Lawsuit on Dryden’s gas drilling ban heads to court Nov. 4 | The Ithaca Journal | theithacajournal.com
October 22, 2011
DEC, major gas company locked in land battle | The Ithaca Journal | theithacajournal.com
August 6, 2011
DEC, major gas company locked in land battle | The Ithaca Journal | theithacajournal.com.
DEC, major gas company locked in land battle
8:17 PM, Aug. 5, 2011 |
Jon Campbell
jcampbell1@gannett.com
ALBANY — One of the country’s largest natural gas
producers and the state of New York appear headed for a battle over a soon-to-be-expiring contract for the natural gas rights on state forestland.
Chesapeake Energy is contending that the company’s gas leases on 15,472 acres of state-owned land in central New York and the Southern Tier should be extended as the state decides how to regulate hydraulic fracturing to extract natural gas.
The leases, which were signed in 2006, are set to expire Nov. 15.
In a letter obtained by Gannett’s Albany Bureau, Chesapeake wrote to the state Department of Environmental Conservation in February that the leases should be extended until the state starts issuing certain drilling permits.
Because the state has yet to allow high-volume hydraulic fracturing — a newer technique used with natural gas drilling — the company believes it has legal ground to prolong the lease, wrote Henry Hood, the company’s senior vice president.
“Chesapeake regrets these circumstances, including the need for this communication,” Hood wrote. “Chesapeake looks forward to the time when it can move forward with the safe and responsible development of the shale resources in New York State.”
The company made the claim under “force majeure,” a legal clause inserted in many contracts that allows either party to extend the length of the deal if unforeseen circumstances prevent it from being carried out. For the state’s leases with Chesapeake, the clause includes “acts of God, work stoppages due to labor disputes or strikes, fires, explosions, epidemics, riots, war rebellion, sabotage or the like.”
In a statement, the DEC didn’t rule out legal action to end the leases in November.
“We are in the process of determining our next steps,” spokeswoman Emily DeSantis said.
Similar attempts to extend gas leases have ended up in the courtroom.
Chesapeake is battling two lawsuits in federal court by Southern Tier landowners who received force majeure letters about their leases in recent years. The original expiration dates on those leases, which date back a decade, have already passed. The landowners want to end them permanently — in large part because the land would be more valuable under a new deal.
The company’s force majeure claims are significant because the acreage sits above the massive, gas-rich Marcellus and Utica shale formations. The state leases are on gas rights below state forests in Broome, Tioga, Chemung, Cortland, Schuyler and Steuben counties.
In 2006, the DEC took bids on about 19,000 acres of gas rights below state-owned forestland. Chesapeake and Fortuna Energy (now Talisman Energy) were the winning bidders, paying a combined $9 million up front to the state with a promise of 12.5 percent royalties on any gas produced.
Since then, technological advancements to the hydrofracking process — which injects water, sand and chemicals deep underground to break up shale formations — have made the Marcellus accessible to gas companies.
The value of the gas rights on the land above the formation, such as the state forestland in dispute, has skyrocketed.
In July 2008, then-Gov. David Paterson announced that the state couldn’t issue permits for high-volume hydrofracking until the DEC completed an environmental review and set up permitting guidelines. Last year, he called for the DEC to put out a second draft of its review for public comment, which is set to kick off later this summer.
The DEC is expected to complete its review at some point next year, but put out a preliminary report last month. Chesapeake says the length of the lease has essentially been on pause since July 2008 and will restart when permits are issued.
A Chesapeake official said the company is trying to protect its investment, and the state’s decision to hold off on hydrofracking prevents the company from “fulfilling its obligation for natural-gas production on these properties.”
“Chesapeake has taken reasonable and legal measures to extend the terms of many of our leases in New York State,” Paul Hartman, the company’s director of state government relations in New York, said in a statement. “These measures are based upon the original lease agreements, which can allow for extensions of the original lease term for various reasons.”
Talisman has not filed an extension claim on any of the 3,754 acres of state gas rights it has leased until November. A spokeswoman for the company did not return a call for comment.
Talisman has faced criticism for trying to enforce its expired leases. In 2009, the company agreed to a $192,500 settlement after then-Attorney General Andrew Cuomo found it was misleading customers with its force majeure claims.
Attorneys for private landowners have argued in lawsuits that the state’s permitting freeze doesn’t prohibit Chesapeake from upholding their end of the contract. They have contended that other gas-producing formations — such as the Trenton Black River and the Herkimer sandstone formation — are still accessible and can be drilled without high-volume hydrofracking.
Because the leases date back a decade, the gas-rich Marcellus and Utica formations weren’t on the company’s radar screen at the time, the lawsuits argue.
But while the private landowners’ lawsuits against Chesapeake seek to have the force majeure claims thrown out and allow their below-market-value leases to expire, the situation with the state-owned land could be more complicated.
A draft of the DEC’s proposed regulations for high-volume hydrofracking proposes a ban of surface drilling on state land, despite the existing Talisman and Chesapeake leases. About 32,500 acres of other state-owned gas rights — mostly in the southwest corner of the state — are also under lease to energy companies so long as existing wells on those properties continue to produce natural gas.
The new technology, however, allows companies to drill on a private piece of land before turning the drill bit horizontal and burrowing under neighboring properties. So if the company holds the rights to a private parcel near the state land, it could obtain gas from that state land by drilling horizontally — despite the surface-drilling ban.
But the DEC holds a significant trump card.
Since the department decides whether or not to grant permits, it could simply decide to reject any applications from Chesapeake that includes any drilling on the forestland in question.
Chesapeake declined to discuss specifics, but Hartman said the company would prefer drilling for gas rather than debating over contract language.
“Chesapeake would much rather be drilling wells and creating value for New Yorkers, especially in the Southern Tier where economic development is much needed and for the whole state where clean energy is much needed,” Hartman said.
Once the Chesapeake and Talisman leases do expire, the DEC could choose to put them out for bid again to generate revenue for the state, with a provision banning drilling on the surface of the state’s properties.
The department spokeswoman, however, said it’s not currently in the cards.
“While this would be possible under the revised draft (regulations), we have no plans to do so at this time,” DeSantis said.
Campbell is a staff writer for the Gannett Albany Bureau.
Groups say facilities wrongly discharging drilling wastewater
March 13, 2011
Groups say facilities wrongly discharging drilling wastewater.
Groups say facilities wrongly discharging drilling wastewater
Organizations plan to file a lawsuit
Friday, March 11, 2011
Two municipal sewage treatment facilities that together discharge 150,000 gallons a day of Marcellus Shale wastewater into the Monongahela River watershed don’t have federal permits for such pollution discharges and should, according to two environmental organizations that say they will sue the facilities in federal court.
Clean Water Action and Three Rivers Waterkeeper on Thursday filed a “notice of intent to sue” against sewage treatment operations in McKeesport and Franklin, Greene County, claiming the facilities are in violation of the federal Clean Water Act.
The notice marks the first legal action challenging the widespread practice of discharging Marcellus wastewater through municipal treatment facilities that do not have permits to treat such waste.
The groups were critical of both the state Department of Environmental Protection and the U.S. Environmental Protection Agency for failing to enforce existing discharge permits, which limit the facilities to treating and discharging sewage waste water. At least 11 sewage treatment facilities in the state accept and discharge Marcellus wastewater.
“We cannot wait any longer to rely on the state and the EPA to act,” said Myron Arnowitt, state director of Clean Water Action. “These sewage plants have been illegally discharging gas drilling wastewater into our rivers since 2008 without a permit as required by the Clean Water Act.”
Mr. Arnowitt said the treatment facilities should immediately stop accepting the gas drilling wastewater or seek permission to amend their permits so they can legally do so.
The 18-page legal notice sent to the treatment plant and municipal officials in McKeesport and Franklin is a requirement of many federal environmental laws that include citizen suit provisions. It’s the first step toward filing a lawsuit and provides 60 days to negotiate a settlement before a lawsuit can be filed.
In response to water quality concerns, the DEP in 2008 limited the Municipal Authority for the City of McKeesport’s treatment and discharge of Marcellus Shale drilling wastewater to 1 percent of its total discharge, or an average of 102,000 gallons a day going into the Monongahela River. This year the authority’s Marcellus discharge is limited to 99,700 gallons a day, based on its average daily discharge in 2010.
The Franklin Township Sewer Authority in Greene County discharges an average of 50,000 gallons a day of Marcellus drilling wastewater into the South Fork of Ten Mile Creek, a tributary of the Monongahela River. That’s equal to 5 percent of the authority’s daily discharge, and allowed under a negotiated consent agreement with the state Department of Environmental Protection.
Those state-imposed treatment and discharge limits don’t address the main claim of the environmental groups: that their existing discharge permits haven’t been changed to allow them to accept the drilling wastewater and that the discharges are having a detrimental effect on water quality in the rivers.
About 500,000 people get their drinking water from the Mon.
“Their failure to follow proper procedures for authorization to discharge oil and as wastewater renders their discharge illegal,” the notice states. “Their failure to follow the requirements pertaining to the pretreatment program also leaves them in violation of the Clean Water Act.”
Joe Ross, executive director of the McKeesport authority, and George Scott, general manager of the Franklin facility, said Thursday afternoon they hadn’t seen the notice filing or been contacted by the environmental groups, so declined to comment.
Don Hopey: dhopey@post-gazette.com or 412-263-1983.
First published on March 11, 2011 at 12:00 am
United States, Energy & Natural Resources, Superior Court Interprets Oil and Gas Lease in Favor of Landowners – Schnader Harrison Segal & Lewis LLP – 03/03/2011, Energy Law, Oil, Gas & Electricity
March 5, 2011
United States: Superior Court Interprets Oil and Gas Lease in Favor of Landowners
| Do you find this article useful? | ||
| Not very | Very | |
03 March 2011
Article by Keith E. Whitson 
and Levi E. Jones
and Levi E. Jones With the recent increase in activity in the oil and gas industry in Pennsylvania, disputes between developers and landowners over the interpretation of oil and gas leases are inevitable. In its most recent opinion on the subject, the Pennsylvania Superior Court held that landowners properly terminated leases where the developer had not commenced drilling by the end of the primary term of the lease. In so holding, the Court concluded that continued delay rental payments after expiration of the primary term did not extend the term of the lease.
In Hite v. Falcon Partners, et al., 2011 WL 9632 (January 4, 2011), the landowners had entered leases with a developer in December 2002 and October 2003. The leases contained the following provision, which identified a primary term and also incorporated a traditional habendum clause (providing that lease term continues “so long thereafter” as oil or gas is produced) and a delay rental clause:
3. Term. Lessee has the right to enter upon the Property to drill for oil and gas at any time withinone [sic] (1) year from the date hereof and as long thereafter as oil or gas or either of them is produced from the Property, or as operations continue for the production of oil or gas, or as Lessee shall continue to pay Lessors two ($2.00) dollars per acre as delayed rentals, or until all oil and gas has been removed from the Property, whichever shall last occur.
Drilling never commenced on the property; instead, the developer (and its assignees) continued to pay delay rentals to the landowners for a period of five years. After obtaining offers from other developers and complying with the right of renewal clauses in the leases, the landowners declared that the leases were terminated.
The Court first reviewed the history of oil and gas lease interpretation in Pennsylvania stretching back to the 19th century. In reviewing this history, the Court concluded that delay rental provisions “have a well settled meaning” — that is, to provide something to the landowner in lieu of royalties from production. The Court further found that these clauses “typically” are concerned with the primary term of the lease only, and it reviewed all of the reasons why such clauses typically are restricted to a lease’s primary term. Historically, the delay rentals clause was developed not only to provide some compensation to the landowner, but also to limit the period in which drilling may be delayed. If delay rentals could be used to extend a lease indefinitely, the lease essentially would be a “no term” lease and may unreasonably restrict the landowner’s ability to use or transfer the land.
Based on this history, the Court concluded, “[t]o find as Falcon urges, that it may pay delay rental indefinitely, thereby denying Plaintiffs the opportunity to reap the financial benefits of actual production, would be contrary to the decisions of our Courts, at odds with the presumed intention of the parties in executing the leases in the first place, and in stark contrast to the clear opinion of the courts of Pennsylvania that the obligation to pay delay rentals is intended to ‘spur the lessee toward development.'”
Although the Court based its decision on a long line of cases interpreting oil and gas leases, the clause at issue in this case was not a typical clause. The standard oil and gas lease has been modified many times over the years, but most modern leases include habendum and delay rental clauses that are separate and apart from the clause which defines the primary term of the lease. In this case, all these clauses were combined into one “term” clause. As a result of this structure, the lease could have been interpreted in a different manner. In particular, the Court could have found that, because the delay rental clause was included in the same clause that defined the primary term, the parties intended for the delay rentals to extend the primary term.
Interestingly, the Court stated that the unusual lease language compelled its decision: “Specifically, the language pertaining to the one year primary term and the delay rental due on an annual basis, used in conjunction, is not typical, and, as we will explain, require us to affirm the lower court’s summary judgment in Plaintiffs’ favor.” To the contrary, however, the Court’s decision appears to be based not on the specific language of the lease, but on the historical interpretation of oil and gas leases generally. Even if the Court focused on the specific language at issue, it would have been very reluctant to issue a ruling that would allow a developer to extend the primary term indefinitely, at least absent the clear intent of the parties.
This decision suggests that the courts may focus less on the specific language of a particular lease and more on the principles underlying the development of modern oil and gas leases. While this may provide more consistency for landowners and the oil and gas industry, it may make it more difficult to deviate from standard lease constructions unless the parties’ intentions are spelled out clearly in the lease.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Groups File Federal Gas Drilling Lawsuit against Delaware River Basin Commission
February 2, 2011
FOR IMMEDIATE RELEASE
February 2, 2011
http://www.damascuscitizens.org/DRBC-lawsuit.html <blocked::http://www.damascuscitizens.org/DRBC-lawsuit.html>
CONTACT:
Damascus Citizens for Sustainability – Jeff Zimmerman (240) 912-6685
Delaware Riverkeeper Network – Tracy Carluccio (215) 692-2329
Groups File Federal Gas Drilling Lawsuit against Delaware River Basin Commission
Trenton, New Jersey —The Delaware Riverkeeper Network and Damascus Citizens for Sustainability have joined forces in filing a federal lawsuit against the Delaware River Basin Commission (DRBC) in federal district court in Trenton, NJ. Complaints were served on the DRBC today. The conservation groups are challenging the actions the DRBC took to allow certain exploratory natural gas wells to be drilled without DRBC review and approval and despite a Basin-wide moratorium on gas wells.
In May, 2009, Carol Collier, Executive Director of DRBC, issued a determination requiring individual review by the Commission of each shale gas production well. A year later the Commission decided to defer action on all gas production wells until regulations are adopted by the Commission to protect the Basin’s water resources. But the Commission left open a loophole for exploratory wells created by the 2009 Executive Director Determination. In June, 2010, the Executive Director issued a supplemental determination that closed the exploratory well loophole. However, in this exploratory well determination, the Executive Director exempted wells that had obtained state drilling permits while the loophole was in effect. These wells are referred to as “grandfathered” wells.
“The drilling of a gas well, whether exploratory or production, has serious environmental impacts. Since the DRBC is supposed to protect the River and the clean drinking water for over 15 million people, they shouldn’t have allowed these wells to proceed without DRBC oversight. These wells threaten pollution and may have already caused pollution. We want these wells removed and the land restored,” said Maya van Rossum, the Delaware Riverkeeper.
At its July, 2010, meeting, the Commission granted a number of hearing requests challenging different aspects of the executive director’s exploratory well determination. One of the requests granted was a challenge by the conservation groups to the “grandfathered” wells reservation. The hearing was supposed to examine whether the Executive Director exceeded her authority when she excluded the grandfathered wells from DRBC regulation.
The DRBC also ignored the National Park Service by not reviewing the grandfathered wells. The Park Service had invoked its authority under the DRBC’s rules to refer all exploratory wells to the DRBC for review, and Ms. Collier had no authority to allow any exemptions from this federal referral.
In accordance with pre-hearing procedures directed by the hearing officer, the conservation groups obtained and submitted a series of nine reports from experts on issues related to the pollution risks associated with drilling the grandfathered exploratory wells, which are essentially vertical gas wells that are not yet hydraulically fractured but which inflict all the impacts of well construction and drilling, including the use of drilling chemicals in fragile geology, the clearing of land in ecologically sensitive areas, and the installation of an industrial operation in rural landscapes. Moreover, the wells, in what may be environmentally risky locations, can become long-term production wells. The expert reports showed clearly that state regulations are not adequate to prevent pollution from the grandfathered wells; that groundwater, streams, and the main stem River would pay the price; and that the wells would violate the DRBC’s anti-degradation requirements.
“When the Commission terminated the hearing process, it forced us to go to court to uphold the protection the Compact provides for the critical water resources for New York City, Philadelphia and all the other communities and water supply systems that depend on the Delaware River for water,” said Barbara Arrindell, director of Damascus Citizens for Sustainability. She continued, “The proper process would be to look first, before allowing any wells, at the cumulative impacts that would be produced by this type of industrial development, It certainly is wrong to allow these gas wells without any review whatsoever. The DRBC does not exist to facilitate the aims of the drillers.”
The conservation groups allege that the DRBC Executive Director’s actions on the grandfathered wells were arbitrary, capricious, an abuse of her discretion and in violation of applicable law in the Compact and the Commission’s administrative Rules of Practice and Procedure. The complaint asserts that by terminating the hearing process before the hearing could be held, the Commission violated the conservation groups’ due process rights.
The conservation groups seek relief in the form of a declaratory judgment that the Commission and the Executive Director violated applicable law, that no further exploratory wells should proceed, and that the already drilled wells were wrongly allowed, should be removed, and the sites cleaned up and restored to natural conditions.
FULL COMPLAINT:
http://www.damascuscitizens.org/DRN+DCSvsCollier+DRBC.pdf <blocked::http://www.damascuscitizens.org/DRN+DCSvsCollier+DRBC.pdf>
or
http://www.delawareriverkeeper.org/resources/Comments/DRN%20v%20Collier%20Final%20Complaint.pdf <blocked::http://www.delawareriverkeeper.org/resources/Comments/DRN v Collier Final Complaint.pdf>
Napoli Bern Ripka & Associates, LLP Views Cabot Oil’s Use Of DEP Consent Order As Improper
December 27, 2010
Napoli Bern Ripka & Associates, LLP Views Cabot Oil’s Use Of DEP Consent Order As Improper.
Cabot and its attorneys have attempted to use a consent order entered with the Pennsylvania Department of Environmental Protection (DEP) to allegedly mislead their clients into waiving their rights to continue the litigation.
GDACC 
