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Larry D. Heasley v. Ksm Energy

July 27, 2012

LARRY D. HEASLEY, APPELLEE
v.
KSM ENERGY, INC., A PENNSYLVANIA CORPORATION; EXCO APPALACHIA, INC., A DELAWARE CORPORATION; AND THEIR PREDECESSORS IN TITLE, SUCCESSORS AND ASSIGNS AND ALL OTHER PERSONS CLAIMING ANY INTEREST IN THE PROPERTY DESCRIBED IN THIS ACTION,
v.
EOG RESOURCES APPALACHIA, INC., A DELAWARE CORPORATION; AND THEIR PREDECESSORS IN TITLE, SUCCESSORS AND ASSIGNS AND ALL OTHER PERSONS CLAIMING ANY INTEREST IN THE PROPERTY DESCRIBED IN THIS ACTION, APPEAL OF: KSM ENERGY, INC., APPELLANT



Appeal from the Order entered on December 10, 2010 in the Court of Common Pleas of Jefferson County, Civil Division, No. 426-2010-CD

The opinion of the court was delivered by: Musmanno, J.

BEFORE: MUSMANNO, DONOHUE and COLVILLE*fn1 , JJ.

OPINION BY MUSMANNO, J.:

KSM Energy, Inc. ("KSM"), a Pennsylvania Corporation, EXCO Appalachia, Inc. ("EXCO"), a Delaware Corporation, and their predecessors in title, successors and assigns and all other persons claiming any interest in the property described in this action, appeal from the Order of the trial court entering judgment on the pleadings in favor of Larry D. Heasley ("Heasley"). We affirm.

In its Opinion, the trial court summarized the factual and procedural history of the instant appeal as follows:

[Heasley] filed a complaint asking the [trial court] to find that two gas and oil leases were terminated due to lack of production of both gas and oil. Heasley identified himself as the fee simple owner of the subject property and its mineral rights and ... [KSM] and EOG Resources Appalachia, Inc.[,] as the lessee[] or assignor[] of the gas and oil rights pursuant to the aforementioned leases.[FN]

[FN] EOG Resources was recently added as an additional defendant and, having been served with copies of the [C]omplaint and [M]otions for judgment on the pleadings, never responded.

According to Heasley, the leases, one for 56 acres and the other for 55 acres, were dated November 23, 1942 and granted KSM the right to mine, drill and operate the property for oil and gas and laying of pipe lines, as well as to build tanks, stations and structures necessary to care for those products. The primary term of 20 years from the date of the execution had expired, averred Heasley, and the secondary term, which was to continue "as long thereafter as oil or gas, or either of them, is produced therefrom," had also expired, he contended, insofar as neither gas nor oil was being produced from the leased premises.

...[B]oth leases contain the same relevant language:

It is agreed that this lease shall remain in full force for the term of twenty years from this date, and as long thereafter as oil or gas, or either of them, is produced therefrom by the party of the second part, his heirs, executors, administrators, successors, or assigns.

KSM admitted the existence and dates of the leases, as well as the stated succession of the gas and oil rights. As for the terms of the leases, KSM answered that the language of those documents spoke for itself. With regard to the averred primary terms and expiration of the secondary term of the leases, KSM identified them as conclusions of law and thus declined to answer. It admitted, however, that gas or oil was not being produced.

KSM also pleaded new matter, averring that it had, pursuant to Paragraph Second of the leases, tendered checks in the amount of $100.00 to Heasley, who had negotiated those payments and accepted them until February 2009 and was, as a result, estopped from denying the leases' ongoing validity. According to KSM, moreover, annual rental, not continued production, was all that was required to maintain the leases.

The paragraph to which KSM refers reflected its agreement, in consideration of the premises,

[t]o pay Twelve and 50/100 ($12.50) dollars, each three months in advance, while the same is used off the premises, for the gas from each and every gas well drilled on said premises, having an open flow free to air of less than one hundred thousand cubic feet of gas in twenty- four hours, as measured by an orifice flow meter, when finally tubed and shut in. Said payments to be made on each well within sixty days after commencing to use the gas therefrom, as aforesaid, and to be paid each three months thereafter while the gas from said well is so used.

Pursuant to Paragraph Third, the annual rental increased to $200.00 if the pressure exceeded one ...


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