On July 12, 2013, the Superior Court of Pennsylvania (“Court”) held that an eleven acre freshwater-storage impoundment was a reasonably necessary or convenient use of the surface estate to develop the underlying natural gas from the Marcellus shale.
On September 16, 2011, Paul F. Humberston, Carol J. Humberston, James F. Humberston and Tennille L. Humberston (collectively, “Humberstons”) filed an action to quiet title and in trespass against Chevron U.S.A., Inc. (“Chevron”) and Keystone Vacuum, Inc. (“Keystone”) regarding a 133 acre oil and gas lease executed between Humberstons and Chevron (as successor in interest to the original lessee) on April 6, 2006 (the “Lease”). Chevron contracted with Keystone for the construction of a freshwater-storage impoundment that would provide for the storage of fresh water to be used to develop the underlying natural gas. The Humberstons alleged, among other things, that the Lease does not grant Chevron the right to construct the impoundment. In response to the Humberstons’ complaint, Chevron and Keystone filed preliminary objections in the nature of a demurrer contending that the Lease provides for “the right to use the surface area to construct an impoundment in connection with the natural gas development of the Humberstons’ property.” The trial court sustained the preliminary objections and dismissed the Humberstons’ complaint. In Paul Humberston et al. v. Chevron U.S.A., Inc., (1270 WDA 2012), the Court affirmed the trial court’s dismissal of the case.
The Court agreed with the trial court’s determination that the language of the Lease and Pennsylvania law allows Chevron the exclusive right to develop the natural gas below the Lease by any means reasonably necessary. The Court relied upon the Supreme Court case Belden and Blake Corporation v. Department of Conservation and Natural Resources, 600 Pa. 599, 969 A.2d 528 (2009), which determined that the right to the subsurface estate includes the right to enter onto the surface and make reasonable use of the surface as may be necessary to access the underlying estate. The Court noted that Chevron must utilize hydraulic fracturing to produce the natural gas underlying the Lease and maximize production from the Marcellus shale, which requires significant quantities of water. Accordingly, the Court determined that the water-storage impoundment on the surface of the Lease is “reasonably necessary for the hydrofracking process and, therefore, incident to the grant” making the Humberstons’ right to the portion of the surface occupied by the impoundment subordinate to Chevron’s right. Because the Humberstons did not allege that the impoundment was unnecessary, the Court did not address the standard for what constitutes reasonable and necessary use of the surface estate.