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Superior Court Upholds Right Of Operator To Construct An Impoundment And To Utilize Hydraulic Fracturing Under Terms Of Lease

The Superior Court of Pennsylvania upheld the trial court’s decision in Humberston v. Chevron U.S.A. to grant preliminary objections in favor of Chevron U.S.A., Inc. and Keystone Vacuum, Inc., holding that Chevron and Keysone had the right under the oil and gas lease to construct a fresh-water impoundment and to utilize hydraulic fracturing on the landowner’s property.  The landowners argued that Chevron and Keystone violated the terms of the lease because hydraulic fracturing was never contemplated by the parties and the water impoundment was impermissible because it would service neighboring drilling sites.

Looking at several key provisions of the lease, the Superior Court found that the landowner’s arguments were in conflict with the clear and unambiguous language of the contract.  The trial court determined that, “[t]he lease clearly provides that the lessee has the right to use as much [of] the surface as is ‘necessary or convenient’ to lessee to explore for, develop and produce oil and gas.”  In addition the lease “provides that lessee, in its efforts to explore for, develop and produce oil and gas from the subject premises and from lands which adjoin the subject premises, may use ‘methods and techniques which are not restricted to current technologies.’”   The Superior Court agreed that this language leaves no room for doubt that the lease permitted hydraulic fracturing and water impoundments.