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[U] Caldwell v. Kriebel Resources Co., LLC

Superior Court of Pennsylvania

June 21, 2013

TERRY L. CALDWELL AND CAROL A. CALDWELL, HUSBAND AND WIFE, Appellants
v.
KRIEBEL RESOURCES CO., LLC, KRIEBEL RESOURCES, KRIEBEL MINERALS, INC., KRIEBEL PRODUCTION COMPANY, JGG PARTNERS, L.P., K&K MINERAL RESOURCES CO., KRIEBEL GAS & OIL, INC. AND RANGE RESOURCES-APPALACHIA, LLC, Appellees

NON-PRECEDENTIAL DECISION

Appeal from the Order Entered August 3, 2012 In the Court of Common Pleas of Clearfield County Civil Division at No(s): 2012-14-CD

BEFORE: BENDER, J., GANTMAN, J., and OLSON, J.

MEMORANDUM

BENDER, Judge.

Terry L. Caldwell and Carol A. Caldwell (Appellants) appeal from an order, dated August 2, 2012, and entered on August 3, 2012, that sustained the preliminary objections filed by Kriebel Resources Co., LLC, Kriebel Resources, Kriebel Minerals, Inc., Kriebel Production Company, JGG Partners, L.P., K&K Mineral Resources Co., and Kriebel Gas & Oil, Inc. (Kriebel Defendants), and the preliminary objections filed by Range Resources—Appalachia, LLC (Range Resources Defendant), and dismissed Appellants' amended complaint. After review, we affirm.

On January 19, 2001, Appellants and Kriebel Resources entered into an oil and gas agreement (Agreement) whereby Appellants leased approximately 105 acres to Kriebel Resources covering "all oil, gas, surface and Drilling Rights … owned or claimed by landowners." Agreement, ¶ 1. The Agreement provided for an initial 24-month term beginning on April 1, 2001, that would be extended so long as oil or gas was being produced. Agreement, ¶ 4. The parties do not dispute that gas is being produced. However, Appellants assert that the drilling activities to date only involve shallow gas drilling and that the Defendants "have not initiated any drilling activities for natural gas locked in the Marcellus Shale formation." Appellants' brief at 3. Appellants also claim that the "Defendants have failed to either pay delayed rentals … or to produce natural gas from the Marcellus Shale strata." Id. at 3-4.[1]

The trial court set forth an abbreviated recitation of the underlying basis for this case, stating:

Plaintiffs Terry and Carol Caldwell filed an Amended Complaint on March 6, 2012, seeking a declaratory judgment terminating an oil and gas lease entered into with Defendant Kriebel Resources. Plaintiffs allege four bases requiring termination of the lease: 1) the gas trapped within the Marcellus Shale is part of the mineral estate, and only "oil, gas, and surface rights" were transferred by the agreement; 2) Defendants did not develop the Marcellus Shale gas; 3) Defendants have breached an implied duty to produce gas in paying quantities; and 4) the intent of the parties was to convey the rights to shallow gas only, not Marcellus Shale gas, thus the contract is ambiguous and must be reformed. The Kriebel Defendants and Defendant Range Resources filed Preliminary Objections to the Amended Complaint, demurring to all Counts.

Trial Court Opinion (T.C.O.), 8/3/12, at 1. The trial court's opinion was issued simultaneously with its order sustaining the preliminary objections and dismissing Appellants' amended complaint. Thereafter, Appellants appealed to this Court, raising the following questions for our review:

I. Did the court err[] by failing to find that oil and gas leases in Pennsylvania include an implied covenant to develop thereby granting a demure [sic] to Count II of the complaint?
II.Did the court err[] by failing to find that oil and gas leases in Pennsylvania include an implied covenant to produce in paying quantities independent of the contract thereby granting a demur [sic] to Count III of the complaint?
III. Did the court err[] by dismissing the complaint without giving plaintiffs the opportunity to present evidence that the lessee was not acting in good faith as to the amount of gas being produced from plaintiffs' property?
IV. Did the court err[] in not taking testimony to determine whether the parties intended to include Marcellus gas in the 2001 oil and gas agreement thereby granting a demur [sic] to Count IV of the complaint?
V. Did the court err[] in not recognizing that Marcellus gas is unique in that it is part of the mineral estate thereby granting a demur ...

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