134 A.3d 470
Pa. Super. Ct.2016Background
- 1966 oil and gas lease (the Loughman Lease) granted exclusive rights to drill, produce, and to inject/store gas; durational clause kept the lease in effect while land was "operated for the exploration or production of gas or oil, or as gas or oil is found in paying quantities thereon, or stored thereunder."
- Dorothy Loughman (lessor) successors are Appellants; Equitable assigned the lease to Equitrans in 1988; Equitrans subleased production rights to EQT in 2011.
- Appellants sued in 2012 seeking a declaratory judgment that production rights terminated because no oil/gas was ever produced and because production rights were severed by the 2011 sublease.
- Appellants moved for summary judgment arguing (1) production and storage rights are severable under the lease language and (2) Equitrans severed them by subletting production only.
- Trial court denied summary judgment, adopting reasoning from a similar case that the lease was nonseverable and had been maintained by payment of storage rent; Appellants appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether production rights terminated for failure to produce over ~50 years | Loughman: Lease treats production and storage as separable (use of "or"); Equitrans severed production by subletting to EQT, so production rights expired | Appellees: Lease is nonseverable; sublease did not control the original parties' intent; storage rent and lease terms keep lease alive | Court: Lease is nonseverable; durational clause is disjunctive but parties’ intent (including sublease language) shows no severance; summary judgment denial affirmed |
Key Cases Cited
- Szymanowski v. Brace, 987 A.2d 717 (Pa. Super. 2009) (standard for contract interpretation and summary judgment review)
- Jacobs v. CNG Transmission Corp., 772 A.2d 445 (Pa. 2001) (doctrine on severability of production and storage rights and inquiry into parties’ intent)
- Murphy v. Duquesne University of the Holy Ghost, 777 A.2d 418 (Pa. 2001) (when writing is clear, courts enforce its terms as written)
- J.K. Willison v. Consolidation Coal Co., 637 A.2d 979 (Pa. 1994) (oil and gas leases governed by general contract interpretation principles)
- Heilwood Fuel Co. v. Manor Real Estate Co., 175 A.2d 880 (Pa. 1961) (doctrine referenced on severability analysis)