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Belden & Blake Corp. v. Commonwealth

April 29, 2009

BELDEN & BLAKE CORPORATION, APPELLEE
v.
COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF CONSERVATION AND NATURAL RESOURCES, APPELLANT



Appeal from the Order of the Commonwealth Court entered on 3/6/07 at No. 25 MD 2006 which granted partial summary judgment and denied cross-motion for summary judgment.

The opinion of the court was delivered by: Mr. Justice Eakin

CASTILLE, C.J., SAYLOR, EAKIN, BAER, TODD, McCAFFERY, JJ.

ARGUED: April 14, 2008

OPINION

Appellee Belden & Blake owns or leases oil and natural gas estates on three parcels of property in Oil Creek State Park; the Commonwealth owns the Park's surface. In December, 2004, Belden & Blake notified the Commonwealth, specifically, the Department of Conservation and Natural Resources (DCNR), it was in the preliminary stages of developing gas wells on two of the parcels; it provided similar notice in March, 2005, regarding the third parcel. Along with its notices, Belden & Blake submitted copies of its draft well drilling permit applications, pursuant to § 201 of the Oil and Gas Act (OGA),*fn1 and maps of proposed access routes and well sites. It posted bond with the Department of Environmental Protection (DEP), pursuant to § 215(a)(1)*fn2 of the OGA to secure well closure, well site reclamation, and pollution remediation costs.

DCNR, however, sought to impose a "coordination agreement" on Belden & Blake before allowing it to access the parcels; the terms included posting of a $10,000 performance bond for each well, and $74,885 in stumpage fees, double the fair market value of the timber to be removed.

Belden & Blake filed a petition for review in the Commonwealth Court seeking declaratory and equitable relief.*fn3 Belden & Blake claimed an implied easement with a right to enter the parcels was acquired with the oil and gas estates; it acknowledged the easement was limited by a good faith requirement that it use the surface area only in a reasonably necessary manner to extract the minerals. Belden & Blake averred it met and exceeded this obligation by: notifying DCNR months in advance of its plan to exercise its rights; meeting with DCNR regarding alternatives to best preserve the Park's surface; giving DCNR time to clear potentially affected land and timber; offering to arrange for timber extraction and pay its fair market value; providing maps of proposed wells; and obtaining a right-of-way across private property after revising its access route.

Belden & Blake also sought to enjoin DCNR from further interference with its rights, alleging DCNR refused it access by imposing unlawful bonds, fees, and an unnecessary right-of-way (as it already had an easement). Belden & Blake subsequently sought partial summary judgment, averring no issue of material fact existed regarding the respective ownership and leasehold interests.

In opposition, DCNR maintained it is a trustee for public resources under Article I, § 27 of the Pennsylvania Constitution,*fn4 and as such, is authorized to condition the surface use of a state park.

The Commonwealth Court granted Belden & Blake's partial summary judgment motion. It relied on Chartiers Block Coal Co. v. Mellon, 25 A. 597, 598 (Pa. 1893), which addressed a surface owner's rights relative to the subsurface owner's rights, where oil and gas underlie the coal subsurface. There, the subsurface owner sought to restrain the surface owner from drilling wells through the coal subsurface to reach the underlying oil and gas, arguing the drilling would render coal mining too dangerous. Id., at 597. We affirmed the lower court's grant of an injunction, holding "[t]he grantee of the coal owns the coal but nothing else, save the right of access to it and the right to take it away." Id., at 599.

Here, the Commonwealth Court included this Court's reasoning in Chartiers:

As against the owner of the surface each of the several purchasers would have the right, without any express words of grant for that purpose, to go upon the surface to open a way by shaft, or drift, or well, to his underlying estate, and to occupy so much of the surface, beyond the limits of his shaft, drift, or well, as might be necessary to operate his estate, and to remove the product thereof. This is a right to be exercised with due regard to the owner of the surface, and its exercise will be restrained, within proper limits, by a court of equity if this becomes necessary; but subject to this limitation it is a right growing out of the contract of sale, the position of the stratum sold, and the impossibility of reaching it in any other manner.

Belden & Blake Corporation v. Commonwealth, No. 25 MD 2006, unpublished memorandum at 13 (Pa. Cmwlth. filed March 5, 2007) (quoting Chartiers, at 598). The court held "[t]he law recognizes [Belden & Blake]'s right to enter upon the land to exercise its oil and gas rights . consequently, [DCNR] has no power to condition [Belden & Blake]'s exercise of those rights by requiring it to enter into the coordination agreement." Id., at 14. It found Chartiers imposed a duty on Belden & Blake to exercise its rights in a reasonable manner, with due regard to the surface owner's rights, and noted both parties may be restrained by a court of equity if necessary. Id. It further found DCNR's position that § 303 of the Conservation and Natural Resources Act (CNRA)*fn5 authorized it to impose a performance bond on Belden & Blake for each well misplaced, as DCNR had not leased the oil and gas rights at issue, and noted Belden & Blake posted bond pursuant to § 215(a)(1) of the OGA to cover well closure, well site reclamation, and pollution remediation costs. Id. The court found the CNRA does not authorize DCNR to levy stumpage fees. Id.

DCNR filed this appeal, followed by an automatic supersedeas, which the Commonwealth Court vacated; DCNR's application to reinstate the ...


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