Pennsylvania Supreme Court Gives Towns More Control Over Drilling Rights

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HARRISBURG, Pa. (AP) — The Pennsylvania Supreme Court on Thursday struck down portions of a law that stripped some of the powers municipalities have to decide where the natural gas industry can operate — portions that the industry had sought from Gov. Tom Corbett and lawmakers.

The justices ruled the 2012 law unconstitutionally restricted the power of municipalities, although the 4-to-2 majority disagreed as to why it was unconstitutional.

Seven municipalities challenged a law known as Act 13, which restricted local municipalities’ ability to control where companies may place rigs, waste pits, pipelines and compressor and processing stations.

Among the objectionable provisions cited by the lawsuit are requirements that drilling, waste pits and pipelines be allowed in every zoning district, including residential districts, as long as certain buffers are observed.

“It’s a tremendous victory for local governments, for local democracy, for public health and for the environment,” said one of the plaintiffs’ lawyers. “It’s a huge, huge victory for the people of Pennsylvania.”

The booming drilling industry had sought the changes, and Corbett and Republican lawmakers approved them over the objections of Democrats.

A narrowly divided lower court had said the zoning rules ran afoul of the state constitution, but Corbett appealed, saying lawmakers have clear authority to override local zoning.

The municipalities said the zoning restrictions run counter to objectives of protecting the environment, health and safety of people who live there, and three of the six justices agreed. A fourth justice ruled that the law violated the municipalities’ constitutional rights to due process.

A lawyer for Senate President Pro Tempore Joe Scarnati, R-Jefferson, said the decision is a setback that will reopen the door to legal fights between municipalities and the drilling industry that the Legislature had sought to settle.

Efforts by communities to limit drilling, in some cases imposing an effective ban, drew complaints from the companies.

The law also imposed new safety regulations for drilling and an impact fee tax for areas where the drilling occurs. Through the end of last year the industry had paid out more than $406 million in impact fees.

http://www.syracuse.com/news/index.ssf/2013/12/pa_supreme_court_strikes_down_key_portions_of_natural_gas_drilling_law.html

Herder Spring Hunt Club v. Keller: Amicus Brief

Herder Spring Hunt Club v. Keller is a case currently pending before the Pennsylvania Superior Court that addresses whether tax sales can impact one’s title to subsurface oil and gas interests.   The Kellers won this case in the trial court by showing that a 1935 tax sale did not “wash” their ancestors’ title to the severed subsurface interests because, among other things, the oil and gas interests were not accessed or taxable under Pennsylvania law.

As the oil and gas owners of severed estates, the Kellers have a number of similarities to Hoyt Royalty and Thorne Heritage Resources.   Hoyt and Thorne have filed an Amicus brief in this case.  That brief can be seen here:

Herder Hunt Club Brief of Amici Curiae Hoyt Royalty and Thorne Heritage

Truckers Tap into Gas Boom

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October 30, 2013 Wall Street Journal on how truck fleets are rapidly adapting to the lower cost of natural gas.

By

Mike Ramsey              
Oct. 29, 2013 6:37 p.m. ET
Operators of some of the largest U.S. truck fleets, including Lowe’s,  Procter & Gamble Co. United Parcel Service Inc., are accelerating a shift to natural gas fueled trucks, betting on new engine technology that promises to drop the cost of shifting from diesel fuel.

Home-improvement retailer Lowe’s wants its delivery company to shift all of its several hundred trucks to natural gas by 2017. P&G already has 7% of its trucks on gas and could reach as much as 20% within two years. UPS says it plans to buy 1,000 natural gas trucks by the end of next year.  FedEx Corp. plans to shift 30% of its long-distance trucks to natural gas over the next decade.

The nation’s supply of relatively cheap natural gas is helping spur this shift. So are new natural gas engines that can power heavy-duty trucks that weigh up to 80,000 pounds. The first, a 12-liter Cummins Westport Inc. natural gas engine went on sale in July. Next year,   Volvo AB, the Swedish heavy truck maker, will introduce a natural gas engine for its trucks.

Please see the full Wall Street Journal Article Here:

http://online.wsj.com/news/articles/SB10001424052702304200804579165780477330844

Gas Leaks in Fracking Less Than Estimated: NY Times Article

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Gas Leaks in Fracking Disputed in Study

By Michael Wines, NY Times, 16 Sept 2013

(Click on the link above to see the entire article at NYTimes.com.)

The study, conducted by the University of Texas and sponsored by the Environmental Defense Fund and nine petroleum companies, bolsters the contention by advocates of fracking — and some environmental groups as well — that shale gas is cleaner and better than coal, at least until more renewable-energy sources are developed. More than 500 wells were analyzed.

The Texas study concluded that while the total amount of escaped methane from shale-gas operations was substantial — more than one million tons annually — it was probably less than the Environmental Protection Agency estimated in 2011.

In particular, it indicated that containment measures captured 99 percent of methane that escaped from new wells being prepared for production, a process known as completion.

The Environmental Protection Agency has begun to require drillers to control leaks during completions, which are believed to be one of the major sources of methane losses at fracking wells. Although controls will not be required until January 2015, a number of companies already capture escaped gases at wells being prepared for production.

“Can we control it? Thanks to new E.P.A. regulations coming online, the answer to that is good news,” Eric Pooley, a senior vice president at the Environmental Defense Fund, said in an interview.

The report was published Monday in The Proceedings of the National Academy of Sciences. With the study, which ran from May through December of last year, the university was the first to conduct detailed examinations of individual drilling sites. It did so with the consent of petroleum companies, which provided about 90 percent of the financing for the study. Previous E.P.A. estimates relied on engineering calculations, and other studies gathered data via aircraft flights over drilling sites.

The study’s connection to the petroleum industry — among its sponsors and financiers are Shell, Anadarko Petroleum Corporation, Exxon Mobil and Chevron — may lead some to question its objectivity, some outside experts said. But most said the research and the reputations of the researchers appear solid.

“Previous studies that have gotten a lot of attention have had red flags jumping out all over them. This one didn’t,” said Michael A. Levi, the director of the program on energy security and climate change at the Council on Foreign Relations. In an e-mailed statement, Shell’s president, Marvin Odum, called the study “a prime example of key groups — that may not have the exact same interests — working collaboratively and taking a science-based approach” to the methane problem.

Mr. Odum said that collecting actual emissions data, rather than relying on estimates, would “ensure that both improvement efforts and regulatory changes can be focused on the areas that will have the biggest impact.”

The report comes at a time when shale-gas drilling is growing at a breakneck pace — production, now 30 percent of all United States natural gas, is expected to reach 50 percent by 2040 — but also when the industry is beset by controversy.

Citizen groups accuse drillers of despoiling streams and water supplies, and suppliers of wrecking local roads with parades of massive trucks. Environmental groups have split sharply over whether to support shale-gas development as a cleaner fuel that will suffice until wind and solar power assume a greater share of the nation’s energy supply.

The Texas study is the most comprehensive look to date at a contentious issue in the debate over fracking: the extent to which methane leaks during drilling and production offset the environmental benefits of the clean-burning natural gas the wells produce.

When burned as fuel, methane — the main component of natural gas — is comparatively clean, producing less carbon dioxide than coal and oil. But vented to the air, it is a short-lived but extremely potent greenhouse gas, trapping heat at a much higher rate than carbon dioxide, the main greenhouse gas.

Such potency means that even a small loss of methane to the air — just 3.4 percent, scientists say — can negate its climate-changing advantage over coal.

Some previous studies suggested that as much as 7.9 percent of all shale gas was lost to the atmosphere, a figure that included every stage of the gas process, from well to stove or furnace burner.

The Texas study did not examine potential losses outside the drilling pad. But its conclusion that losses at the well were comparatively low could remove one issue from the debate. The Environmental Defense Fund is leading other research efforts that should address losses elsewhere, including a look at methane leaks in municipal gas-distribution lines.

The American Petroleum Institute hailed the study’s conclusions, saying in a statement that its own efforts to reduce methane emissions “are paying off.” But while E.P.A.-mandated measures appear to have reduced emissions during well completions, the study also concluded that leaks elsewhere in the fracking process were higher than the E.P.A. had previously estimated.

Estimates of leaks from chemical pumps, while small, were twice past estimates, while leaks from pneumatic controllers, or valves, were pegged at more than 639,000 tons a year, roughly a third greater. None of those components are currently subject to federal regulation.

So What’s the Matter with Shale Gas Anyway?

Excerpts from the July 19th Wall Street Journal

So What’s the Matter with Shale Gas Anyway? Environmental Groups Want It to Replace Coal, but Not at the Expense of Wind and Solar

“Shale gas and oil are widely viewed as one of the biggest forces to hit the US economy in modern history … The new narrative about shale gas is about jobs, economic growth, global competitiveness and a US manufacturing renaissance …  For years, environmental groups saw gas as something as an ally in the cause.  Gas has half the carbon footprint as coal.  It was the ideal substitute for coal and a bridge to greater use of renewable energy such as wind and solar.  But as shale gas production soared, the price of natural gas plummeted.  Environmental groups now worry that gas is moving in to stay, taking the momentum out of the shift to nonpolluting renewables.”

Title Wash – a Brief Overview

July 15, 2013 12:03 am

When some property owners in the Marcellus Shale region want to contract with drilling companies to explore for natural gas on their land, they may find that others have laid claim to their sub-surface rights.

Disputed ownership results from Pennsylvania laws that are more than a century old and a long-dormant practice called “title washing.”

A title wash occurred when someone bought undeveloped property at a tax sale. Former Pennsylvania tax laws gave the purchaser clear title to the taxed property. According to these early tax laws, the obligation to pay taxes on undeveloped property ran with the property. An owner could therefore default on taxes and then purchase the same property at a tax sale, thereby “washing” the property’s title from any prior obligations. From 1900-1950, Pennsylvania saw a lot of “title-washing.”

Some legal scholars believe that even if the tax assessment was directed at only the surface estate, the tax sale of the unseated surface could nonetheless “wash” the title of the unassessed subsurface rights to minerals, oil and gas. These scholars rely on early court decisions which they contend ruled that tax sales “washed” the title to the subsurface interests.

Judges more recently have focused on whether subsurface rights could have been or were taxed. Pennsylvania’s highest court has now declared that oil and natural gas cannot be assessed for property taxes. With no assessment possible, courts have ruled that title to the oil and gas in question was not “washed” when the surface rights were sold for taxes.

It is imperative that property owners have a careful title search done before negotiating a drilling contract, paying close attention to any past tax sales. In some cases, the property owner may not own or will have to defend his or her right to sell the subsurface rights.

Ronald L. Hicks, Jr., Meyer, Unkovic & Scott, rlh@muslaw.com

Business workshop is a weekly feature from local experts offering tidbits on matters affecting business. To contribute, contact Business Editor Brian Hyslop at bhyslop@post-gazette.com.

US Energy Environment Continues to Favor Natural Gas

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Two articles in today’s NY Times show how cheap natural gas continues to replace coal and nuclear as the preferred power source in the US.   Nuclear power production is more expensive after new regulations imposed since the Fukushima disaster.  Coal production and use, dirtier than natural gas, is now looking for more export opportunities.  But is that the right thing to do?

Nuclear Plants, Old and Uncompetitive, Are Closing   Earlier Than Expected

By MATTHEW L.   WALD

Even reactors still licensed to operate may close, because the price of the electricity they generate doesn’t warrant costly repairs and maintenance.

A Fight Over Coal Exports and the Industry’s Future

By CLIFFORD   KRAUSS

Environmental worries complicate an energy company’s plan to mine an Indian tribe’s large deposit of coal and ship it to Asia.

Bailey v. Elder: Order to Strike Quiet Title Default Judgment

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The order, which was in favor of Hoyt Royalty, is pasted below and can also be seen here:

http://www.lycolaw.org/Cases/opinions/2013/bailey052913a.pdf

IN THE COURT OF COMMON PLEAS OF LYCOMING COUNTY, PENNSYLVANIA

NO. 08 – 02,327  : CIVIL ACTION – LAW

DAVID C. BAILEY, :

Plaintiff :

vs. :

:

GEORGE A. ELDER a/k/a G.A. ELDER, :

WILLIAM HOYT and MARY HOYT, :

MARK HOYT and ANN A. HOYT, :

EDWARD C. HOYT and CORDELIA IDA :

HOYT, THEODORE R. HOYT, GEORGE :

S. HOYT, ELK TANNING COMPANY, :

CENTRAL PENNSYLVANIA LUMBER :

COMPANY, their successors, heirs, :

administrators and assigns or anyone :

claiming by, through or under them, :

Defendants

Petition to Strike or Open Default Judgment

 

OPINION AND ORDER

Before the court is the Petition to Strike or Open Default Judgment filed by Hoyt Royalty, LLC on February 27, 2013. Argument on the petition was heard April 23, 2013, at which time Plaintiff’s counsel requested an additional thirty days in which to file a brief. That brief was filed May 22, 2013.

On October 7, 2008, Plaintiff filed a Complaint in Action to Quiet Title, alleging ownership of a 168 acre tract of land in Pine Township. Plaintiff alleges that the Hoyt Defendants reserved all oil, gas and mineral rights to themselves when deeding the property to Elk Tanning Company in 1893, and that he acquired the property from his mother, who acquired it in 1942 after a tax sale. Plaintiff claims to have acquired title to the mineral rights by virtue of a lost deed, adverse possession, abandonment, and the tax sale. On October 9, 2008, Plaintiff’s counsel filed a Motion and Affidavit for Leave to Obtain Service by Advertisement, and said motion was granted by Order dated October 13, 2008. On December 1, 2008, Plaintiff filed a Motion for Default Judgment, and by order dated December 2, 2008, a preliminary default judgment was entered. Following a praecipe for final judgment on January 21, 2009, final judgment was entered that date.

In its Petition to Strike or Open Default Judgment, Hoyt Royalty claims it was formed to acquire and manage all oil, gas and mineral rights owned by William Hoyt, Mark, Hoyt, Edward Hoyt, Theodore Hoyt and George Hoyt, and their heirs, successors and assigns, and that it now owns 83.9% of the Hoyt mineral estate, which includes the mineral rights retained in the 1893 deed to Elk Tanning Company. Hoyt Royalty contends the default judgment must be stricken because the underlying complaint is not self-sustaining and the record reflects improper service, or, in the alternative, that the judgment must be opened because no good faith effort was made to locate the defendants and Hoyt Royalty has a meritorious defense to the Complaint. As the court finds the judgment must be stricken for lack of a self-sustaining complaint, the remaining grounds will not be addressed.

If a Complaint fails to state a cause of action upon which relief may be granted, such is a fatal defect appearing of record and on that basis, any default judgment entered for want of an answer may be stricken. Navarro v. George, 615 A.2d 890 (Pa. Commw. 1992); Calesnick v. Redevelopment Authority of City of Philadelphia, 529 A.2d 528 (Pa. Super. 1987). A review of the Complaint filed in the instant matter shows that none of the four counts contained therein sufficiently states a cause of action.

In Count I, Plaintiff asserts he has “actual title to all mineral rights, including oil and gas, in the premises by virtue of a deed which was lost wherein the Defendants reconvey all of their right, title and interest, including mineral rights, to the Plaintiffs and/or their predecessors in title.” This contention is insufficient to support a finding of actual title as Plaintiff fails to allege when, by whom or to whom the deed was executed. See Burke v. Hammond, 76 Pa. 172 (1874). To establish title to land based on a lost deed, all terms and conditions of the transaction, including the facts and circumstances of delivery, must be alleged and proven. See Manley v. Manley, 357 A.2d 641 (Pa. Super. 1976). Since Plaintiff has not set forth the specifics of the alleged “lost deed”, he has not stated a claim to the mineral rights upon which relief may be granted.

In Count II, Plaintiff asserts he and his mother “have been in actual, continuous, visible, distinct, open, exclusive, notorious and hostile adverse possession of the premises in excess of 21 years.” Where the mineral rights have been severed from the surface rights by a reservation 3 in a deed, however, in order to claim title to the mineral rights by adverse possession, the claimant must show continuous drilling and/or production for an uninterrupted twenty-one year period. Hoffman v. Arcelormittal Pristine Resources, Inc., 2011 U.S. Dist. LEXIS 50170 (W.D. Pa. May 10, 2011)(citing Thomas v. Oviatt, 5 Pa. D. & C. 4th 83)(Warren County 1989). Plaintiff does not allege such drilling and/or production and thus has failed to set forth a claim for adverse possession of the mineral estate upon which relief may be granted.

In Count III, Plaintiff claims that Defendants have abandoned their mineral rights by non-use and non-payment of taxes. Mere non-use does not support a finding of abandonment, Buffalo Township v. Jones, 813 A.2d 659 (Pa. 2002); nor does non-payment of taxes. Kreamer v. Voneida, 24 Pa. Super 347 (1904). There must be some affirmative act which expresses an intent to abandon, and Plaintiff has failed to allege any such act. Therefore, Plaintiff has failed to set forth a claim of abandonment upon which relief may be granted.

Finally, in Count IV, Plaintiff alleges that “[b]ecause Defendants failed to pay taxes on the premises, all rights, exceptions and reservations for oil, gas and minerals were extinguished by the 1940 tax sale”. Plaintiff also alleges, however, that “[n]o assessment was ever made by Lycoming County on the mineral rights”. Where mineral rights have been severed from surface rights and are not separately assessed, only the surface passes in a tax sale for failure to pay taxes. See New York State Natural Gas Corp. v. Swan-Finch Gas Development Corp., 173 F. Supp. 184 (W.D. Pa. 1959). See also Babcock Lumber Co. v. Faust, 39 A.2d 298 (Pa. Super. 1944)(“The lien for unpaid taxes attaches only to the estate assessed, and that estate, but no more, passes at a public sale even though the authorities assume to convey land against which there had been no valid assessment.”)1 Plaintiff has alleged no facts which would support a finding that the tax sale passed title to the mineral rights. Thus, this count also fails to state a claim for which relief may be granted.

1 Plaintiff cites Proctor v. Sagamore Big Game Club, 166 F.Supp. 465, 475 (W.D. Pa. 1958), for the proposition that where there is no separate assessment of the mineral estate, “a purchase of the whole by the owner of the surface divests the title of the owner of the minerals.” There, the Court found that an owner of surface rights in unseated land had no legal obligation to pay the taxes and could purchase the property at a tax sale and thus acquire title to the previously reserved gas rights. The court fails to see how the holding of Proctor supports Plaintiff’s position in this matter since Plaintiff alleges that at the time of the sale, George A. Elder was the owner of the surface, not his mother. The holding of Proctor does not apply.

In summary, as none of Plaintiff’s claims would entitle him to relief, he was not entitled to a default judgment and such must be stricken.

 

ORDER

AND NOW, this 29th day of May 2013, for the foregoing reasons, the Petition to Strike is hereby GRANTED. The default judgment entered January 21, 2009, is hereby STRICKEN.

BY THE COURT,

Dudley N. Anderson, Judge

cc: Scott A. Williams, Esq.

Ronald Hicks, Esq., Meyer, Unkovic & Scott, LLP

535 Smithfield Street, Suite 1300, Pittsburgh, PA 15222

Gary Weber, Esq.

Hon. Dudley Anderson

THOMAS v. OVIATT – 1989 Quiet Title, Adverse Possession and Title Wash Ruling

“…plaintiffs’ contention they have acquired title to the subsurface minerals because they have not been separately assessed for tax purposes is … without merit. Title to realty may not be acquired by payment of taxes.”

THOMAS v. OVIATT

5 Pa. D. & C. 4th 83 (1989)

Thomas

v.

Oviatt

No. 334 of 1988.

Common Pleas Court of Warren County, Pennsylvania.

July 18, 1989.

Thomas D. Heberle, for plaintiff.

Gregory J. Hammond, for defendants.


WOLFE, P.J., July 18, 1989.

Defendants have filed preliminary objections to plaintiffs’ amended complaint to quiet title.

The subject matter of dispute is the ownership of the oil, gas and minerals underlying plaintiffs’ 70-acre tract in Spring Creek Township. Plaintiffs’ complaint alleges they are the owners in fee of these premises and seek to quiet title thereto by reason of defendants’ claim to the oil, gas and minerals. The parties do not dispute the oil, gas and minerals were excepted in a prior conveyance to plaintiffs’ predecessor in title and that the oil, gas and minerals currently rest in defendants by virtue of a quitclaim deed on November 28, 1934. Likewise, the parties do not disagree plaintiffs have resided on the premises since 1953, and defendants have never exercised any drilling operations on the surface to extract the oil, gas and minerals. It is further not disputed plaintiffs entered into and recorded three separate oil and gas leases over a 23-year period. The leases were made for periods of 10 years, five years, and five years. Notwithstanding, there were never any drilling operations by the lessees of these leases.

It is plaintiffs’ contention they have acquired title to the OGM rights by virtue of adverse possession, evidenced by the recorded deeds which placed defendants on notice of plaintiffs’ claim as being open, hostile and notorious and existing for a period in excess of 21 years without defendants taking any action to the contrary.  In turn, defendants argue it is totally insufficient to vest title in plaintiffs by reason of their contract in granting a lease which is recorded in absence of drilling activity on the surface. We agree.

We have found no cases, nor have there been any submitted to us by counsel in their respective briefs, addressing the issue of oil and gas; however, the case of Delaware & Hudson Canal Co. v. Hughes, 183 Pa. 66, 38 Atl. 568 (1897) supports defendants’ conclusion. In this case there was a severance of the coal from the surface. The court held the conveyance of the coal creates in the vendee an interest in land, and the recording of that interest gives notice to the world thereof of an estate in fee or any lesser estate, in the same manner as by the same words of grant made use of in conveyances of the surface.  “When such a conveyance has been made of the coal or other mineral it works a severance of the estate so conveyed from the surface, and if the deed be recorded it is constructive notice to all the world of the fact of severance. Thenceforward the owner of the soil may cultivate, enclose and reside upon his estate for any length of time, but his possession will not extend below it. It will not grasp or affect in the slightest degree the estate below him which has been severed by the deed.”

It is now settled beyond argument, and the courts have not wandered from the stereotype definition of adverse possession, to-wit, the possession must be hostile, adverse, open, visible, notorious and continuous for a period of 21 years. Burns v. Mitchell,252 Pa.Super. 257, 381 A.2d 487 (1977). Plaintiffs’ contention, that plaintiffs intention to hold the subsurface for themselves, was manifested by the granting of the aforesaid three leases is woefully lacking in that one may not lose title to realty simply by one claiming a right thereto. If this were so, no estate would be free from attack and acquisition. Plaintiffs argue defendants could have, with due diligence, checked the indexes at the courthouse periodically to determine if there was any activity affecting their oil, gas and minerals. A property owner does not have to daily visit the Recorder’s Office to ascertain if one is making a claim for his property.

Finally, plaintiffs’ contention they have acquired title to the subsurface minerals because they have not been separately assessed for tax purposes is likewise without merit. Title to realty may not be acquired by payment of taxes.

Because it is not possible for plaintiffs to plea a better cause of action under these facts, we enter the following

ORDER

And now, July 18, 1989, defendants’ demurrer to plaintiffs’ complaint to quiet title is granted.

http://www.leagle.com/xmlResult.aspx?xmldoc=1989885PaDampC4th83_176.xml&docbase=CSLWAR2-1986-2006