In Danko Holdings, LP v. EXCO Resources (PA), LLC, the lease at issue
provided that the lessee was not bound by a change in ownership “until
furnished with such documentation as Lessee may reasonably require.” The original parties to the lease made
several assignments of interest, but neither the lessors nor their successors
provided the lessee or its successors with notice of the change in
ownership. The plaintiff, Danko, was a
successor of the lessor. Danko sought a
declaration that the lease had expired by its own terms because the predecessor
of defendant EXCO made the extension payment to the original lessors who, at the
time of the payment, had already assigned their interest.
Judge Brann held that because EXCO
and its predecessors had not been provided with notice of the change in
ownership, the payment made to the original lessors was sufficient to extend
the lease under the change in ownership provision. As the issue was novel under Pennsylvania
law, Judge Brann relied on authority from other state and federal courts, as
well as prominent oil and gas treatises, to conclude that change of ownership
clauses are valid features of oil and gas leases and are strictly
construed. Moreover, Judge Brann held
that constructive or actual notice of the change in ownership will not obviate
a change of ownership clause. The plain
language of the lease required Danko or its predecessors to provide
documentation of the change in ownership.Judge Brann's opinion.
This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713 651 3662) and Michael Gaetani (michael.gaetani@nortonrosefulbright.com or 724 416 0400) from Norton Rose Fulbright's Energy Practice Group.
