Heasley v. KSM Energy, Inc.

52 A.3d 341, 177 Oil & Gas Rep. 301, 2012 Pa. Super. 151, 2012 Pa. Super. LEXIS 1596
CourtSuperior Court of Pennsylvania
DecidedJuly 27, 2012
StatusPublished
Cited by7 cases

This text of 52 A.3d 341 (Heasley v. KSM Energy, Inc.) is published on Counsel Stack Legal Research, covering Superior Court of Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Heasley v. KSM Energy, Inc., 52 A.3d 341, 177 Oil & Gas Rep. 301, 2012 Pa. Super. 151, 2012 Pa. Super. LEXIS 1596 (Pa. Ct. App. 2012).

Opinion

OPINION BY

MUSMANNO, J.:

KSM Energy, Inc. (“KSM”), a Pennsylvania Corporation, EXCO Appalachia, Inc. (“EXCO”), a Delaware Corporation, and their predecessors in title, successors and assigns and all other persons claiming any interest in the property described in this action, appeal from the Order of the trial court entering judgment on the pleadings in favor of Larry D. Heasley (“Heasley”). We affirm.

In its Opinion, the trial court summarized the factual and procedural history of the instant appeal as follows:

[Heasley] filed a complaint asking the [trial court] to find that two gas and oil leases were terminated due to lack of production of both gas and oil. Heasley identified himself as the fee simple owner of the subject property and its mineral rights and ... [KSM] and EOG Resources Appalachia, Inc.[,] as the lessee[] or assignor[] of the gas and oil rights pursuant to the aforementioned leases.

According to Heasley, the leases, one for 56 acres and the other for 55 acres, were dated November 23, 1942 and granted KSM the right to mine, drill and operate the property for oil and gas and laying of pipe lines, as well as to build tanks, stations and structures necessary to care for those products. The primary term of 20 years from the date of the execution had expired, averred Heasley, and the secondary term, which was to continue “as long thereafter as oil or gas, or either of them, is produced therefrom,” had also expired, he contended, insofar as neither gas nor oil was being produced from the leased premises.

... [B]oth leases contain the same relevant language:
It is agreed that this lease shall remain in full force for the term of twenty years from this date, and as long thereafter as oil or gas, or either of them, is produced therefrom by the party of the second part, his heirs, executors, administrators, successors, or assigns.

KSM admitted the existence and dates of the leases, as well as the stated succession of the gas and oil rights. As for the terms of the leases, KSM answered that the language of those documents spoke for itself. With regard to the averred primary terms and expiration of the secondary term of the leases, KSM identified them as conclusions of law and thus declined to answer. It [343]*343admitted, however, that gas or oil was not being produced.

KSM also pleaded new matter, averring that it had, pursuant to Paragraph Second of the leases, tendered checks in the amount of $100.00 to Heasley, who had negotiated those payments and accepted them until February 2009 and was, as a result, estopped from denying the leases’ ongoing validity. According to KSM, moreover, annual rental, not continued production, was all that was required to maintain the leases.

The paragraph to which KSM refers reflected its agreement, in consideration of the premises,

[t]o pay Twelve and 50/100 ($12.50) dollars, each three months in advance, while the same is used off the premises, for the gas from each and every gas well drilled on said premises, having an open flow free to air of less than one hundred thousand cubic feet of gas in twenty-four hours, as measured by an orifice flow meter, when finally tubed and shut in. Said payments to be made on each well within sixty days after commencing to use the gas therefrom, as aforesaid, and to be paid each three months thereafter while the gas from said well is so used.

Pursuant to Paragraph Third, the annual rental increased to $200.00 if the pressure exceeded one hundred thousand cubic feet.

By way of reply, Heasley admitted that he had negotiated the annual $100.00 tenders through 2008, but had returned [KSM’s] February 9, 2009 check and elected not to specifically address KSM’s other claims, observing that they were conclusions of law.

... KSM filed its [M]otion for judgment on the pleadings on July 30, 2010, therein confirming that the primary term for the leases was 20 years and that “[t]he wells on the Leases [sic] Premises are no longer producing oil and gas.” One month later, Heasley filed a[C]ounter-[M]otion for judgment on the pleadings on the grounds that production was a prerequisite to the leases’ continuing enforceability.

Trial Court Opinion, 12/10/10, at 1-3 (emphasis added) (footnote in original).

On December 10, 2010, the trial court entered an Order denying KSM’s Motion and granting judgment on the pleadings in favor of Heasley. On March 2, 2011, the trial court rendered its December 10, 2010 ruling applicable to third-party defendant EOG Resources Appalachia, Inc. A discontinuance was entered as to EXCO. Thereafter, KSM filed a Notice of appeal, followed by a court-ordered Pennsylvania Rule of Appellate Procedure 1925(b) Statement of Matters Complained of on Appeal.

KSM presents the following claim for our review: “Whether the term of an oil and gas lease calling for a flat rental as opposed to a percentage royalty is determined by payment?” Brief for Appellant at 4. KSM argues that the Pennsylvania Supreme Court’s decision in T. W. Phillips Gas and Oil Co. v. Komar, 424 Pa. 322, 227 A.2d 163 (1967) (“Phillips ”) controls the Phillips, the Supreme Court held that

[w]here a lessor’s compensation is subject to the volume of production, the period of active production of oil or gas is the measure of the duration of the lease. Where lessor’s compensation is a definite and fixed amount unrelated to the volume of production, the duration of the lease is not measured by the length of time the mineral is actually extracted and marketed, but by the time during which the lease provides that the lessor shall receive the fixed rental....

[344]*344Phillips, 227 A.2d at 165. KSM argues that the agreement language found to be controlling in Phillips, ie., “should any well ... produce gas in paying quantities, and the gas therefrom be sold off the said premises” is indistinguishable from the language of its lease with Heasley, ie., “[w]hile the same be used off the premises.” Brief for Appellant at 10. KSM asserts that, because there is no difference between “sold off the premises” and “used off the premises[,]” Heasley’s compensation is a “definite and fixed amount.” Id. at 11. Because it paid Heasley a fixed rental, KSM contends that the Phillips case is controlling. Id. We disagree.

In reviewing a trial court’s grant of a motion for judgment on the pleadings, our scope of review is plenary. Katzin v. Cent. Appalachia Petroleum, 39 A.3d 807, 309 (Pa.Super.2012).

Our review of a trial court’s decision to grant ... judgment on the pleadings is limited to determining whether the trial court committed an error of law or whether there were facts presented which warranted a jury trial. In so reviewing, we look only to the pleadings and any documents properly attached thereto. Judgment on the pleadings is proper only where the pleadings evidence that there are no material facts in dispute such that a trial by jury would be unnecessary.

Id. (quoting Pennsylvania Financial Responsibility Assigned Claims Plan v. English, 541 Pa.

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Bluebook (online)
52 A.3d 341, 177 Oil & Gas Rep. 301, 2012 Pa. Super. 151, 2012 Pa. Super. LEXIS 1596, Counsel Stack Legal Research, https://law.counselstack.com/opinion/heasley-v-ksm-energy-inc-pasuperct-2012.