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July 25, 2014

Pennsylvania General Assembly to Consider Requirements for Releases of Record by Oil and Natural Gas Lessees

Recently introduced legislation in Pennsylvania’s General Assembly proposes to create new statutory requirements for the release of terminated or cancelled oil or natural gas leases of record. If enacted, House Bill 402 would require lessees under oil or natural gas leases to deliver releases in recordable form to landowners at least 30 days prior to the termination or cancellation of such lease. No liability would attach to the lessee by virtue of a failure to deliver a release. However, a landowner could then file an affidavit of termination or cancellation in the event that a lessee fails to respond to a statutory notice sent on or before 15 days prior to the termination or cancellation of the lease by such landowner in a timely and appropriate manner in accordance with the statute.

While House Bill 402 would not provide particularly sharp teeth with which to compel a lessee to proactively deliver a release for an oil or natural gas lease that is of no further force and effect, it would afford astute landowners an opportunity to quiet title on their properties. These procedures could boost the marketability of properties in the oil and gas regions of Pennsylvania for lease to other oil and gas companies. Perhaps most importantly, however, House Bill 402 would ease the acquisition and development process for traditional real estate transactions hampered by clouded title concerns stemming from the existence of multiple oil or natural gas leases of record.

Several other states in the Marcellus-shale region have devised similar schemes to require the release of terminated oil or gas leases of record. See Ohio (substantially similar to the Pennsylvania proposal except with no time requirement for a landowner to provide the statutory notice), New York (substantially similar to the Pennsylvania proposal except with no time requirement for a landowner to provide the statutory notice) and West Virginia (only in the event that lessee fails to make a delay rental payment after notice from landowner). For a helpful survey on the topic from 2010, see also Kuntz, Law of Oil and Gas: §12.4 (LexisNexis).

©2014 Greenberg Traurig, LLP. All rights reserved.

About the Author

Associate

Josh Cohen represents developers, institutional investors and lenders in connection with the acquisition, disposition, development and financing of commercial and multi-family real estate projects. His practice focuses on affordable housing development and environmentally contaminated real estate, as well as alternative energy project development and financing. Josh is also experienced in complex real estate financing workouts, bond financings and commercial and industrial leasing.

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