One of the issues most frequently encountered by both gas companies and landowners is whether a lease automatically extends beyond its initial term or expires at the end of it. As five years—the typical initial term for a gas lease—have now passed since the initial push by gas companies to get land signed to leases, the initial terms for many leases have ended or are about to end. Both gas companies and landowners have a great deal at stake.
If gas companies lose leases it would force them to either renegotiate, likely on less favorable terms, or lose the land’s gas development potential. Landowners will either have the opportunity to negotiate a new more favorable lease or be bound to their current one throughout the entire gas development process. Disputes regarding this issue are reaching the courts and are likely to do so in large numbers. Although some relevant lease provisions have been interpreted by courts, no Pennsylvania court has yet directly decided the lease extension issue in a Marcellus Shale context.
Why Extension v. Expiration Is Important
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