OPINION BY Judge COVEY.
Seneca Resources Corporation (Seneca) filed preliminary objections to the Commonwealth of Pennsylvania, Pennsylvania Game Commission's (Commission) Complaint seeking injunctive and declaratory relief against Seneca
By May 28, 1928 deed, Sancrik Lumber Company (Sancrik) transferred to the Commission four tracts of land comprising approximately 3,171.58 acres (Contract L-81) (1928 Deed). The 1928 Deed expressly excepted and reserved "all the oil and gas in or under the herein[-]described lands, with the right to operate for same by ordinary means now in use." Complaint Ex. A at 9.
In a November 27, 1929 deed, Sancrik granted and conveyed to United Natural Gas Company (United Natural Gas) (1929 Deed)
Complaint Ex. C at 1, 8-9.
By October 15, 1932 deed, Sancrik transferred to the Commission four tracts of additional land totaling approximately 483.2 acres (Contract L-368) (1932 Deed). The 1932 Deed expressly excepted and reserved "all petroleum oil and natural gas together with the right to prospect for, drill and bore for, produce and remove the same." Complaint Ex. B at 5.
In its Complaint, the Commission avers that Seneca's rights contained in Contracts L-81 and L-368 (collectively, the Property) derive from the exceptions and reservations contained in the 1928 Deed and the 1932 Deed surface land conveyances to the Commission, and the 1929 Deed conveying Sancrik's oil and gas rights to United Natural Gas, since "[i]t is believed, and therefore averred that United Natural Gas merged with Seneca...." Complaint at ¶ 9.
Seneca drilled a vertical test well targeting unconventional shale gas formations in Contract L-81. Complaint at ¶ 11. The Commission asserts that "Seneca plans on drilling horizontal wells on multiple well pads targeting unconventional shale gas on Contract L-81 by way of methods not ordinarily used during the time of the [conveyance] severance ... and has, in fact, permitted at least one well for that purpose." Complaint at ¶ 12. The Pennsylvania Department of Environmental Protection issued to Seneca on December 20, 2012 Well Permit No. 37-121-45122-00-00. Seneca's Prelim. Obj. Ex. 1. The Commission contends that since modern horizontal drilling methods and hydrofracking were not developed at the time of the Property transfers, Sancrik could not have contemplated nor intended to reserve the right to burden the surface estates with the wells, well pads, water impoundments and water usage necessary for those processes.
In Count I of its Complaint, the Commission seeks a declaration from this Court that the Commission "has ownership of the oil, gas and development rights" associated with modern extraction of the oil and gas subject to Contract L-81 (1928 Deed) and Contract L-368 (1932 Deed).
Seneca filed preliminary objections to the Commission's Complaint, seeking that the Complaint be dismissed because the claims therein: (1) are nonjusticiable, and (2) fail to state a claim
Id. at 415-16 (citations omitted).
Seneca first argues that the Commission's claims are not justiciable because the Commission merely alleges that Seneca "plans on" drilling wells to extract oil and gas from the Property. Complaint at ¶ 12. Seneca maintains that although it has obtained a permit for a well, the permitted well is not located on the Property, but rather adjacent thereto, which will allow Seneca access to its oil and gas interests by drilling under the Property. Thus, Seneca asserts there is no present case or controversy for this Court to decide. We disagree.
Section 7541 of the Declaratory Judgments Act states that "[i]ts purpose is to settle and to afford relief from uncertainty and insecurity with respect to rights, status, and other legal relations, and is to be liberally construed and administered." 42 Pa.C.S. § 7541.
Allegheny Cnty. Constables Ass'n, Inc. v. O'Malley, 108 Pa.Cmwlth. 1, 528 A.2d 716, 718 (1987) (citations and quotation marks omitted). "An actual controversy exists when litigation is both imminent and inevitable and the declaration sought will practically help to end the controversy between the parties." Chester Cmty. Charter Sch. v. Dep't of Educ., 996 A.2d 68, 80 (Pa. Cmwlth.2010). "[T]he subject matter of the dispute giving rise to a request for declaratory relief need not have erupted into a full-fledged battle...." Ronald H. Clark, Inc. v. Twp. of Hamilton, 128 Pa. Cmwlth. 31, 562 A.2d 965, 968 (1989).
Mid-Centre Cnty. Auth. v. Boggs Twp., 34 Pa.Cmwlth. 494, 384 A.2d 1008, 1011 (1978) (quoting Lakeland Joint Sch. Dist. Auth. v. Scott Twp. Sch. Dist., 414 Pa. 451, 456-57, 200 A.2d 748, 751 (1964)). "Granting or denying a petition for a declaratory judgment is committed to the sound discretion of a court of original jurisdiction." GTECH Corp. v. Dep't of Revenue, 965 A.2d 1276, 1285 (Pa.Cmwlth.2009).
Here, while it is true that Seneca has not yet begun drilling operations, and could decide never to drill, Seneca has admitted that it holds a well permit for property located adjacent to Contract L-81 for the purpose of extracting oil and gas from under the Property. See Seneca's Prelim. Obj. at ¶ 6. In addition, Seneca "has drilled a vertical test well targeting unconventional shale gas formations on [Contract] L-81." Complaint at ¶ 11. Moreover, Seneca need afford the Commission only 60 days advance notice before drilling for oil or gas under the Property and has abated any action pending determination of the parties' rights. Seneca clearly has tools in place threatening imminent invasion of the Commission's purported rights, thereby creating an actual controversy. The declaration sought will practically help to end the controversy. Liberally construing and administering the Declaratory Judgments Act, as we must, this Court holds that the claims set forth in the Commission's Complaint are justiciable. Accordingly, we overrule Seneca's objection that the Commission's claims are not justiciable.
Seneca next argues that the Commission's Complaint fails to state a cause of action upon which relief may be granted. We agree, in part. "[P]reliminary objections in the nature of a demurrer require the court to resolve the issues solely on the basis of the pleadings. Thus, no testimony or other evidence outside the complaint may be considered to dispose of the legal issues presented by a demurrer." Cardella v. Pub. Sch. Emp. Ret. Bd., 827 A.2d 1277, 1282 (Pa.Cmwlth.2003).
The Commission's Complaint avers that "[the Commission] is the owner of certain modern oil/gas development rights, and in particular those associated with extracting gas using the horizontal drilling method and the hydrofracturing process, as well as the oil and gas that can only be economically extracted using those methods." Complaint at ¶ 26. At oral argument, the Commission conceded that Seneca at all times retained all the oil and gas rights underlying the Property, but continued to maintain that the Commission owns the development rights to extract the oil and gas by modern means. Consequently, the Commission asserts, in order for Seneca to get the oil and gas it must compensate the Commission to extract the same.
Complaint at 6. Specifically, the Commission contends in its Complaint that the Deeds intended for Sancrik's successor, Seneca, to retain ownership of the oil and
"Pennsylvania law recognizes three discrete estates in land: the surface estate, the mineral estate, and the right to subjacent (surface) support." BET Lehigh Real Estate, LLC v. Schuylkill Cnty. Bd. of Assessment Appeals, 67 A.3d 845, 858 (Pa.Cmwlth.2013).
Hetrick v. Apollo Gas Co., 415 Pa.Super. 189, 608 A.2d 1074, 1077-78 (1992) (citations omitted). Moreover,
Consolidation Coal Co. v. White, 875 A.2d 318, 326 (Pa.Super.2005) (citations omitted).
The subject Deeds were attached to and incorporated by reference in the Commission's Complaint. The 1928 Deed clearly excepted and reserved "all the oil and gas in or under the herein[-]described lands...." Complaint at ¶ 4 and Ex. A at 9. The Complaint also reflects that the 1929 Deed granted to Seneca's predecessor, United Natural Gas, "all the petroleum oil and natural gas in and under or which may be produced from the following described tracts of land...." Complaint Ex. C at 1. And, the Complaint admits that the 1932 Deed excepted and reserved "all petroleum oil and natural gas...." Complaint at ¶ 6 and Ex. B at 5. Thus, despite that the Complaint clearly avers that the Commission owns the development rights,
The question remains, however, whether Seneca's extraction of its oil and gas underlying the Property is limited to technology existing at the time the Deeds were executed.
Humberston v. Chevron U.S.A., Inc., 75 A.3d 504, 511 (Pa.Super.2013).
Belden & Blake, 600 Pa. at 567, 969 A.2d at 532-33.
Finally,
Consolidation Coal Co., 875 A.2d at 326-27 (citations omitted).
Here, "[t]he Commission has requested this Honorable Court to issue an order that the express limitations and restrictions set forth in the deeds referenced above [i.e., 1928 and 1932 Deeds] as to the manner of exercising the rights to produce and operate for oil and gas...." Commission Br. at 2. According to the Commission's Complaint, the 1928 Deed clearly excepted and reserved the oil and gas "with the right to operate for same by ordinary means now in use." Complaint Ex. A at 9. The Commission claims that Seneca's extraction methods are limited to those "in use" in 1928 when the Deed was executed. The 1932 Deed did not similarly limit the oil and gas removal method under the land conveyed therein. The Commission contends that although the 1932 Deed did except and reserve the underlying oil and gas and the right to drill for and remove the same, since the 1932 Deed did not "contain words such as `stimulate,' `rework,' `deviate,' `hydrofrack,' `laterally drill,' or `horizontally drill[,]'" those rights passed to the Commission. See Commission Br. at 7. Seneca avers that interpreting the Deeds in that manner would lead to an absurd result, making its oil and gas rights meaningless.
Initially, we conclude that, unlike the 1928 Deed, the 1932 Deed did not limit removal of oil and gas to "ordinary methods now in use." Complaint Ex. A at 9, Ex. C at 8. Rather, the 1932 Deed generally permitted "prospect[ing] for, drill[ing] and bor[ing] for, produc[ing] and remov[ing] the same." Complaint Ex. B at 5. Because the language is unrestricted, it unambiguously grants Seneca "all the means of attaining" the oil and gas subject to the 1932 Deed. Humberston, 75 A.3d at 511. Thus, there is no question that Seneca may extract its oil and gas underlying the land conveyed in the 1932 Deed by horizontal drilling and hydrofracturing or by any other generally-accepted means, while respecting the Commission's surface estate as the law requires. Accordingly, we hold that the Complaint fails to state a cause of action upon which relief may be granted in the Commission's favor as to the 1932 Deed, and Seneca's objection is sustained.
We further conclude that the extraction methods language contained in the 1928 Deed is ambiguous. This Court could interpret the 1928 Deed as intending that extraction methods used before the Deed was executed (such as blasting) were no longer permitted, and that Seneca may
Count II of the Commission's Complaint seeks a "permanent injunction that prevents [Seneca] from developing the oil and gas in any way that conflicts with the express rights of the aforesaid severance."
The Commission cannot establish a clear right to the oil and gas underlying the Property or the development thereof. The oil and gas underlying the Property belongs to Seneca under all circumstances, and whether the Commission has any development rights is uncertain. The law already limits Seneca from developing the oil and gas in a way that conflicts with the severances; therefore, a permanent injunction is not necessary for that purpose. Because the Commission cannot establish a clear right to relief, not all of the requirements for a permanent injunction can be met. Thus, Seneca's objection that Count II of the Commission's Complaint fails to state a cause of action upon which relief may be granted is sustained.
For all of the above reasons, we overrule Seneca's objection that the Commission's claims are not justiciable. As to Count I of the Commission's Complaint, we sustain Seneca's objections that Count I of the Commission's Complaint fails to state a viable basis on which this Court may declare that the Commission has a right to the oil and gas under the Property, and that the Complaint fails to state a claim for a declaration that Seneca's method of extracting the oil and gas conveyed by the 1932 Deed is limited thereby. We overrule Seneca's objection that Count I of the Commission's Complaint fails to state a claim for a declaration that Seneca's extraction of the oil and gas underlying the Property is limited by the 1928 Deed. Finally, we sustain Seneca's objection that
AND NOW, this 27th day of January, 2014, Seneca Resources Corporation's (Seneca) preliminary objection that the claims in the Commonwealth of Pennsylvania, Pennsylvania Game Commission's (Commission) Complaint are not justiciable is overruled. Seneca's preliminary objection that the Commission's Complaint fails to state a cause of action upon which relief may be granted is sustained in part and overruled in part. Accordingly, Seneca is directed to file an answer to Count I of the Commission's Complaint within 20 days of this Court's order.
Humberston v. Chevron U.S.A., Inc., 75 A.3d 504, 511 (Pa.Super.2013). Thus, although hydrofracking technology may not be a new or modern method, it was not developed at the time the Deeds were executed.