Eleven reasons why a judge was wrong to imply a lease covenant to pool

Here Are the Eleven Reasons That The Tyler County Circuit Court Judge’s Ruling Is Wrong, And Why No Other Circuit Court Judge nor the Supreme Court Should Agree With the Ruling.

Read about the ruling here.

First, by the time the Circuit Court judge ruled on the issue there was no party on the other side of the issue to argue against it. The driller agreed in the lawsuit to pay something like current market payments for pooling amendments to anyone who appeared or who was represented by a guardian ad litem in the case — so the ruling was only against parties that did not show up to argue the other side.

Second, because there was no party left to argue against the ruling, there was no party who could have, and certainly would have, appealed the ruling to the West Virginia Supreme Court where it probably would have been overturned.

Third, the interests of the surface owner were affected because the ruling removed the need for the driller to use an alternative legal procedure which could have led to the surface owner owning an interest in the minerals and receiving the royalties and signing bonus! However, the surface owner was not included in the suit and did not have the opportunity to argue against or appeal the ruling.  So a necessary party to the suit was missing.

Fourth, the legal conclusions contradict all the cases on the same point in other states, and those decisions should have influenced the judge to rule differently.

Fifth, it is based on a “cross-conveyance” property law theory of pooling, and the West Virginia Supreme Court has adopted the “contract” law theory of pooling.

Sixth, some of the fact-finding is erroneous, particularly as to current pooling amendment provisions.

Seventh, as written, the ruling also states that there is an implied covenant, in some situations, to pay royalties for gas produced from a well bore in the mineral tract in question to owners of other mineral tracts in the unit whose gas is not being produced — which is unheard of.

Eighth, as written, the ruling also states that there is an implied covenant, in some situations, to allow a lease to be held by production from wells drilled into other tracts in a unit while only paying a fraction of the royalty that would be due if gas was being produced from all the tracts in the unit or from just the tract in question — which is also unheard of.

Ninth, oil and gas leases offered by the companies are always drafted by the driller’s lawyer or their trade organizations’ lawyers and not by the mineral owner or owners or their lawyers.  Long standing law in every jurisdiction in the country holds that contracts, especially oil and gas leases, are interpreted against the drafter, in this case the drillers.

Tenth, where the courts have implied covenant in leases, like the covenant to fully develop, it is because the leases are drafted by the drillers and presented by them to the landowners who are infinitely less sophisticated in oil and gas operations and law, and it is because the leases are not subject to consumer protection laws.  So, courts have historically adopted “implied covenants” to the leases in order to fill in gaps in the language of lease contracts to protect mineral owners and not to protect the drillers. This would be the first implied covenant anywhere that benefits the driller by imposing outdated economic terms for royalty amounts that are made possible by new drilling techniques etc.

Eleventh, and finally, the consequences are so profound that only an appellate decision by a multi-judge panel hearing from all of the interested parties should be given any weight.

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