Recent Case Law and Legislation in the Oil & Gas Industry

By: Amanda L. Fitzhugh Porter, Esq.

Warner v. Equitable Gas Company, No. 697 WDA 2014

In a non-precedential decision dated February 4, 2015, the Pennsylvania Superior Court ruled that the use of the word “or” in an oil and gas lease means exactly that: “or.” The case out of Greene County, Warner v. Equitable Gas Company, came on an appeal by the lessors, Warner, who argued that because the lessee was not producing natural gas on the property, the lease was now void. The original lease was signed in 1967 with a primary term of 10 years and extended “as long thereafter commencement of operations as said land is operated for the exploration or production of natural gas, or as gas or oil is found in paying quantities, or stored thereunder, or as long as said land is used for the storage of gas or the protection of gas storage on lands of the general vicinity of said land.” In looking at the lease in light of case precedent and tools of contract construction, the Court ruled that the lease was effectively extended through any of the actions listed due to the use of the word “or.” Essentially, this is a “dual-purpose lease” that grants the lessor a right to use the land for storage, as well as, to drill and produce. Thus, because Equitable Gas continued to use the land for storage the lease had extended into the present day.

This case is non-precedential, but it does imply that the Courts will uphold dual-purpose leases as being bestowing multiple rights to the lessor that cannot be severed. This is consistent with a recent federal case in Pennsylvania that came to the same determination. (Penneco Pipeline Corp. v. Dominion Transmission, Inc., 2007 WL 1847391 (W.D. Pa. June 25, 2007), aff’d 300 Fed.Appx.186 (3d Cir. 2008)).

For a full copy of the opinion, please visit:  http://law.justia.com/cases/pennsylvania/superior-court/2015/697-wda-2014.html

Gillibrand Bill – U.S. Senate Amendment 48

A measure that would pave the way for federal regulation of hydraulic fracturing proposed by Senator Kirsten Gillibrand (D-NY) was defeated in the U.S. Senate by a vote of 63 to 35 on January 28, 2015. 53 Republicans and 10 Democrats voted against Amendment 48 that would have changed a provision of the Energy Policy Act of 2005, referred to as the “Halliburton loophole” by environmentalists, which left the exclusive rights to regulation of this form of drilling to the states on all but federally-owned lands. This would have laid the groundwork for the Environmental Protection Agency and other federal players to regulate hydraulic fracturing, something supported by many Democratic officials and environmental groups, but opposed by most in the oil and gas industry. Gillibrand introduced Amendment 48 as an amendment to the legislation to approve the Keystone XL pipeline. Not surprisingly, the majority of the 10 Democrats against the proposal come from oil and gas producing states like West Virginia, Colorado, North Dakota and New Mexico. Senators Bob Casey (D-PA) and Sherrod Brown (D-OH) voted in favor of the proposal.

For more information on Amendment 48 please visit:  http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=114&session=1&vote=00041#top

Johnson Bill – U.S. House of Representatives House Resolution 351

A bill aimed at speeding up the permit approval process for exporting liquefied natural gas was approved in the U.S. House by a vote of 277-133 on January 28. 2015. House Resolution 351 was introduced by Rep. Bill Johnson of Ohio and supported mostly by party lines, with some Democratic support, including Tim Ryan of Ohio and Mike Doyle of Pennsylvania.

The rationale behind this bill, called the LNG Permitting Certainty and Transparency Act, is to make the process of permit approval more efficient and transparent. As supporters have pointed out, only five of the 27 non-Free Trade Agreement applications received by the Department of Energy (“DOE”) since 2010 have reached a final decision. Further, there are currently only five approved export terminals for liquid-natural gas and none of them have been fully completed. This has slowed down the ability of U.S. companies to enter the international arena as competitors in natural gas. This bill would impose a 30-day deadline on the DOE after required environmental studies are completed,  to issue a determination and grant jurisdiction to whatever Court of Appeals the proposed facility sits under authority in order to compel a determination if one is not released within that timeframe.

The bill is scheduled for committee in the U.S. Senate. A similar bill failed in the Senate after passing the House last year, but supporters are hopeful that the change of party control will lead to a different outcome.

For more information on HR 351, please visit:  https://www.govtrack.us/congress/bills/114/hr351/text

Amanda L. Fitzhugh Porter is an associate in the Energy Practice Group in Leech Tishman’s Pittsburgh office. If you would like more information on this subject, please contact Amanda at (412) 261-1600 or aporter@leechtishman.com. Learn more about Leech Tishman’s Energy Practice Group here.

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