Interpreting Oil and Gas Leases in Pa.'s Shale Gas Era


Originally published in the July 31, 2012 issue of The Legal Intelligencer. © 2012 ALM Media Properties, LLC.

An oil and gas lease is the fundamental document through which a producer obtains rights to explore for and develop oil, natural gas and other hydrocarbons. When landowners and production companies enter into oil and gas leases, they do so with business purposes in mind in the context of a unique industry.

As Pennsylvania courts have held, it is proper to understand the nature of the industry in which the lease arises in order to interpret the parties' agreement. This is particularly important in the shale gas era given that courts may be faced with lease disputes for many years to come.

To that end, this article provides a general overview of (1) an oil and gas lease and some of its general terms; (2) the general rules of lease interpretation; and (3) some of the characteristics of modern shale gas exploration and production operations.

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