CRE Case Roundup

Pennsylvania

Dressler Family v. PennEnergy Resources

In Dressler Family v. PennEnergy Resources, 2022 PA Super 77 (2022), Pennsylvania's Superior Court held that a provision in an oil, gas and mineral lease that established the royalty due to the landowner to one-eighth of "gross proceeds received from the sale of gas at the prevailing price for gas sold at the well" did not allow the gas company to deduct post-production costs from the royalties owed to the landowner. Jacob and Charlotte Dressler hold title to certain real property situated in Lancaster and Connoquenessing townships, Butler County, Pennsylvania. In March 2007, they executed an oil and gas lease with William McIntire Coal, Oil and Gas. The terms of the lease permitted the lessor to drill wells on the Property and provided that the Dresslers would be paid a royalty of "an amount equal to one-eighth of the gross proceeds received from the sale of same at the prevailing price for gas sold at the well, for all native gas saved and marketed for the said premises, payable monthly."

As the terms "gross proceeds" and "sold at the well," were not defined in the lease, a disagreement arose between the Dresslers and PennEnergy (the successor in interest to William McIntire Coal, Oil and Gas) as to whether the lessor was permitted to deduct post-production costs from the royalties paid to the landowner. The Dresslers commenced an action in the Butler County Common Pleas Court seeking a declaratory judgment that the deduction of such costs was not permitted. Both parties filed motions for summary judgment, and the trial court entered summary judgment for PennEnergy, taking the position that the terms of the lease were unambiguous, and permitted the deduction of such costs.