American Oil and Gas Reporter - February 2018 - 18

IndustryDigest
underlying regulation," he describes.
Meanwhile, Fuller predicts EPA's
efforts to postpone the deadline for
WOTUS compliance also will be
challenged. "Some articles suggest that
previous court decisions have rejected
extended compliance dates after the
initial compliance dates have passed,"
he says. "The WOTUS regulations
would fall into this category, except that
the stays prevented them from being
implemented. Whether the courts would
take those circumstances into account is
an open question and could be
influenced by the reality that EPA is in
the process of revising the regulations."
r

Ohio High Court Rejects
Duty To Explore Deeper
PITTSBURGH-Ohio landowners
cannot force oil and gas operators to
drill unfeasible wells at deeper strata,
the state's top court has ruled.
According to attorneys at K&L
Gates' Pittsburgh office, Ohio's top
court ruled in Alford v. CollinsMcGregor Operating Co. that there was
no implied covenant to explore deeper
targets and that the implied covenant of
reasonable development imposed a
"reasonable operator" standard. The
decision was issued on Jan. 3.
According to the ruling, the litigated
lease-which did not disclaim any
implied covenants nor specify a
particular number of wells or
production from a particular depth-was
signed in 1980 to permit an operator to
produce oil and gas on a landowner's 74
acres in Washington County, Oh. The
operator drilled a well in 1981 and
produced gas in paying quantities from
the shallow Gordon Sand on an
uninterrupted basis.
"Nearly 35 years later, in 2015, on
discovering that neighboring properties
had been producing oil and gas from
other strata, such as the Marcellus and
Utica formations, the landowners
brought a claim against the operator
seeking partial termination of the lease,
alleging 'horizontal forfeiture,'" K&L
Gates explains. "The landowners
requested the court to deem the lease
forfeited as to all strata below the
Gordon Sand formation, claiming that
the operator had an obligation to
explore further by drilling below the
Gordon Sand into deeper, and

18 THE AMERICAN OIL & GAS REPORTER

potentially more profitable, strata."
However, the firm says the ruling
opts not to recognize an obligation to
explore further, stating "the covenant
imposes on the lessee only the
obligation to act as a reasonably prudent
operator would as it develops the land
under the lease."
K&L Gates cites a trio of key
reasons it considers the Alford decision
to be significant:
* It reaffirms the longstanding
proposition that oil and gas leases are
contracts controlled by their terms. "As
a result, a party is able to effectively
disclaim all implied covenants,
including the implied covenant of
reasonable development, through a
general disclaimer of all covenants. The
lease in Alford, however, failed to
include any type of disclaimer, which
subjected it to the implied covenant of
reasonable development."
* The court declined to recognize
the landowners' position that operators
were bound by an implied covenant to
explore further. "An implied covenant to
explore further could have potentially
placed an undue burden on operators to
develop multiple strata of gas, even if
such a development strategy was not
prudent, timely or profitable."
* The court found that the already
recognized implied covenant of
reasonable development sufficiently
balanced the interests of both parties to
the lease.
Ultimately, the firm concludes,
"Ohio landowners cannot construe the
terms of their leases to compel
operators to drill strata if such
development is not economically or
practically feasible." r

Court Issues Sanctions
Against CELDF Attorneys
In Disposal Well Case
WEXFORD, PA.-A federal judge
has sanctioned attorneys from an
environmental rights organization for
their "continued pursuit of frivolous
claims and defenses" in representing a
Pennsylvania township trying to ban an
oil and gas disposal well.
The Pennsylvania Independent Oil &
Gas Association reports that U.S.
Magistrate Judge Susan Baxter Paradise
fined two lawyers from the Community
Environmental Legal Defense Fund

$52,000 and referred them to the
Pennsylvania Supreme Court
Disciplinary Board for possible further
punishment.
The amount represents 10 percent of
the more than $500,000 in legal costs
that PIOGA member company
Pennsylvania General Energy LLC has
spent fighting a 2014 "community bill
of rights" ordinance banning oil and gas
waste disposal wells in the Indiana
County community of Grant Township,
the association says.
PIOGA notes that CELDF has
represented dozens of communities
opposed to oil and gas development,
agribusiness or other industrial activity
by using ordinances that purport to
elevate local authority over state and
federal law (see story, page 27).
Baxter writes that the group's legal
theories have been discredited
repeatedly throughout 15 years of
federal litigation in Pennsylvania.
Nevertheless, CELDF attorneys
"continue to pursue nearly identical and
rejected theories unabated," she writes.
Those actions "substantially and
inappropriately prolonged this
litigation, and required the court and
PGE to expend significant time and
resources eliminating these baseless
claims."
The judge has ruled in favor of the
company already on most of its federal
constitutional claims, PIOGA reports,
adding that a jury trial to resolve the
company's remaining claims is
scheduled for May.
According to General Counsel Kevin
Moody, the association intervened in
PGE's lawsuit to help stop CELDF's
"attempts to pursue a political agenda to
'reorder and restructure' our system of
government so that communities can
pass laws to prohibit any activity that is
disfavored by some members of the
community." PIOGA says it is raising
state constitutional issues that the
company did not address in its
litigation.
"PIOGA hopes that Judge Baxter's
imposition of sanctions on CELDF
attorneys for continuing to press
unfounded, plainly unreasonable and
frivolous legal arguments in support of
this claimed right is a first step in
stopping the use of our judicial system
to address what is a political and
legislative issue, not a dispute for the
courts," Moody concludes. r



American Oil and Gas Reporter - February 2018

Table of Contents for the Digital Edition of American Oil and Gas Reporter - February 2018

Contents
American Oil and Gas Reporter - February 2018 - 1
American Oil and Gas Reporter - February 2018 - 1
American Oil and Gas Reporter - February 2018 - 2
American Oil and Gas Reporter - February 2018 - Contents
American Oil and Gas Reporter - February 2018 - 4
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