Overview of Legal Issues in Marcellus Shale Development Penn State Ag Council Membership Meeting October 12, 2009 Agricultural Law Resource and Reference.

Overview of Legal Issues in Overview of Legal Issues in Marcellus Shale Development Marcellus Shale Development

Penn State Ag Penn State Ag Council Membership Council Membership Meeting Meeting

October 12, 2009October 12, 2009

Agricultural Law Resource and Reference CenterRoss H. Pifer, J.D., LL.M., Director

Penn State Ag Council Penn State Ag Council October 12, 2009October 12, 2009

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Who Needs Legal Information? Owners of Natural Gas Rights Surface Owners Private Attorneys Local Government Officials State Legislators Industry / Industry Attorneys General Public

Agricultural Law Resource and Reference Center


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..Role of Agricultural Law Center

Presentations Use of technology

Educational Programs Pennsylvania Natural Gas Summit – November 16 to 18 Continuing Legal Education

Publications Fact sheets Case summaries Legislative summaries

Web site – Natural Gas Exploration Resource Area The Agricultural Law Brief



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Sources of the Law

Lease Agreement Statutes Regulatory Agencies Court Opinions



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Sources of the Law




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..Standard Leasing Process

Energy company presents landowner with lease Energy company presents landowner with lease agreement.agreement.

Landowner negotiates additional terms to be Landowner negotiates additional terms to be included as addendum to lease agreement.included as addendum to lease agreement.

Lease agreement will govern nearly all aspects Lease agreement will govern nearly all aspects of relationship between landowner and energy of relationship between landowner and energy companycompany..



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Contents of Lease Agreement Payment termsPayment terms

– BonusBonus– Delay rentalDelay rental– RoyaltyRoyalty– Free gasFree gas

Conveyance of interest in mineral estateConveyance of interest in mineral estate– Restrictions / conditions upon the energy company’s Restrictions / conditions upon the energy company’s

use of the propertyuse of the property Length of lease agreementLength of lease agreement



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Sources of the Law




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PA Oil and Gas Act

Declaration of Purpose – Section 102Declaration of Purpose – Section 102– Permit optimal development . . . consistent with Permit optimal development . . . consistent with

protection of health, safety, environment, and protection of health, safety, environment, and property;property;

– Protect safety of employees and facilities;Protect safety of employees and facilities;– Protect safety and property of those near Protect safety and property of those near

development; anddevelopment; and– Protect natural resourcesProtect natural resources



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PA Oil and Gas Act

Specific provisions include: Permitting Well location restrictions Protection of water Well site restoration Well plugging Bonding Reporting



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Sources of the Law




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State Agencies

Department of Environmental Protection (DEP)

Bureau of Oil and Gas Management Department of Conservation and

Natural Resources (DCNR)



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Federal Agencies

Susquehanna River Basin Commission (SRBC)

Delaware River Basin Commission (DRBC) Federal Energy Regulatory Commission

(FERC) Environmental Protection Agency (EPA)



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Sources of the Law




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Municipal Regulation of Natural Gas Drilling Operations

Pennsylvania Supreme Court rulingsPennsylvania Supreme Court rulings– Borough of OakmontBorough of Oakmont

Restriction on oil and gas wells in R-1 zoning Restriction on oil and gas wells in R-1 zoning district was not preempted by Oil and Gas Act.district was not preempted by Oil and Gas Act.

– Salem TownshipSalem Township SALDO was preempted by Oil and Gas Act.SALDO was preempted by Oil and Gas Act.



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Minimum Royalty Act litigation

Hundreds, possibly thousands, of Hundreds, possibly thousands, of landowners seek to terminate their lease landowners seek to terminate their lease agreements.agreements.

Issue: Does reduction of royalty to pay Issue: Does reduction of royalty to pay for post-production costs violate for post-production costs violate Pennsylvania minimum royalty statute?Pennsylvania minimum royalty statute?



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Rights of Surface Owner

Belden & Blake Corp. v. DCNRBelden & Blake Corp. v. DCNR– DCNR could not require company to DCNR could not require company to

execute surface use agreement.execute surface use agreement.



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Governments’ Roles in Natural Governments’ Roles in Natural Gas DevelopmentGas Development

The Agricultural Law Resource and Reference CenterThe Agricultural Law Resource and Reference Center Ross Pifer, J.D., LL.M., DirectorRoss Pifer, J.D., LL.M., DirectorPhone: (814) 865-3723Phone: (814) 865-3723Email: Email: [email protected]: Web: www.law.psu.edu/aglaw


mailto:[email protected]

http://www.law.psu.edu/aglaw

Overview of Legal Issues in Marcellus Shale Development Penn State Ag Council Membership Meeting October 12, 2009 Agricultural Law Resource and Reference.

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