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Legislative Developments Affecting Landowners

By Paul R. Yagelski

 
 

 

 

Two bills affecting landowners have been enacted into law in Pennsylvania.  One  is Act 173 of 2014, known as the Unconventional Well Report Act. The other is Act 152 of 2014, known as the Recording of Surrender Documents from Oil and Natural Gas Lease Act.

The Unconventional Well Report Act, 58 P.S. § 1001, et seq., requires the operator of an unconventional well to file with the Pennsylvania Department of Environmental Protection a monthly report specifying the amount of production on the most available well-specific basis.  The initial report is to be filed by March 31, 2015, and it must specify the status of each well.  In subsequent reports, only changes in the status must be reported.  Subsequent monthly reports are to be filed with the DEP within 45 days after the close of the reporting period and must include production data from the preceding reporting period.  The DEP is to make the reports available on its website.

The law only applies to unconventional wells or a well whose bore hole is drilled or being drilled for the purpose of or to be used for the production of natural gas from an unconventional formation.  An unconventional formation is defined as a geological shale formation existing below the base of the Elk Sandstone or its geological equivalent stratigraphic interval where natural gas generally cannot be produced at economic flow rates or in economic volumes except by vertical or horizontal well bores stimulated by hydraulic fracture treatments or by using multilateral well bores or other techniques to expose more of the formation to the well bore.

The Recording of Surrender Documents from Oil and Natural Gas Lease Act, 58 P.S. § 901 et seq., requires that not more than 30 days after the termination, expiration, or cancellation of an oil or natural gas lease, the lessee; must deliver to the lessor a surrender document in recordable form. 

The surrender document is to include: (1) a brief description of the land upon which the lease is based, including the municipality in which the land is situated; (2) a statement that the oil or natural gas lease is terminated, expired, or cancelled pursuant to the terms of the lease; (3) the date of the termination, expiration, or cancellation; (4) a statement indicating that the lessee surrenders all of the lessee’s rights, duties, and interest under the lease; and (5) the signature of the lessee. 

If the lessee fails to provide a timely surrender document, the lessor may serve a notice on the lessee stating that: (i) the lease will be terminated, expired, or cancelled according to its terms, including the date of the termination, expiration, or cancellation; (ii) the lessee has a duty to provide a surrender document under Section 3 of the Act; (iii) the lessor has failed to receive a timely surrender document from the lessee; and (iv) if the surrendered document is not received by the date of termination, expiration, or cancellation, the lessor has a right to record an affidavit of termination, expiration, or cancellation of an oil or natural gas lease in the office of the recorder of deeds for the county in which the land is situated.

The notice is also to contain: the names and addresses of the lessor, if contained in the lease; the name and address of the person giving notice and a statement as to the person’s interest in the land or the relationship to the lessor; the municipality in which the land is located and a brief description of the land; if located in a unit, the name and description of the unit, if known to lessor; if there is a well on the land, the name or number of the well if known to the lessor; the date of the execution of the oil or natural gas lease; and the date of termination, expiration or cancellation of the oil or natural gas lease and the basis of the termination, expiration, or cancellation. 

If after receiving a notice of termination, expiration, or cancellation, the lessee disputes that the oil or natural gas lease will be terminated, expired, or cancelled on the date stated in the notice, the lessee must, not more than 30 days after receipt of the notice, deliver a written challenge to the lessor.  If the lessor who has been served a notice of termination, expiration, or cancellation fails to receive a timely challenge from the lessee, the lessor may record an affidavit of termination, expiration, or cancellation of the oil or natural gas lease in the office of the recorder of deeds in the county in which the land is situated.  The affidavit must contain: (1) the names and addresses of the lessor and lessee; (2) the municipality in which the land is located and a brief description of the land; (3) if located in a unit, the name and description of the unit, if known to lessor; (4) if there is a well on the land, the name or number of the well if known to the lessor; (5) the date of the execution of the oil or natural gas lease; (6) the date of termination, expiration, or cancellation of the oil or natural gas lease; (7) a statement that the lessor complied with its duty to serve a notice to the lessee and that the lessee failed to provide a timely challenge to the notice; and (8) a notarized signature of the lessor.

The recorder of deeds who receives an affidavit of termination, expiration or cancellation that satisfies the provisions of the act must file the affidavit.

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