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Ken Zupp v. Cabot Oil & Gas Corporation

May 9, 2013

KEN ZUPP, PLAINTIFF,
v.
CABOT OIL & GAS CORPORATION, DEFENDANT.



The opinion of the court was delivered by: A. Richard Caputo United States District Judge

JUDGE CAPUTO

MEMORANDUM

Presently before the Court is Cabot Oil & Gas Corporation's ("Cabot") Motion to Dismiss Plaintiff Ken Zupp's ("Zupp") Amended Complaint Pursuant to Federal Rule of Civil Procedure 12(b)(6). (Doc. 10.) Because the facts as alleged in the Amended Complaint fail to state a claim upon which relief can be granted, Cabot's motion to dismiss will be granted.

I. Background

A. Factual Allegations

The facts as alleged in the Amended Complaint are as follows: Zupp is the owner of certain real estate located within Susquehanna County, Pennsylvania. (Am. Compl., ¶ 1.) On or about April 3, 2007, Zupp leased the premises to Cabot for purposes of exploring and producing oil and gas pursuant to an Oil and Gas Lease (the "Lease"). (Id. at ¶ 3.) The primary term of the lease was five (5) years, which expired on April 2, 2012. (Id. at ¶¶ 4, 10.)

On March 1, 2012, Cabot spudded a gas well on Zupp's property. (Id. at ¶ 18.) Drilling on Zupp's property was completed as of April 2, 2012, and the drilling rig was released. (Id. at ¶ 19.) Cabot embarked upon completion of the well on Zupp's property on May 15, 2012, approximately forty-three (43) days after the expiration of the primary term. (Id. at ¶ 20.) The well was completed on June 2, 2012. (Id. at ¶ 21.) Since June 2, 2012, Cabot has not conducted operations on Zupp's property. (Id. at ¶ 22.) Cabot has asserted to Zupp that that the well has been "shut-in." (Id.)

On or about June 4, 2012, Cabot recorded a Declaration of Pooling and Utilization that included approximately 87 acres of Zupp's property, which Cabot subsequently amended on September 27, 2012. (Id. at ¶¶ 11-12.) In or about July 2012, Zupp contacted a Cabot representative to inquire why his neighbor received a lease extension in May 2012. (Id. at ¶¶ 13-14.) Zupp also discussed with Cabot's representative whether his Lease remained in effect. (Id. at ¶¶ 16-17.) While the representative indicated to Zupp that the Lease may have expired, he informed Zupp that he would need to get a definitive answer on the issue. (Id. at ¶ 17.) Ultimately, the Cabot representative told Zupp that he was advised that the Lease did not expire. (Id.) According to Cabot, the Lease was extended beyond its primary term based on the activities that occurred on Zupp's property in May and June 2012. (Id. at ¶ 24.)

B. Relevant Lease Provisions

The Lease agreed to by the parties provides:

This lease shall remain in force for a term of five (5) years from [April 3, 2007] (called "primary term") and as long thereafter as oil or gas is produced, or considered produced under the terms of this lease, in paying quantities from the premises or from lands pooled therewith, or the premises are used for gas storage purposes as provided in paragraph 6 hereof, or this lease is maintained in force under any subsequent provisions hereof. (Am. Compl., Ex. A, "Lease", ¶ 2.) The parties agree that paragraphs 4 and 12 of the Lease are the pertinent provisions for resolving the instant motion. Paragraph 12 states:

If during the last ninety (90) days of the primary term hereof or at any time after the expiration of the primary term, production of oil and gas in paying quantities from the premises, or lands pooled therewith, should cease for any reason, or if during or after such ninety (90) day period and prior to discovery of oil or gas on the premises or lands pooled therewith, Lessee should complete a dry hole thereon, this lease shall not terminate if Lessee commences or resumes additional operations on the premise or lands pooled therewith, within ninety (90) days after production ceased or the well was completed as a dry hole, which is applicable. If, at the expiration of the primary term, oil or gas is not being produced in paying quantities from the premises, or lands pooled therewith, but Lessee is then engaged in operations thereon, this lease shall remain in force so long as operations are prosecuted (whether on the same or different wells) with no cessation of more than ninety (90) consecutive days, and if they result in production, so long thereafter as oil or gas is producing in paying quantities from the premises or lands pooled therewith. The term "operations" as used in this Lease shall include but not be limited to the drilling, testing, completing, (including by horizontal and slant hole well completion techniques) reworking, recompleting, deepening, plugging back, or repairing of a well (and all work preparatory, incident or related to any such operations) in search for or in an endeavor to obtain, restore, maintain, or to increase production of oil, liquid hydrocarbon, or gas, or any of them. (Id. at ¶ 12.)

Paragraph 4 provides in its entirety:

If at any time either during or after the primary term hereof there is a well capable of producing gas (with or without condensate) in paying quantities (other than stored gas) located upon the premises or on lands pooled therewith but such well is shut-in (whether before or after production) and this lease is not maintained in force by operations or production at any well, by gas storage, or by other activity or event, nevertheless it shall be considered that gas is being produced in paying quantities within the meaning of this lease. On or before the end of the initial year during which this lease is maintained in force for the entire annual period under this paragraph 4, Lessee shall pay or tender to Lessee hereunder, or to those entitled to the royalties provided in this lease (as shown by Lessee's records) at the addresses shown by Lessee's records, a shut-in royalty equal to $1.00 per acre for the acreage under this lease (as shown by Lessee's records) at the time such payment or tender is made. Each subsequent payment or tender shall be made thereafter in like manner and amount on or before the end of each annual period while the lease was maintained in force for the entire annual period under the first sentence of this paragraph 4. Lessee's failure to timely or correctly pay or tender the shut-in royalty for any year shall not operate to terminate this lease or serve as a basis for cancellation, but Lessee shall correct any erroneous payment or tender, when notified thereof, and if late then Lessee shall make the correcting payment or ...


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