Superior Court Interprets Oil and Gas Lease in Favor of Landowners

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With the recent increase in activity in the oil and gas industry in Pennsylvania, disputes between developers and landowners over the interpretation of oil and gas leases are inevitable. In its most recent opinion on the subject, the Pennsylvania Superior Court held that landowners properly terminated leases where the developer had not commenced drilling by the end of the primary term of the lease. In so holding, the Court concluded that continued delay rental payments after expiration of the primary term did not extend the term of the lease.

In Hite v. Falcon Partners, et al., 2011 WL 9632 (January 4, 2011), the landowners had entered leases with a developer in December 2002 and October 2003. The leases contained the following provision, which identified a primary term and also incorporated a traditional habendum clause (providing that lease term continues “so long thereafter” as oil or gas is produced) and a delay rental clause...

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