Heasley v. KSM Energy, Inc.
52 A.3d 341
| Pa. Super. Ct. | 2012Background
- Heasley filed suit seeking termination of two 1942 oil/gas leases for lack of production, naming KSM and EOG Resources Appalachia as lessees or assignors.
- Leases covered 56 and 55 acres, with a 20-year primary term and a secondary term to continue as long as oil or gas is produced.
- KSM admitted existence and dates of the leases and that gas/oil was not being produced; KSM argued production status determined duration.
- KSM tendered quarterly checks under the lease terms (Paragraph Second), asserting fixed rental maintained the leases; Heasley did not accept payments after 2009.
- Trial court granted judgment on the pleadings for Heasley, holding the leases became tenancies at will once production ceased; the appeal followed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does production drive the lease duration rather than fixed rent? | KSM argues Phillips controls, fixing duration by fixed rental regardless of production. | Heasley contends production-based duration governs, as in Jedlicka/Caswell. | Production-based duration applies; leases terminate when production ceases. |
Key Cases Cited
- T.W. Phillips Gas & Oil Co. v. Jedlicka, 424 Pa. 322, 227 A.2d 163 (Pa. 1967) (production-based duration governs when royalty is tied to production)
- Cassell v. Crothers, 193 Pa. 359, 44 A. 446 (Pa. 1899) (fixed rental vs. production-based term in oil leases)
- Summerville v. Apollo Gas Co., 207 Pa. 334, 56 A. 876 (Pa. 1904) (lease term tied to continued production, with fixed rental rights limited)
- T.W. Phillips Gas & Oil Co. v. Jedlicka, 42 A.3d 261 (Pa. 2012) (Jedlicka reaffirmation of contract-lease interpretation in PA)
- Clark v. Wright, 311 Pa. 69, 166 A.775 (Pa. 1933) (lessor's compensation tied to production fixes lease duration)