,
2014 PA Super 237 (Pa. Super. Ct. 2014)
Brian Pulito, Steptoe Johnson
Holding: Failure to conduct full title search deprived operators of bona fide
purchaser status; trial court had erred in finding that operators were good
faith trespassers at any point in time because they were on statutory
constructive notice of the true owner's interest based on owner’s recorded
instrument.

5.
PennFuture v. Ultra Resources, Inc.,
2015 U.S. Dist. LEXIS 21357 (M.D. Pa. Feb. 23, 2015)
Michael Winek, Babst Calland
 Eight compressor stations
 8 small sources
OR
 1 major source
 “sources located on one or more contiguous or adjacent
properties”

6.
• Distance only
OR
• Distance + functional interdependence

7.
 Court held:
 Plain meaning should normally control
 However, interdependence may be considered
 “unique factual scenario”
 “unusual or outside of the normal oil and gas
configurations and arrangements contemplated by
PADEP”

8.
Sisson v. Stanley, 2015 PA Super 18 (Pa. Super. Ct.
2015)
Robert Burnett, Houston Harbaugh
• In 1953, the OGM were severed from surface and
reserved by the grantor, Joseph Stanley
• Many years later the surface owner, Donald Sisson, filed
a quiet title action in an effort to “acquire” the OGM
rights
• Attempted to effectuate “alternative service” under Rule
430(a)
• Trial court granted motion for “alternative service” and
surface owner published notice of the suit in local
newspaper
• Default judgment entered on August 2, 2010

9.
• In November 2010, the sole surviving heir of Joseph
Stanley, filed a petition to open the default judgment
• Rule 430(a) provides that a motion for alternative service
must be “accompanied by an affidavit stating the nature
and extent of the investigation which has been made to
determine the whereabouts of the defendant and the
reasons why service cannot be made.”
• The trial court granted the petition and held the affidavit
was insufficient under Rule 430(a) and Deer Park Lumber
v. Major, 559 A.2d 941 (Pa. Super. 1989)

10.
• Prior to trial, the surviving heir filed a motion for
judgment on pleadings on the basis of the 1953 Deed
• Trial court granted motion and entered judgment in
favor of the surviving heir
• On appeal, the Superior Court affirmed and held that:
i. The affidavit was insufficient under Rule 430(a); and
ii. 1953 Deed severed OGM rights and Butler v. Powers
Estate was inapplicable

11.
Harrison v. Cabot Oil & Gas,
2015 Pa. LEXIS 355 (Pa. 2015)
Lisa C. McManus, PGE
Harrison v. Cabot Oil & Gas Corp., 887 F. Supp. 2d 588 (M.D. Pa. 2012):
•Challenged lease was valid, the primary term continued to run during the
litigation, and thus the lease had expired. No equitable tolling applied.
•Cited case law:
 Derrickheim Co. v. Brown, 305 Pa. Super. 173, 451 A.2d 477 (1982)
 Lauchle v. Keeton Group LLC, 768 F. Supp. 2d 757 (M.D. Pa. 2011)

12.
Cabot’s Grounds for Equitable Tolling
1) A lessor’s commencement of a lease-validity challenge constitutes an effective
repudiation of the agreement;
2) The lawsuit and attending uncertainty renders it economically impractical for the
lessee to proceed with the costly development of production infrastructure on
the property; and,
3) It would be unfair to permit a meritless lease challenge to deprive the lessee of
the benefit of its bargain.
Courts should therefore award an extension of the primary lease term, measured
according to the length of time the unsuccessful lawsuit was pending.

13.
Supreme Court’s Opinion
• Commencement of declaratory judgment action as to oil and gas
lease’s validity is not a “repudiation of the lease” because
repudiation requires an “absolute and unequivocal refusal to
perform” the contract.
• Oil and gas lessees have superior bargaining power and can draft
leases to include a tolling provision.
• Recognition of special tolling rule for oil and gas leases would chill
lease challenges with merit.
• Ruling is limited to cases in which actual repudiation has not
occurred

14.
Motion for Reconsideration/Reargument
1. Extension is not dependent on a finding of repudiation and is
available whenever a lessor prevents or obstructs a lessee’s
operations.
2. Pennsylvania law already recognizes that a lessor may not prevent
or obstruct a lessee’s operations on its lease, but the Opinion
ignored this principle.
3. The unique character of an oil-and-gas lease compels the
conclusion that a lessor’s suit attacking the validity of its lease
amounts to a repudiation.
4. Extension is implied by the terms of oil-and-gas leases, even if not
expressly stated, to protect the benefit of the parties’ bargain.
5. The Opinion essentially creates a no-lose situation for lessors who
challenge the validity of their oil-and-gas leases during the primary
term.

15.
What’s a Lessee to Do?
1. Proceed with development plans and hope for either:
a) a favorable ruling on the lease’s validity or
b) interference from the lessor that establishes a complete
repudiation of the lease.
2. Ensure inclusion of a tolling provision in each oil and gas lease that
provides for tolling.

16.
Pennsylvania Environmental Defense Foundation v.
Commonwealth, Docket No. 228 M.D.2012, 2015 Pa.
Commw. LEXIS 9 (Pa. Commw. Ct. Jan. 7, 2015)
Joel R. Burcat, Saul Ewing

17.
Environmental Rights Amendment
(i) The people have a right to clean air, pure water, and to the
preservation of the natural, scenic, historic, and esthetic values of the
environment. (ii) Pennsylvania’s public natural resources are the
common property of all the people, including generations yet to
come. (iii) As trustee of these resources, the Commonwealth shall
conserve and maintain them for the benefit of all the people.
Art. I, § 27 (1971) (Numbering added).

18.
Payne v. Kassab,
312 A.2d 86(Pa. Cmwlth. 1973) (Payne I), aff’d, 361 A.2d 263(Pa.
1976) (Payne II).

19.
The Payne Test:
(1) Was there compliance with all applicable statues and
regulations relevant to the protection of the
Commonwealth’s public natural resources? (2) Does the
record demonstrate a reasonable effort to reduce the
environmental incursion to a minimum? (3) Does the
environmental harm which will result from the challenged
decision or action so clearly outweigh the benefits to be
derived thereform that to proceed further would be an
abuse of discretion?
Payne I, 312 A.2d at 94.

20.
Robinson Twp. v. Commonwealth,
83 A.3d 901 (Pa. 2013).

21.
Pennsylvania Envt’l Defense Found. v.
Commonwealth,
108 A.3d 140 (Pa. Cmwlth. 2015)

22.
Questions?