On February 14, 2015 6:35 pm
By: Hannah Fowler, Intern, Davis Law Group
Prior to exiting office, former Pennsylvania Governor Tom Corbett endorsed Act 152 of 2014, “Recording of Surrender Documents from Oil and Natural Gas Lease Act.” Act 152 entitles landowners the right to obtain a formal release of a past shale oil and gas lease. Formerly, there has not been any regulation that entices a lessee to provide documentation of the canceled shale oil and gas leases.
The new act states, “Every lessee shall, within 30 days after expiration, termination, or forfeiture of the oil and gas lease, present for recording in the office where the oil and gas lease is recorded a duly executed surrender document… the surrender document shall thereafter discharge, defeat, and release a lessee’s interests in the lease upon recording (Section 4, Senate Bill No. 1238).” The surrender document should also include a copy of the recorded lease or the original oil and gas lease; and also the county’s recorders office’s fee. This will give sufficient evidence to validate the original oil and gas lease.
According to the act, after 30 days, the lessor may send a notice to the lessee to present for recording a surrender document to avoid reparations. If within 60 days of the lessee’s receipt of the surrender document, the lessee has failed to return for recording to the office where the oil and gas lease was recorded, the lessor may take the proper court action to force the surrender of the lease. Unless there is a satisfactory reason provided by the lessee as to why the shale oil and gas lease should not be surrendered, the lessee needs to notify the lessor with a surrender document.
There are several other states that have a similar procedure for forfeiting shale oil and gas leases, such as Pennsylvania’s neighbor to the west, Ohio. Although there are a lot of similarities, Pennsylvania’s Act 152 has a considerably shorter amount of time to respond and also it does not include details as to the effects of an Affidavit of Termination.
Some reports have described this act as “ambiguous” and “subject to interpretation.” The act does not distinctly define the terms “terminated, expired, or forfeited.” Due to the vagueness of the act, there may be some circumstances where the lessee could per say “dodge” delivering a surrender document. Under the habendum clause, the primary term of a lease may expire, but if there has been production of shale oil and gas or drilling of wells, then this would develop a new secondary term. This means that the lease will remain in effect even though the primary has expired. As long as there is production on a leasehold the lease technically has not expired.
Since the terms “terminated, expired, or forfeited” were not clearly defined, it makes it unclear as to whether a lessee would have to produce a surrender document to the landowner because of this habendum clause. All in all, this new act could lead to various disputes when dealing with the validity of leases.
Hannah Fowler is a junior at California University of Pennsylvania. She is completing her bachelor’s degree in Jurisprudence with a concentration in Land Management (a new program offered at the university), along with earning a minor in business. In addition, Hannah is an intern at the Davis Law Group, a boutique law firm for the shale oil and gas industry. To contact Davis Law Group, call 724.243.5005 or email firstname.lastname@example.org.