Wiser v. Enervest Operating, L.L.C.
803 F. Supp. 2d 109
N.D.N.Y.2011Background
- Ten-year primary terms in oil/gas leases (1999–2000) with Belden & Blake, granting exploration rights and indefinite secondary term upon paying quantities; delay rentals required if drilling not commenced within 90 days; force majeure clause excludes delays due to government action or events beyond lessee control; 2008 NY governor memo directed environmental review, argued as de facto moratorium on fracking; leases were still within primary terms with no drilling and limited seismic work; 2009 delay rentals not paid, 2010 tenders rejected; plaintiffs seek declaration that leases expired or are void due to nonpayment and force majeure; court must decide if force majeure extends term and if nonpayment causes automatic termination.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the 2008 governor memo constitute a force majeure extending the leases? | Defendants: force majeure; memo caused stay. | Defendants: memo extended leases into secondary term. | Force majeure extends only primary term, not into secondary; no automatic extension to secondary. |
| Does force majeure move the leases into the secondary term if drilling never occurs? | Leases terminate automatically unless paying quantities are produced. | Force majeure could push into secondary term. | No shift to secondary term; production not occurring means primary term governs. |
| Did the force majeure and nonpayment suspend delay rental obligations indefinitely? | Delay rentals due to maintain the lease; nonpayment breaches. | Force majeure suspends payments. | Delay rentals remained due during primary term; nonpayment caused automatic termination. |
| Is notice of default required for automatic termination under an unless clause? | Notice contemplated for nonpayment of other items, not delay rentals. | Default notice needed. | Notice not required to trigger automatic termination under unless clause; termination self-operates. |
| Do these leases terminate automatically for failure to pay delay rentals, despite default provisions? | Automatic termination by unless clause. | Default procedures should apply. | Leases terminated automatically upon nonpayment of 2009 delay rentals; leases void. |
Key Cases Cited
- Sun Operating Ltd. P'ship v. Holt, 984 S.W.2d 277 (Tex. Civ. Ct. App. 1999) (habendum clause can be affected by force majeure; duration tied to contract terms)
- Philips Petroleum Co. v. Curtis, 182 F.2d 122 (10th Cir. 1950) (time is of the essence in oil and gas leases; unless clauses create termination rights)
- Phyfer v. San Gabriel Dev. Corp., 884 F.2d 235 (5th Cir. 1989) (unless clause triggers automatic termination upon failure to drill or pay by due date)
- Rice v. Richfield Oil Corp., 229 P.2d 185 (Cal. App. 1951) (unless leases terminate automatically for failure to pay or tender rent on time)
- Valentine Oil Co. v. Powers, 59 N.W.2d 159 (Neb. 1953) (unless clause; lease termination automatic and self-operating)