Statoil USA Onshore Properties Inc. v. Pine Resources, LLC

675 F. App'x 285
CourtCourt of Appeals for the Fourth Circuit
DecidedJanuary 18, 2017
Docket15-2099
StatusUnpublished
Cited by1 cases

This text of 675 F. App'x 285 (Statoil USA Onshore Properties Inc. v. Pine Resources, LLC) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fourth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Statoil USA Onshore Properties Inc. v. Pine Resources, LLC, 675 F. App'x 285 (4th Cir. 2017).

Opinion

Unpublished opinions are not binding precedent in this circuit.

PER CURIAM:

In 2008, Appellant Pine Resources, LLC (“Pine”), sold certain mineral rights to non-party PetroEdge Energy, LLC (“Pe-troEdge”), pursuant to the terms of a purchase and sale agreement (the “Pine PSA”). In 2012, PetroEdge sold its mineral rights to Appellee Statoil USA Onshore Properties, Inc. (“Statoil”), pursuant to the terms of a second purchase and sale agreement (the “Statoil PSA”).

In 2014, Statoil sought a declaratory judgment that it was not in breach of the Pine PSA, and had no obligations under that agreement to Pine other than to pay certain royalty interests. Pine filed a breach of contract counterclaim, seeking damages for Statoil’s alleged nonperformance of spudding obligations outlined in Section 5.7(b) of the Pine PSA. The parties filed cross-motions for summary judgment.

The district court granted summary judgment to Statoil, and denied Pine’s motion for summary judgment on its counterclaim. The court held that, under the unambiguous language of the Pine PSÁ, the agreement’s spudding obligations extended only to the “Purchaser,” which the court read to mean PetroEdge alone.

This holding, however, renders effectively meaningless a successors and assigns provision in the Pine PSA. It is our duty to read a contract as a whole, giving meaning to every provision whenever possible. Because the district court failed to properly do so, we vacate its judgment and remand for further proceedings.

*287 I.

A.

In 2001, Pine acquired mineral interests in a 565-acre tract of land in Barbour County, West Virginia (the “Property”)- In 2008, at a price of $479,876, and pursuant to the terms of the Pine PSA, non-party PetroEdge purchased from Pine the Mar-cellus Mineral Rights on the Property. 1

The Pine PSA—-drafted by PetroEdge— contains the following relevant provisions:

• Introduction: The Pine PSA states in its introductory paragraph that it is an agreement “by and between Pine Resources Inc., a West Virginia corporation (‘Seller’), and PetroEdge Energy LLC, a Delaware limited liability company (‘Purchaser’).” J,A. 49. The Pine PSA further provides that “Seller and Purchaser are sometimes referred to herein together as the ‘Parties’ and individually as a ‘Party’.” Id.
• Article 5: Article 5 outlines the covenants of the parties, and centers on their mineral production plans. Section 5.5 calls for quarterly meetings by the “Parties” to discuss drilling plans and operations. J.A. 56. Section 5.6 enjoins cooperation between the “Parties” in the event of parallel drilling or operations. Id. Section 5.7(a) requires “Purchaser [to] apply for a meter tap on a gas transmission line” within 60 days of executing the Pine PSA. J.A. 56-57. Section 5.7(b) provides that the “Purchaser shall spud not less than one (1) well on the Contract Area” within a year of the installation of the meter tap; it further provides that the “Purchaser” shall have spudded at least three wells within five years of the meter tap’s installation, J.A. 57, 2 Section 5.8 discusses the scenario where a party abandons a well and the non-abandoning party gets the right to take over its operation. Id. Section 5.9(a) discusses Pine’s 18% retained overriding royalty interest on hydrocarbons produced from the Marcellus Mineral Rights. J.A. 57-58. Section 5.9(b) establishes an arbitration procedure for disputes between the “Seller” and the “Purchaser” over the occurrence of a “Production Termination Event.” J.A. 58.
• Article 7: Article 7 is the Pine PSA’s “Indemnification; Limitations” section. J.A. 60-62. As relevant here, Section 7.2(a), provides as follows:
[1] The representations and warranties of the Parties in Articles 3 (except Section 3.7) and 4 and the covenants and agreements of the Parties in Article 6 [sic] (except Sections 5.4 through 5.9) shall survive the Execution Date for a period of two (2) years. [2] The representations, warranties, covenants and agreements of Seller in Sections 3.7 and 5.4 shall survive until the close of business 30 days after the expiration of the applicable statutes of limitation (including any extensions thereof) provided that any proceeding or indemnification claim pending on the date of any such termination shall survive until the final resolution thereof. [3] The remainder of this Agreement shall survive the Execution Date so long as Purchaser holds any interest in the Mineral Rights. Representations, warranties, covenants and *288 agreements shall be of no further force and effect after the date of their expiration, provided that there shall be no termination of any bona fide claim asserted pursuant to this Agreement with respect to such a representation, warranty, covenant or agreement prior to its expiration date.
J.A. 61.
• Article 8: Article 8 contains the remaining miscellaneous provisions. Section 8.5 instructs that the Pine PSA is to be construed in accordance with West Virginia law. J.A. 63. Section 8.8 contains a successors and assigns provision, which in relevant part provides that “this Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and assigns.” Id.
• Deed: Pine’s deed to PetroEdge (the “Deed”) granting the latter the Mar-cellus Mineral Rights is an exhibit attached to the Pine PSA. (All exhibits to the Pina PSA were expressly incorporated under Section 8.9, the integration clause of the Pine PSA. J.A.' 63.) Article III of the Deed provides that, “Notwithstanding anything to the contrary,” Pine reserves an 18% retained overriding royalty interest on hydrocarbons produced from the Marcellus Mineral Rights. J.A. 68. Article III adds .that if there is a dispute regarding the occurrence of “Production Termination Events,” it shall be settled in accordance with Section 5.9(b) of the Pine PSA. Id.

B.

By written assignment in 2012, Pe-troEdge sold its interest in the Marcellus Mineral Rights to Statoil. That assignment agreement is subject to and incorporates the terms and conditions of a purchase and sale agreement—the Statoil PSA—dated October 12, 2012, between Statoil and Pe-troEdge.

Section 10.1(a) of the Statoil PSA provides that Statoil shall assume responsibility for the “performance of all express and implied obligations” arising from “instruments in the chain of title to the Assets, the Leases, the Contracts and all other orders, contracts and agreements to which the Assets are subject, including the payment of royalties and overriding royalties[.]” J.A. 450. The Statoil PSA lists the Pine PSA as a “Contract[ ] included in the Assets” that were sold by the Statoil PSA. J.A. 447, 453. The Statoil PSA further acknowledges that the obligation to drill “at least two (2)” wells (in addition to the Bumgardner 5-2H well) is an unfulfilled drilling obligation dictated by the Pine PSA. J.A. 449, 451.

By letter dated December 19, 2012—one day after the transaction contemplated by the Statoil PSA closed—PetroEdge notified Pine of its assignment to Statoil.

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Bluebook (online)
675 F. App'x 285, Counsel Stack Legal Research, https://law.counselstack.com/opinion/statoil-usa-onshore-properties-inc-v-pine-resources-llc-ca4-2017.