Shale Energy Law Blog
The landowners argued, among other things, that the 1961 lease has expired because (i) the lease provides the lessee the right to use the premises to produce gas, store gas and protect gas stored on the leased premises; (ii) the lessee may not use the leased premises for the protection of gas stored on adjoining lands until it first produced gas on the leased premises; and (iii) the annual payments were insufficient to extend the lease into its secondary term. The court applied the rationale set forth in Penneco Pipeline v. Dominion Transmission, Inc. and the rules of contract interpretation to conclude that the lease had entered into its secondary term and remained in effect. The court held that the only reasonable construction of the granting and habendum clauses is that the lessee may use the land for protecting gas stored immediately under the leased premises or gas stored under adjoining land or both. Because the lessee was using the leased premises to protect gas stored under adjoining land and tendered annual rental payments, it concluded that the 1961 lease is still in effect.