Roughly 15 years ago, many Pennsylvania landowners entered into oil and gas leases in the expectation of receiving royalties for the extraction of shale gas and oil underlying their properties. Today, as natural gas prices remain low, and fossil fuels generally—including methane leaks specifically—encounter policy and regulatory resistance because of attention to climate change, lessees may not move as rapidly to develop marginal leaseholds. Indeed, some may not continue exploration or production at all, raising the question of when a lease ends.  Last month, the Pennsylvania Supreme Court offered some guidance in SLT Holdings v. Mitch-Well Energy, No. 6 WAP 2020 (Pa. Apr. 29, 2021).

Oil and gas leases were not new when the Marcellus Shale boom hit Pennsylvania. As is well-known, Pennsylvania was the original oil and gas state; Edwin Drake dug his oil well near Titusville in 1859. The oil and gas estate has been severed and conveyed—in fee or by lease—at least once for many parcels in the commonwealth. So, the question of when a lease terminates is hardly novel, but it was controversial enough to warrant litigation through the Supreme Court.