Pennsylvania’s highest court recently refused to expand the equitable doctrine of abandonment to terminate an oil and gas lease.
In SLT Holdings, LLC v. Mitch-Well Energy, Inc., 249 A.3d 888 (Pa. 2021), lessor filed a complaint in equity against lessees claiming lessees abandoned the lease underlying two parcels and sought an injunction barring lessees from entering the parcels, a declaration that lessees had no interest in the parcels, and damages for conversion.
In reversing the Superior Court, the Supreme Court observed that the landowners had available to them a full and adequate remedy at law from the operators’ alleged breach of the lease through general contract principles. Thus, lessors could not seek relief under the equitable doctrine of abandonment even in light of lessees’ brief period of drilling followed by years of inactivity, failure to make required payments in lieu of royalties during the period of non-production, and removal of equipment. The Court further observed that the leases provided for notice and opportunity to cure if a breach of the terms of the lease had occurred, and further established that the exclusive remedy for an uncured breach was termination of the lease. Therefore, the lessors were barred from seeking equitable relief under abandonment.
Please contact your Metz Lewis relationship attorney or a member of our Oil and Gas team if you have any questions or wish to discuss.