The Pennsylvania Superior Court recently held that an operator had the right to construct an 11-acre freshwater storage impoundment under the terms of its lease, regardless of whether it complied with a subsequent Surface Damage Release.  See Humberston v. Chevron U.S.A., Inc., Case No. 1270 WDA 2012 (July 12, 2013).  Quoting the trial court, the appellate court agreed that "[t]o produce the natural gas and maximize production from the Marcellus shale, Chevron must utilize hydraulic fracturing of the seam of shale.  This process requires the use of significant quantities of water.  Temporary impoundment of water on the surface of the leased premises is reasonably necessary for the hydrofracking process and, therefore, is incident to the grant [contained in the lease]."

Regarding the Surface Damage Release, the court stated:  "[I]t is a separate agreement that provided for payment to the Humberstons for damage to the initial drilling area.  The Release does not incorporate the Lease and therefore cannot limit in any way the use of the surface as contemplated in the Lease."

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