Gastar Exploration v. Joyce Contraguerro
239 W. Va. 305
| W. Va. | 2017Background
- PPG (lessor) owned surface and executive leasing rights to a 105.9-acre tract; various heirs (NPRI holders) held a collective one‑fourth nonparticipating royalty interest (NPRI) derived from a 1946 deed that conveyed leasing rights away.
- PPG leased a large parcel (3,285.6874 acres) to Gastar for Marcellus Shale development; the lease included a pooling/unitization clause enabling Gastar to form pooled horizontal well tracts and to allocate royalties by acreage contribution.
- Gastar designated a 700‑acre Wayne/Lily Unit (including the 105.9 acres) and drilled multiple horizontal wells; five laterally penetrated the 105.9‑acre tract. Production began and royalty payments to NPRI holders were escrowed pending litigation.
- NPRI holders sued for declaratory relief and damages, arguing the pooling/unitization that diluted their royalty required their consent or ratification because pooling effects a cross‑conveyance creating undivided interests across the unit.
- The Marshall County Circuit Court granted partial summary judgment for NPRI holders, declaring the lease pooling provision and the Wayne/Lily Unit void until NPRI holder consent/ratification; PPG and Gastar appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does pooling/unitization require NPRI holder consent when the NPRI holder previously conveyed oil and gas in place and executive leasing rights to the lessor? | NPRI holders: Pooling cross‑conveys interests, creating undivided ownership across the unit; thus consent/ratification is required. | PPG/Gastar: Pooling is contractual consolidation of lease/financial rights; no conveyance of title occurs, so consent not required. | Court: No consent required where NPRI holders have conveyed oil and gas and executive leasing rights to the lessor; pooling does not create undivided title. |
| Does pooling/unitization create a cross‑conveyance (merger of title) that converts NPRIs into undivided ownership interests across the unit? | NPRI holders: Cross‑conveyance theory applies (as in some Texas/Illinois cases), converting interests into undivided shares throughout the unit. | PPG/Gastar: West Virginia precedents treat pooling/unitization as contractual, not a merger of title; cross‑conveyance would destabilize oil & gas transactions. | Court: Rejects cross‑conveyance theory for West Virginia; pooling/unitization consolidates contractual and financial rights, not property title. |
Key Cases Cited
- Davis v. Hardman, 148 W.Va. 82, 133 S.E.2d 77 (1963) (distinguishes nonparticipating royalty interests from mineral-in-place interests)
- Boggess v. Milam, 127 W.Va. 654, 34 S.E.2d 267 (1945) (unitization produces contractual merger, not title merger)
- Donahue v. Bills, 172 W.Va. 354, 305 S.E.2d 311 (1983) (executive right described as agency coupled with an interest; supports lessee's power to negotiate leases)
- McDonough Co. v. E.I. DuPont DeNemours & Co., Inc., 167 W.Va. 611, 280 S.E.2d 246 (1981) (parties bound by ordinary meaning of words in deeds)
- Minchen v. Fields, 345 S.W.2d 282 (Tex. 1961) (exemplar of cross‑conveyance reasoning relied on by circuit court)
- Ragsdale v. Superior Oil Co., 237 N.E.2d 492 (Ill. 1968) (unitization can be treated as creating single ownership of unit—used by plaintiffs to support cross‑conveyance)