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A Further Problem with Pennsylvania’s Recording of Surrender Documents from Oil and Natural Gas Lease Act

By Paul R. Yagelski, Esquire

I previously wrote two articles on Pennsylvania’s Recording of Surrender Documents from Oil and Natural Gas Lease Act. The Act allows a lessor to serve a notice of termination, expiration or cancellation of an oil and gas lease on a lessee if the lessee fails to timely provide a surrender document in recordable form, not more than 30 days after the termination, expiration or cancellation of the lessor’s oil and natural gas lease (“lease”). The first article is “Do Not Use Recording of Surrender Documents from Oil and Natural Gas Lease Act.”  The second article is “Additional Problems with Pennsylvania’s Recording of Surrender Documents from Oil and Natural Gas Lease Act.”

The first article dealt with a problem with the notice that is to be given by the lessor to the lessee of the termination, expiration or cancellation of the lease if the lessee does not timely provide a surrender document in recordable form to the lessor, not more than 30 days after the termination, expiration or cancellation of the lease.  The problem with the notice is that it must state that the lease will be terminated, will expire or will be cancelled according to its terms, including the date of termination, expiration or cancellation, i.e., some future date.  Why send a notice stating that the lease will be terminated, will expire or will be cancelled, according to its terms when the lease has already terminated, expired or been cancelled, according to its terms?

The second article dealt with two additional problems with the Act.  One is the date that the lessor sets in the notice for termination, expiration or cancellation of the lease. The other is the service of the notice itself.

In addition to the problems addressed in these articles, there is one other problem with the Act. Specifically, the Act does not indicate that the affidavit of termination, expiration or cancellation, which the Act allows the lessor to file when the lessee does not challenge the lessor’s notice, is conclusive as to the termination, expiration or cancellation of the lease.

As indicated, the Act allows a lessor to serve notice on the lessee if the lessee fails to provide a surrender document in recordable form, not more than 30 days after termination, expiration or cancellation of the lease. The Act also allows the lessee to challenge the notice if, after receiving the notice, the lessee disputes that the lease will be terminated, will expire or will be cancelled on the date stated in the notice.  In order to challenge the lessor’s notice, the lessee must, not more than 30 days after receiving the notice, serve a written challenge to the lessor, but what happens if the lessee does not serve a challenge to the lessor’s notice or serves a late challenge?  What is the effect, if any?

If the lessee does not serve a challenge to the lessor’s notice, the Act provides that:

(B) Effect of No Challenge. – A lessor who has served a notice under subsection (a) and fails to receive a timely challenge from the lessee under subsection (c) may record an affidavit of termination, expiration or cancellation of oil or natural gas lease in the office of the recorder of deeds in the county in which the land is situated.

58 P.S. §904(d).  Pursuant to this subsection of the Act, the effect of no challenge is to allow the lessor to file an affidavit of termination, expiration or cancellation of the lease in the recorder’s office for the county in which the land is situated, but what is effect of the lessor’s affidavit. This is not stated. Is the lessor’s affidavit a conclusive determination of the termination, expiration or cancellation of the lease?  The Act does not state this. Neither does the Act address the effect of a late challenge by the lessee.

One would think that if the lessee fails to challenge the lessor’s notice or serves a late challenge and the lessor has filed an affidavit of termination, expiration or cancellation of the lease, the lessor’s affidavit would be conclusive evidence to the world that the lessor’s lease has been terminated, has expired or been cancelled, but this is not stated in the Act.  As such, the Act has a big ambiguity.  With the filing of the lessor’s affidavit, is the lease done or not?  Maybe the answer to this question can be found in the legislative history of the Act; however, a lessor should not have to go to the Act’s legislative history to get the answer.  Maybe a court will determine that the lessor’s filed affidavit is conclusive as to the termination, expiration or cancellation of the lease; however, a lessor should not have to wonder whether his/her affidavit is conclusive as to the termination, expiration or cancellation of the lease.  The lessor should not have to obtain a court decision if the lessee fails to serve a challenge or serves an untimely challenge to the Lessor’s notice.  The Act should simply state that the filing of the lessor’s affidavit is conclusive evidence that the lease has terminated, expired or been cancelled.

The long and short of it is that the Act is very badly written. It should be amended.  It would appear that the purpose of the Oil and Natural Gas Lease Act is to clear the title to the lessor’s interest in his/her oil and gas, but does the Act accomplish this?

There are so many problems with the Act that the Act should be amended. If you are experiencing issues with your oil and gas lease, contact us online or call (412) 338-1124.