The Oil and Gas Addendum

Before signing oil and gas leases, landowners should pay close attention to lease provisions asking for warranties and representations about prior oil and gas development on the land. These provisions are often buried in a lease and frequently get overlooked in negotiations over signing bonuses and royalties. But, these lease clauses, frequently asking landowners to agree that there has not been prior oil and gas development on the property, should not be disregarded. Many times, landowners have no idea about prior oil and gas development on their property and making representations about those types of issues can cause problems.

On July 18, 2022, the Pittsburgh Post-Gazette ran an article entitled “A shale well met an abandoned well a mile away. How did it happen?” According to the article, on June 19, 2022, a Greene County, Pennsylvania landowner “noticed a geyser shoot up 15 feet above the ground on his property” and, after the geyser died down, the landowner “could see water rushing underground through a sinkhole that had formed around an old, abandoned gas well.” Whatever the root cause of this dramatic scene, it is useful to identify a broader issue, which is that the long-history of oil, gas and mineral extraction in Pennsylvania is not something buried in the past.

Pennsylvania is littered with hundreds of thousands of orphaned and abandoned oil and gas wells. Whether this Greene County episode was caused by the interplay between hydraulic fracturing of a new well and the presence of an old abandoned well is unclear. But, as the Pittsburgh Post-Gazette article notes, it is not unheard for stimulation and production activities associated with deep wells to impact conventional wells in the vicinity. If an oil and gas owner makes representations in a lease that a particular property does not have any wells on it, then it is possible that a driller could argue that the oil and gas owner is liable for damage to a property like the geyser and sinkhole described in the Post-Gazette story. A driller could argue that its due diligence for potential old wells on a property relied on the landowner's representation that there were no wells on the property and that representation turned out to be untrue.

Whether or not gas companies would make such an argument in the event of damage to a property caused by communication between old and new wells is a question that is not at-hand. But, for landowners, there is no need to even deal with that headache. Oil and gas owners should pay close attention to lease provisions that ask for representations about the existence and nature of prior oil and gas development on a piece of land and consult with experienced oil and gas counsel to address those types of provisions in a way that minimizes or eliminates representations by oil and gas owners that could pose liability concerns down the road. If you have been offered a lease, contact oil and gas attorney Brendan A. O'Donnell at 412-288-2226 or odonnellba@hh-law.com  to talk through these issues and all other leasing concerns.