The Pennsylvania Mechanics' Lien Law, 49 P.S. Section 1101 et seq. (the Lien Law), provides contractors a powerful legal hammer for the recovery of payment owed for work performed on a construction project; they can impose a lien against the property on which their work was performed, clouding the owner's title, until payment is received. In December 2016, as a result of last year's Act 142 (the act) amendments to the Lien Law, the Department of General Services launched the online State Construction Notices Directory (the directory). Prior to the creation of the directory, there was no streamlined system for owners and general contractors to track subcontractors and suppliers on a project site. Now, the directory provides greater certainty with respect to who may have lien rights, and helps owners and general contractors track work performed by subcontractors, sub-subcontractors and suppliers with whom they otherwise do not have a contractual relationship.

In light of the updates to the Lien Law, owners, general contractors, and subcontractors involved with the ever-increasing energy infrastructure projects within the commonwealth would be prudent to evaluate their business practices to ensure compliance with—and to take full advantage of their rights under–the amended Lien Law.

Applicability to Energy Infrastructure Construction Contracts

Although the case law in Pennsylvania is not completely settled, it appears from the text of the Lien Law, and the case law developed from it, that many well pad and pipeline construction projects are subject to the Lien Law. For example, a Pennsylvania appellate court held that a “well for the production of gas, oil or other volatile or mineral substance” falls within the definition of a “structure or other improvement” governed by the Lien Law, so long as the well involves “the erection or construction of a permanent improvement.” See Yellow Run Coal v. Yellow Run Energy, 420 A.2d 690, 692 (Pa. Super. Ct. 1980); compare with Stingray Pressure Pumping v. EQT Products, No. CV 16-279, (W.D. Pa. Dec. 21, 2016) (the mere furnishing of “labor, material, machinery and supplies … in connection with drilling and/or operation of the well” is insufficient to plead services “related to the 'construction, erection, alteration or repair' of a building or improvement under the Lien Law).

Additionally, lien rights can attach to subsequent “substantial additions” to an existing improvement (i.e., a previously constructed well pad or pipeline). Another Pennsylvania court held the addition of plastics-making machinery to a pre-existing plant was a “substantial” enough addition for the associated work to be covered by the Lien Law, as in Wendt & Sons v. New Hedstrom, 858 A.2d 631, 635 (Pa. Super. Ct. 2004). This suggests that activities like the installation of additional surface facilities or the erection of infrastructure necessary to tie a well into a pipeline are subject to the Lien Law.

Overview of the Notices Required by the Act

The amendments to the Lien Law created a structured notice procedure for owners and contractors on “searchable projects” (projects consisting of the construction, alteration or repair of an improvement costing at least $1.5 million). Specifically, the act permits four new types of filings within the Directory: notice of commencement; notice of furnishing; notice of completion; and notice of nonpayment.