United States District Court, M.D. Pennsylvania
GARY R. BUTTERS, as Co-Trustee of THE BUTTERS CLINTON COUNTY GAS PROTECTOR TRUST, DAVID F. BUTTERS, individually, TERRY L. BUTTERS, individually, and GLEN E. BUTTERS, individually, Plaintiffs
SWN PRODUCTION COMPANY, LLC, Defendant
Christopher C. Conner, Chief Judge.
commenced this action against defendant SWN Production
Company, LLC ("SWN") to quiet title under
Pennsylvania Rule of Civil Procedure 1061(b)(3) and for
declaratory judgment under 28 U.S.C. § 2201 and Federal
Rule of Civil Procedure 57. (Doc. 7). SWN moves to dismiss
plaintiffs' amended complaint pursuant to Federal Rule of
Civil Procedure 12(b)(6). (Doc. 15).
Factual Background & Procedural History
Subject Properties and Lease Execution
own several tracts of real property totaling approximately
445.61 acres in Morris Township, Tioga County, Pennsylvania
that are subject to oil and gas leases. (Doc. 7 ¶¶
11, 15). In 1997, Raymond G. Butters and Peggy A. Butters
conveyed their interest in subterranean oil and gas
associated with two parcels of land containing approximately
100.42 and 142.42 acres ("242 Acre Tract"), to the
Butters Living Trust. (Id. ¶¶ 12-13). Two
years later, Roger W. Mitschele, Jr. and Keith E. Mitschele
conveyed title and interest in two parcels of land comprising
approximately 214.15 acres ("214 Acre Tract, " and
together with the 242 Acre Tract, the "subject
properties") to plaintiffs David F. Butters and Terry L.
Butters. (Id. ¶14).
Butters Living Trust leased the 242 Acre Tract to Jim
Bourbeau Land Service, LLC ("Bourbeau") on December
8, 2005. (Id. ¶ 16; Doc. 7-7). David F. Butters
and Terry L. Butters leased the 214 Acre Tract to Bourbeau on
the same day. (Doc. 7 ¶ 17; Doc. 7-8). Each lease
established a primary term of five years for the leases.
(Doc. 7 ¶ 18; Doc. 7-7 at 3; Doc. 7-8 at 3). As lessee,
Bourbeau could extend the primary term by an additional five
years from the original expiration date at a cost of $45 per
net-acre. (Doc. 7 ¶ 19; Doc. 7-7 at 7 C.12th; Doc. 7-8
at 7 C.12th).
Relevant Lease Provisions
leases each contain a habendum clause setting forth five
alternative conditions by which the lessee could extend the
leases beyond the primary term. (Doc. 7 ¶ 20; Doc. 7-7
at 5 C.11th; Doc. 7-8 at 5 C.11th). The habendum clause
provides that the leases will "remain in full force and
effect" beyond the primary term and
as long thereafter as (1) drilling operations continue with
due diligence, provided that LESSEE has commenced drilling
operations on any portion of the premises or any lands pooled
or unitized therewith, within the primary term, (2) an
application for a drilling permit is pending with the
appropriate authorities, and LESSEE, after grant of such
permit, commences drilling operations within a reasonable
time thereafter and continues same with due diligence,
provided said permit application was filed prior to the
expiration of the primary term, (3) oil and gas or either of
them is produced or withdrawn from any portion of the
premises or any lands pooled or unitized therewith, (4) gas
storage operations are conducted in or on any portion of the
premises or (5) a completed oil or gas well would be capable
of producing oil or gas from any portion of the premises or
any lands pooled or unitized therewith, but for acts of God,
unavailability or interruption of markets or pipelines,
delays due to pending governmental or regulatory
authorization, or any other causes, which have caused LESSEE
not to commence production from such well or to suspend
production from such well.
(Doc. 7 ¶ 20; Doc. 7-7 at 3; Doc. 7-8 at 3). The leases
provide the definition of "operations" in paragraph
Operations. Whenever used in this lease, the word
"operations" (unless specified to the contrary)
shall mean operations for and any of the following: dirt
work, building of roads and locations, drilling, testing,
completing, reworking, recompleting, deepening, plugging
back, repairing, abandoning or dewatering (meaning pumping or
flowing of water and/or associated hydrocarbons from a well)
of a well in search of or in an endeavor to obtain, increase
or restore and/or market or render marketable or more
valuable production of oil or gas, and/or production, actual
or constructive, of oil or gas.
(Doc. 7-7 at 5 C.11th; Doc. 7-8 at 5 C.11th).
leases also set forth a notice requirement which reads:
All expressed or implied covenants of this Lease shall be
subject to all federal, state and local laws, orders, rules
and regulations. If LESSEE is unable to fulfill any covenant
hereunder because of such laws, orders, rules or regulations,
acts of God (such as natural disasters), wars, civil
disturbances, insurrections, riots, epidemics, equipment or
pipeline breakdown or freeze-up, or similar causes not
reasonably within the control of LESSEE, for such time as
such situation exists, the term of this Lease shall be
extended for an equal period of time, and LESSEE'S
obligation to fulfill its covenants under this Lease shall be
suspended for such period of time. This Lease shall not be
terminated, in whole or in part, nor Lessee held liable for
any failure to perform unless such obligation, covenant or
condition remains unsatisfied and unperformed for a period of
one year following the express and specific written demand
upon Lessee by Lessor for such satisfaction and performance.
Neither the service of said notice nor the doing of any acts
by Lessee intended to satisfy any of the alleged obligations
shall be deemed an admission or presumption that Lessee has
failed to perform all its obligations hereunder. No judicial
action may be commenced by Lessor for forfeiture of this
lease or for damages until after said period. Lessee shall be
given a reasonable opportunity after judicial ascertainment
to prevent forfeiture by discharging its expressed or implied
obligation as established by the court.
(Doc. 7-7 at 5 C.7th; Doc. 7-8 at 5 C.7th).
Lease Assignments and Transfers
assigned its interest in the leases to Anadarko E&P
Company, LP ("Anadarko") in February 2007. (Doc. 7
¶ 29). Anadarko assigned a 50% interest in the leases to
Chesapeake Appalachia, LLC ("Chesapeake") effective
September 1, 2006. (Doc. 7 ¶ 30; Doc. 7-13). Chesapeake
thereafter transferred a 32.5% interest in the leases to
Statoil Hydro USA Onshore Properties, Inc.
("Statoil") effective November 17, 2008. (Doc. 7
¶ 31; Doc. 7-14).
Butters Living Trust transferred its interest in the 242 Acre
Tract to various members of the Butters family in 2011. (Doc.
7 ¶ 22). Plaintiffs David F. Butters and Terry L.
Butters each received an undivided 35% interest in the 242
Acre Tract. (Id. ¶¶ 23-24). The Butters
Living Trust conveyed an undivided 15% interest in the 242
Acre Tract to plaintiff Glen E. Butters. (Id.)
Plaintiff Butters Clinton County Gas Protector Trust (the
"Trust"), executed on November 16, 2010, received
an undivided 15% interest in the 242 Acre Tract.
(Id. ¶¶ 23-25).
and Statoil assigned their combined 50% interest in the
leases to SWN effective January 1, 2013. (Id.
¶ 33; Doc. 7-16). Anadarko also assigned 32.5% of its
interest in the leases to Mitsui E&P USA, LLC
("Mitsui") effective July 20, 2012. (Doc. 7 ¶
34; Doc. 7-17). Anadarko assigned the remainder of its
interest in the leases to SWN effective September 1, 2014.
(Doc. 7 ¶ 36; Doc. 7-19). At the conclusion of the
leases' primary terms on December 8, 2015, SWN and Mitsui
held "the totality of the working interest in the
[l]eases." (Doc. 7 ¶ 38; see also Doc. 30