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Additional Problems with Pennsylvania’s Recording of Surrender Documents from Oil and Natural Gas Lease Act

By Paul R. Yagelski, Esquire

I previously wrote an article entitled, “Do Not Use the Recording of Surrender Documents from Oil and Natural Gas Lease Act,” in which I indicated that Pennsylvania’s Act should not be used when a lessor is dealing with notice to the lessee of the termination, expiration or cancellation of an oil and gas lease. The Act allows a lessor to serve notice of the termination, expiration or cancellation of an oil and gas lease (“Notice”) 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 lease. This is well and good. The problem, however, is that the Notice must state that the lease will be terminated, expired or cancelled according to its terms, including the date of the termination, expiration or cancellation, i.e., some future date.  Why send a notice stating that the lease will be terminated, expired or cancelled according to its terms when it has already been terminated, expired or cancelled according to its terms?! This is the problem that was addressed in the prior article, but there are two additional problems. One is the date that the lessor sets in the Notice for the termination, expiration or cancellation of the lease. The other is the mode of service of the Notice.

The Notice must include the date of the termination, expiration or cancellation of the lease, but the Act does not state what that date is.  As such, it would appear that the lessor can set whatever date that the lessor wants in the Notice.  The lessor, however, will not be able to file an affidavit of termination, expiration or cancellation of the lease with the county recorder’s office, as provided for in the Act, until 30 days have passed from the date that the lessee receives the Notice and there is no challenge to the Notice:

(c) Challenge to notice. – If, after receiving a notice of termination, expiration or cancellation under subsection (b), the lessee disputes that the oil or natural gas lease will be terminated, expired or cancelled on the date stated in the notice, the lessee must, not more than 30 days after receipt of the notice, deliver a written challenge to the lessor.

58 P.S. § 904(c).

In addition, the Act provides that the lessor can file an affidavit of termination, expiration or cancellation of the lease (“Affidavit”) if none is filed:

(d) 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 an oil or natural gas lease in the office of the recorder of deeds for the county in which the land is situated.

58 P.S. § 904(d).

The effect of these subparagraphs is that if the lessor places a date in the Notice as to when the lease will be terminated, expired or cancelled, and such date is before the lessee’s 30-day period to file a challenge has expired, the lessor’s termination, expiration or cancellation date is not the date on which a lessor can file the Affidavit in the office of the recorder of deeds for the county in which the land is situated.  This can only be done on the 31st day after the lessee’s receipt of the Notice and if there is no timely challenge.  Accordingly, if the lessor believes that he can file an Affidavit on a date that will likely be prior to 30 days from the lessee’s receipt of the Notice, the lessor is wrong.  Whatever date that the lessor places on the Notice, if it is less than 30 days after the date that the lessee receives the Notice, the lessor will have to wait until the 30-day period runs and there is no timely challenge before the lessor can file the Affidavit. On the other hand, if the lessor sets a date of termination, expiration or cancellation, which the lessor estimates will likely occur, and does occur 30 days after the lessee’s receipt of the Notice and there is no challenge, the lessor should not file the Affidavit until the date of termination, expiration or cancellation of the lease that is set forth in the Notice. Even though the lessee did not file a challenge, the lessor set a date in excess of the 30-day challenge period. As such, filing an Affidavit prior to the termination, expiration or cancellation of the lease as set forth in the notice would be a false Affidavit.

The Act also provides that service of the Notice can be made by certified mail. This is a poor choice. Next day delivery by a recognized courier would have been better. By using next day delivery with signature required, the lessor would have certainty as to when the Notice will be received by the lessee. With certified mail, there is no certainty that the Notice will get there on a certain date or even on an approximate date. When the Notice is received by the Grantee, the green card that is returned may not have the date of delivery and/or it may not have the required signature. Certified mail was a poor choice.

In short, when a lessor is dealing with the form of notice that should be given to a lessee when the lessor believes that the lessor’s oil and gas lease has terminated, expired or cancelled, use of Pennsylvania’s Recording of Surrender Documents from Oil and Natural Gas Lease Act is problematic (the name of the Act itself is even problematic).

If you have an oil and gas issue, contact us online or call (412) 338-1124.