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County oil, gas dispute decision is overturned

The state Supreme Court has overturned a trial court decision regarding oil and gas rights on two parcels in Watson Township.

The case dates all the way back to 2013 at the county level. The Superior Court ruled in the case in August 2019, upholding a decision made by President Judge Maureen Skerda.

Eleanor McLaughlin acquired the mineral rights to the two parcels and leased them to United Land Services in 1985. The interests themselves were transferred to Jack and Zureya McLaughlin in the 1990s.

United Land Services then assigned the leases to Mitch-Well Energy.

One parcel is 350.51 acres while the other is much larger at 1,112.1 acres, according to the Supreme Court opinion, which provides background on the situation.

The surface rights for the parcels are owned by the U.S. Forest Service and/or the Pennsylvania Game Commission.

“During the initial term of the leases, Mitch-Well drilled one well on each lease parcel and produced oil in paying quantities until 1996,” the order states. “Mitch-Well did not drill any additional wells. After 1996, no oil was produced or royalty payments, or delay rental payments made or tendered until 2013. Nor did Mitch-Well tender any… minimum payments during that period under either lease.”

In 2008, the McLaughlins sold their stake in the larger parcel to the Sheffield Land and Timber Company, which merged into SLT Holdings, LLC in 2012.

That firm and the McLaughlins then filed a complaint in the county Court of Common Pleas in 2019 that claimed Mitch-Well Energy and Mitchell had abandoned the lease, a claim that Skerda and the Superior Court both upheld.

That abandonment issue was ultimately why the Supreme Court overturned the prior decisions, remanding it back to lower courts for further resolution.

They ruled that SLT Holdings LLC and the McLaughlins “had available to them a full and adequate remedy at law, through contract principles generally applicable to oil and gas leases, and through the specific provisions of the subject leases” to terminate the leases.

“(W)e conclude it was (in) error to provide recourse through application of the equitable doctrine of abandonment.”

The order cited findings by the trial court that determined the lack of further drilling, cessation of production for 16 years, failure to make required payments, removal of equipment and closing of business bank accounts “all raised a presumption of abandonment.”

The Pennsylvania Independent Oil & Gas Association filed an amicus brief and argued that the lower courts erroneously bypassed the express terms of the leases at issue in this case, per the order.

The court essentially rules the same thing — that the termination portions of the lease have to be tried before abandonment can be claimed.

“There may indeed be overlap, but there must be a determination of the inadequacy of a remedy at law before equitable relief under the doctrine of abandonment is an issue,” the ruling details.

The court ruled that SLT Holdings and the McLaughlins “never explain why their bargained for remedy of termination under Paragraph 12 of the lease is unavailable or inadequate. Neither did the trial court or Superior Court provide such explanation.”

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