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[U] Humberston v. Chevron U.S.A., Inc.

Superior Court of Pennsylvania

July 12, 2013



Appeal from the Order Entered July 23, 2012 In the Court of Common Pleas of Fayette County Civil Division at No(s): 2068 of 20011 GD




Paul F. Humberston, Carol J. Humberston, James F. Humberston and Tennille L. Humberston, (collectively "Appellants" or "Humberstons") appeal from the July 23, 2012 order that sustained the preliminary objects filed by Chevron U.S.A., Inc. ("Chevron") and Keystone Vacuum, Inc. ("Keystone") and dismissed Appellants' complaint with prejudice. We affirm.

The Humberstons own approximately 133 acres of land in Fayette County. On April 6, 2006, they entered into a gas and oil lease ("Lease") with the Keeton Group, LLC. Subsequently, Chief Exploration & Development LLC became the successor in interest to the Keeton Group and, thereafter, Chevron became the successor in interest to Chief. Keystone is a contractor that performed construction work for Chevron involving the freshwater-storage impoundment covering 11 acres of the Humberstons' property that is central to the issue in this matter. The freshwater-storage impoundment provided for the storage of fresh water to be used to develop the gas wells[1] on the Humberstons' property and other wells in the Humberston Unit.[2]

The Humberstons filed an action to quiet title and in trespass on September 16, 2011, alleging that the freshwater-storage impoundment was not contemplated by the parties at the time the Lease was executed, that the Lease does not grant Chevron the right to construct the impoundment, and that the impoundment improperly intends to serve potential wells on other properties. The Humberstons requested the court to "enter a decree indicating that [Chevron and Keystone] have no right to build a large fresh water impoundment on the Humberston[s'] Subject Land." See Complaint. They also seek an award of actual and punitive damages. Id.

The Lease that is at the heart of this matter includes a Leasing Clause and a Unitization Clause, both of which are pertinent to the issues raised in this case. The Leasing Clause states:

LEASING CLAUSE: Lessor hereby leases exclusively to Lessee all the oil, gas and coal bed methane and their constituents, whether hydrocarbon or non-hydrocarbon, underlying the land herein leased, together with such exclusive rights as may be necessary or convenient for Lessee, at its election, to explore for, develop, produce, measure, and market production from the Leasehold, and from adjoining lands, using methods and techniques which are not restricted to current technology, including the right to conduct geophysical and other exploration tests; to drill, maintain, operate, cease to operate, plug, abandon, and remove wells; to use or install roads, electric power and telephone facilities, and to construct pipelines with appurtenant facilities, including data acquisition, compression and collection facilities for use in the production and transportation of products from the Leasehold and from neighboring lands across the leasehold, and such right shall survive the term of this agreement for so long thereafter as operations are continued, to use oil, gas, and non-domestic water sources, free of cost, to store gas of any kind underground, regardless of the source thereof, including the injection of gas therein and removing same therefrom, to protect stored gas, to operate, maintain, repair, and remove material and equipment.

Lease - Leasing Clause (emphasis added). The Lease also contains the following language in the Unitization Clause:

UNITIZATION: Lessor grants Lessee the right to pool, unitize, or combine all or part of the Leasehold with other lands, whether contiguous or not contiguous, leased, or un-leased, whether owned by Lessee or by others, at a time before or after drilling to create drilling or production units either by contract right or pursuant to governmental authorization. Lessee is granted the right to change the size, shape and conditions of operations or payment of any unit created. Lessor agrees to accept and receive out of the production of the revenue realized from production of such unit, such proportional share of the Royalty from each unit well as the number of leasehold acres included in the unit bears to the total number of acres in the unit. Otherwise, except for Free Gas, the drilling, operations in preparation for drilling, production from, or payment for Royalty, Shut-In Royalty, or Delay in Marketing for a well on such a unit shall have the same effect upon the terms of this lease as if the well were located on the Leasehold.

Lease – Unitization Clause (emphasis added).

The trial court's opinion provides some additional background information:

[Appellants] also allege in the complaint that on July 17, 2010[, ] [the] Humberstons and lessee, Chief, entered into a [S]urface [D]amage [R]elease, attached as Exhibit #3 to [Appellants'] complaint. This exhibit provides, inter alia, for the payment by Chief to [Appellants] of $10, 000.00, which "shall be payment in full for the location up to the initial impacted area as defined below and for any and all surface damages which may result on the location from operations performed by Chief, its contractors, successors or assigns." The "initial impacted area" was to be no larger than seven acres. The release also provides that if Chief deems it necessary to utilize more of the subject land, lessee agrees to obtain the consent of the surface owners, which consent shall not be unreasonably withheld or delayed, and pay the surface owners an additional consideration of $1500.00 per acre so expanded.
The complaint also alleges that in January of 2011, Chief sought to enter into a surface lease for a freshwater impoundment site on the premises. No agreement was executed by [the] Humberstons relative ...

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