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"Pennsylvania Superior Court Applies Doctrine of Estoppel by Deed in Oil and Gas Context"

By: James H. McCune
Oil & Gas Alert
May 9, 2014

The Pennsylvania Superior Court has applied the doctrine of "estoppel by deed" in a case involving the ownership and leasing of oil and gas.

The Plaintiffs in a quiet title action, owners of the surface of a 62-acre parcel in Tioga County (Pennsylvania), entered into an oil and gas lease with Anadarko in 2006, purporting to lease 62 acres for a five-year primary term. It was then learned that the Plaintiffs owned only an undivided one-half interest in the oil and gas; the other one-half interest had been reserved in 1894. Following the discovery that Plaintiffs owned only a one-half interest, Anadarko advised the Plaintiffs that it would pay bonus money only on 31 acres; Plaintiffs accepted and negotiated the payment regarding 31 acres.

Two years later, the Plaintiffs acquired the remaining one-half interest.

In March 2011, within the primary term of the Anadarko lease, Anadarko tendered to Plaintiffs a check for the full 62 acres pursuant to a provision in the lease granting an option to extend the lease for an additional five years. Plaintiffs did not cash the check.

The Plaintiffs then filed a declaratory judgment action against Anadarko, claiming that the Anadarko lease pertained only to 31 acres, and that Plaintiffs were free to lease the remaining interest in the oil and gas to another lessee. Plaintiffs argued that because they only owned a one-half interest in the oil and gas at the time they entered into the 2006 lease with Anadarko, and because Anadarko paid a bonus only on a one-half interest, that the extension applied only to a one-half interest.

On April 16, 2013, the trial judge granted Anadarko's motion for summary judgment, and stated:

  "The court hereby finds as a matter of law that the Lease covers all oil and gas underlying the entirety of Plaintiffs' 62 acre property...and that the initial term of the Lease was timely and validly extended...and the Lease remains in effect according to its terms"

The Plaintiffs appealed to the Pennsylvania Superior Court, which on March 14, 2014 affirmed the lower court, holding that the doctrine of estoppel by deed applies, and that when Plaintiffs acquired the remaining one-half interest, they did so for the benefit of its earlier lessee, Anadarko.

For more information about this court ruling or related matters, please contact attorney James H. McCune in the Bowles Rice Southpointe, Pennsylvania office by phone (724) 514-8938.