Energy and Natural Resources

Court to Mull Whether 1920s Deed Contemplated Fracking

, The Legal Intelligencer

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"This court could interpret the 1928 deed as intending that extraction methods used before the deed was executed (such as blasting) were no longer permitted, and that Seneca may extract its oil and gas as modern technology allows; or, as the commission contends, that Seneca is precluded from using the more modern extraction processes," Covey said. "Even accepting as true all of the commission's well-pled material allegations, and drawing all inferences in the commission's favor, this court cannot declare, as the commission requests, that 'the [commission] has ownership of the ... development rights associated with extracting gas using the horizontal drilling method and hydrofracking process, future methods of oil and gas production and such other relief as may be deemed just,' because it is uncertain whether the commission owns the alleged development rights and, therefore, is entitled as a matter of law to the same."

Covey was joined by President Judge Dan Pellegrini and Judges Bonnie Brigance Leadbetter, Renée Cohn Jubelirer, Robert Simpson, Mary Hannah Leavitt and P. Kevin Brobson.

In framing the question of whether the 1928 deed limits oil and gas extraction to methods available at the time it was executed, Covey pointed to the Pennsylvania Superior Court's 2013 ruling in Humberston v. Chevron USA, in which the court acknowledged that the state Supreme Court has held as a general rule that "'when anything is granted, all the means of attaining it and all the fruits and effects of it are also granted.'"

In addition, Covey cited the Supreme Court's 2009 decision in Belden & Blake v. Department of Conservation and Natural Resources, which held that a "'surface owner cannot unilaterally impose extra conditions on the subsurface owner beyond those that are reasonable.'"

But Covey also noted that the Superior Court held in the 2005 case Consolidation Coal v. White that "'effect must be given to all the language of the instrument, and no part shall be rejected if it can be given a meaning.'"

While Covey said it remains to be determined whether fracking is prohibited under the 1928 deed, she found that a 1932 deed, under which Sancrik transferred additional land to the commission, clearly and unambiguously allows Seneca to engage in all methods of extraction.

Unlike the 1928 deed, according to Covey, the 1932 deed did not contain the "'ordinary methods now in use'" language.

"Rather, the 1932 deed generally permitted 'prospect[ing] for, drill[ing] and bor[ing] for, produc[ing] and remov[ing] the same,'" Covey said. "Because the language is unrestricted, it unambiguously grants Seneca 'all the means of attaining' the oil and gas subject to the 1932 deed. Thus, there is no question that Seneca may extract its oil and gas underlying the land conveyed in the 1932 deed by horizontal drilling and hydrofracturing or by any other generally accepted means, while respecting the commission's surface estate as the law requires."

Therefore, Covey said, the commission failed to state a claim with regard to the 1932 deed.

A spokesman for the commission declined to comment on ongoing litigation.

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