On November 26, 2013, the Pennsylvania Supreme Court
denied an appeal of a Superior Court decision which held that a gas lessee has no obligation to drill into the Marcellus Shale formation. In
Caldwell v. Kriebel Resources Co., LLC, et al., filed in 2012 in the Clearfield County Court of Common Pleas, Case No. 2012-14-CD, 2012 WL 8745184 (C.P. Clearfield County, Aug. 3, 2012), the plaintiff landowners sought a declaratory judgment that would allow them to terminate their lease agreement with the defendant gas company. Id. The company had drilled a series of shallow wells on the plaintiffs’ property, which produced gas in paying quantities, but did not drill deeper wells into the Marcellus Shale formation.
Id. The Court of Common Pleas dismissed the suit, holding that the company was developing the property as required by the lease. Id. The court also rejected plaintiffs’ argument that minimum royalty payments should be based on the natural gas potentially available in all strata underlying the property, finding instead that a well should be deemed to have produced in paying quantities if it resulted in any profit whatsoever.
Id.
The Pennsylvania Superior Court
affirmed the trial court holding by stating:
Under Pennsylvania law, we are not authorized to impose an implied duty on the lessee to develop the various strata in light of the language contained in their contract. This is so particularly in light of the fact that defendants are producing gas pursuant to the agreement, a fact that appellants acknowledge.
Caldwell v. Kriebel Res. Co., LLC et al., 72 A.3d 611 (Pa. Super. Ct. 2013). With the state Supreme Court denying the appeal, the Superior Court’s decision based on the strict language of the lease remains controlling Pennsylvania law.
