Table of ContentsTable of Contents Chapter A: Pennsylvania 2012 Oil and Gas Law Litigation...

Table of Contents

Chapter A:

Pennsylvania 2012 Oil and Gas Law Litigation Update ............................................. A-1

Joel R. Burcat, Esquire

Andrew T. Bockis, Esquire

Richard A. Guerra, Jr.

I. Litigation Update ............................................................................................... A-5

A. Oil and Gas Leases ...................................................................................... A-5

1. General Interpretation of Oil and Gas Instruments ........................... A-5

2. Minimum Royalty Provision Litigation (Royalty Clause) ................... A-5

3. Preferential Rights Purchase Provisions/Rule against Perpetuities .. A-6

4. Application of Habendum Clause ........................................................ A-6

5. Arbitration Clause ................................................................................ A-9

6. Lease Provision Permitting Conversion of Leasehold

from Exploration and Production to Gas Storage ............................. A-11

7. Delay Rental Clause ........................................................................... A-11

8. Equitable Extension of Oil and Gas Lease ........................................ A-11

9. Intention of the Parties: “Oil and Gas” vs. “Minerals” ...................... A-11

10. Term of Lease ..................................................................................... A-11

B. Breach of Contract ..................................................................................... A-13

1. Equitable Accounting ......................................................................... A-13

2. Strict Adherence to Terms of Lease ................................................... A-13

3. Breach of Implied Covenant ............................................................... A-14

C. Rights of Oil and Gas Owners and Operators on

Lands Owned or Claimed by Third Parties .............................................. A-16

1. Claims by/against the Commonwealth .............................................. A-16

2. Claims by/against the Federal Government ...................................... A-16

3. Land Trusts ........................................................................................ A-20

D. Administrative Law (EHB) Cases ............................................................. A-21

E. Rights of Pipeline Companies ................................................................... A-21

F. Damages Actions Arising from Gas Drilling Activities ............................ A-21

1. Jurisdiction ......................................................................................... A-21

2. Causes of Action ................................................................................. A-22

3. Discovery ............................................................................................ A-24

4. Settlement .......................................................................................... A-27

G. Right to the Natural Gas or Oil ................................................................ A-27

1. Butler v. Charles Powers Estate, 2011 ............................................... A-27

2. Butler v. Charles Powers Estate, 2012 ............................................... A-30

H. Miscellanea ................................................................................................ A-31

1. Recording of Oil and Gas Title Documents ........................................ A-31

I. Title Insurance .......................................................................................... A-31

1. Validity of Claim ................................................................................ A-31

II. Municipal Law Update ..................................................................................... A-32

A. Interpretation of Ordinance ...................................................................... A-32

1. In re: Twp. Of Bradford ..................................................................... A-32

B. Zoning and Oil & Gas Act Preemption ...................................................... A-33

1. Hoffman Mining Co. v. Zoning Hearing Bd. Of Adams Township ... A-33

C. Act 13 Preemption Cases ........................................................................... A-34

1. Robinson Township v. Commonwealth .............................................. A-34

Table of Contents

Chapter B:

PowerPoint: Estates, Trusts, and Conveyancing ........................................................ B-1

Lester L. Greevy, Jr., Esquire and John A. Shoemaker, Esquire

I. Trust & Estate Issues ......................................................................................... B-5

A. Who Gets What? .......................................................................................... B-6

B. An Illustration ............................................................................................. B-6

C. New Inheritance Tax Rules ......................................................................... B-6

1. Family Farm Exemption ...................................................................... B-7

2. Valuing Mineral Interests .................................................................... B-8

D. Executor’s Role ............................................................................................ B-8

1. Leasing Estates .................................................................................... B-9

2. Leasing in Trusts ................................................................................. B-9

E. Principal & Income Act ............................................................................... B-9

F. Clean & Green ........................................................................................... B-10

G. Realty Transfer Tax................................................................................... B-10

H. Inheritance Tax ......................................................................................... B-11

1. Inheritance Tax Liens ........................................................................ B-11

II. Construing & Interpreting Deeds .................................................................... B-11

A. 21 PA.C.S.A. § 3 ......................................................................................... B-12

B. Creating Exceptions and Reservations ..................................................... B-12

1. The Dunham Rule .............................................................................. B-12

a. Dunham’s Progeny ....................................................................... B-13

b. Dunham Policy ............................................................................. B-14

c. Butler v. Powers (2011) ................................................................. B-14

d. U.S. Steel v. Hoge ......................................................................... B-15

e. Butler v. Powers (2012) ................................................................. B-15

C. Mineral-Royalty Distinction ...................................................................... B-16

1. PA Caselaw ......................................................................................... B-16

2. The Difference .................................................................................... B-17

3. Mineral Interest ................................................................................. B-17

4. Royalty Interest .................................................................................. B-17

5. Interpretation ..................................................................................... B-18

D. Overconveyances ....................................................................................... B-18

1. An Illustration .................................................................................... B-18

III. Basic Leasing Issues ......................................................................................... B-19

A. A Lease? ..................................................................................................... B-19

B. Lease as a Conveyance .............................................................................. B-19

C. Term of the Lease ...................................................................................... B-20

1. Primary Term ..................................................................................... B-20

2. Secondary Term .................................................................................. B-20

D. Commencement of Operations .................................................................. B-20

E. Legal Definition ......................................................................................... B-21

F. Acreage Hypo ............................................................................................. B-21

1. Adjusting Acreage .............................................................................. B-21

2. Effect ................................................................................................... B-22

IV. Curative Toolkit ................................................................................................ B-22

A. Actions to Quiet Title ................................................................................ B-22

1. Service by Publication ........................................................................ B-23

a. Good Faith .................................................................................... B-23

b. Bad Faith? .................................................................................... B-24

c. Procedure ...................................................................................... B-24

2. Quitclaim Deeds ................................................................................. B-25

B. Protective Leases ....................................................................................... B-26

C. Affidavits ................................................................................................... B-26

D. Curative Statutes ...................................................................................... B-27

E. Dormant Oil & Gas Act ............................................................................. B-27

1. Purpose ............................................................................................... B-28

2. Who May File ..................................................................................... B-28

3. Procedure ............................................................................................ B-28

4. Winners & Losers ............................................................................... B-28

5. A Better Way? .................................................................................... B-29

F. Other Cures ............................................................................................... B-29

1. Waiver ................................................................................................ B-29

2. Continued Records Search ................................................................. B-29

Appendix A: New Tax Rules Benefit Royalty Owners ..................................... B-31

John A. Shoemaker, Esquire

Table of Contents

Chapter C:

Practical Leasing Concerns: Creating a Constructive Paradigm

for Negotiations between Landowners and Industry................................................ C-1

Michael P. Joy, Esquire

Robert M. Jochen, Esquire

Stephen W. Saunders, Esquire

I. Introduction ........................................................................................................ C-5

II. Background ......................................................................................................... C-5

III. Different Perspectives ........................................................................................ C-6

A. The Industry ................................................................................................ C-7

B. The Landowners .......................................................................................... C-8

IV. Shared Perspectives ............................................................................................ C-9

V. The Hypothetical .............................................................................................. C-10

A. Continuous Operations .............................................................................. C-10

Table of Contents

Chapter D

Estate Planning for 706 and Non-706 Clients ............................................................... D-1

Section One:

Estate Planning for Larger Estates ................................................................................ D-5

Robert H. Louis, Esquire

I. The Federal Estate Tax ...................................................................................... D-7

A. Imposed on the Value of Assets Owned on the Date of Death ................... D-7

B. Exemption from Tax .................................................................................... D-7

II. The Federal Gift Tax .......................................................................................... D-8

A. A Companion to the Federal Estate Tax ..................................................... D-8

B. Rates and Exemptions ................................................................................. D-8

C. Additional Limits on Annual Gifts .............................................................. D-9

III. The Federal Generation Skipping Tax ............................................................... D-9

A. In Addition to Gift and Estate Tax ............................................................. D-9

B. The Effect ..................................................................................................... D-9

C. Rate and Exemptions .................................................................................. D-9

D. Complex Provisions about When a Skip Takes Place ................................. D-9

E. Necessity for Careful Planning to Use GST Exemption ............................. D-9

IV. Techniques for Reducing Federal Estate Tax Liability ................................... D-10

A. Outright Gifts ............................................................................................ D-10

B. Gifts in Trust ............................................................................................. D-10

C. Use of Family Limited Partnerships ......................................................... D-10

D. Limited Liability Companies ..................................................................... D-11

E. Subchapter S Corporations ....................................................................... D-11

F. Sale of Interests to Grantor Trust ............................................................. D-12

G. Grantor Retained Annuity Trust (GRAT) ................................................. D-13

V. Other Techniques to Reduce Estate Value (or Increase Value Remaining) .... D-14

A. Qualified Personal Residence Trust .......................................................... D-14

B. Intra-family Loans ..................................................................................... D-14

C. Life Insurance Trusts ................................................................................ D-15

D. Charitable Giving ...................................................................................... D-15

VI. Valuation Issues for Oil and Gas Interests ...................................................... D-16

A. For Estate, Gift and Generation Skipping Taxes ..................................... D-16

D-3

B. As a Starting Point for Planning ............................................................... D-16

C. Ownership of Property Rights Involving Oil and Gas .............................. D-16

D. Many Writers on the Subject .................................................................... D-16

E. Professor Baen’s Statement on Valuation Techniques

for Mineral Estates and Assessment ........................................................ D-16

Section Two:

Estate Planning for Estates Not Subject to Federal Estate Tax............................. D-19

Kathryn H. Crary, Esquire and Robert H. Louis, Esquire

I. Basic Concepts .................................................................................................. D-21

A. Purpose a Will and Formalities ................................................................. D-21

B. Will Substitutes ......................................................................................... D-21

C. What if There Is No Will – The Rules of Interstate Succession ............... D-22

II. Probate of Wills in Pennsylvania ..................................................................... D-22

A. At Office of Register of Wills ..................................................................... D-22

B. Ease of Probate in PA ................................................................................ D-22

III. Will Challenges ................................................................................................. D-22

A. Basis of Undue Influence or Lack of Testamentary Capacity .................. D-22

B. Importance of Planning and Execution..................................................... D-22

IV. Uses of Trusts in Estate Planning ................................................................... D-22

A. Purpose of Trusts When there is No Federal Estate Tax ......................... D-22

B. Who Will Be the Trustee ........................................................................... D-22

V. Retirement Plan Concepts ................................................................................ D-22

A. Detailed Rule in Internal Revenue Code on Distribution after Death..... D-22

B. Who Should be the Beneficiaries? ............................................................. D-23

VI. Use of Life Insurance ........................................................................................ D-23

A. Used to Care for Survivor or to Leave a Legacy ....................................... D-23

B. Can Provide Liquidity ............................................................................... D-23

VII. Other Documents Needed for Estate Planning ................................................ D-23

A. Power of Attorney ...................................................................................... D-23

B. Healthcare Directive or Living Will .......................................................... D-23

C. Separate Ownership Entity for Marcellus Shale Land ............................ D-23

VIII. Pennsylvania – A Haven for Retirement ......................................................... D-23

A. Pennsylvania Imposes Inheritance Taxes ................................................ D-23

D-4

Table of Contents

Chapter E:

Severed Oil and Gas Estates and Surface Rights in Pennsylvania ......................... E-1


I. Estates in Property, Severance and Means of Conveyance ............................... E-5

A. Real Property ............................................................................................... E-5

1. Pennsylvania Recognizes Three Distinct Estates in Land .................. E-5

2. Different Owners May Hold Title to the Separate

Estates in the Same Property .............................................................. E-5

3. Rule Permitting Severance of Oil and Gas .......................................... E-6

4. Estate Owner Can Convey a Fee, a License or Some Other

Interest Depending on the Wording of the Grant ............................... E-6

B. Method of Transfer and Resulting Relationship......................................... E-6

II. Characterization of Oil and Gas ......................................................................... E-7

A. The Evolving and Uncertain Status of Natural Gas .................................. E-7

B. Ownership of Oil and Gas ........................................................................... E-9

III. Concurrent Estates and Development of Oil and Gas Interests ....................... E-9

A. Joint Tenants ............................................................................................... E-9

B. Tenants by the Entireties .......................................................................... E-10

C. Tenants in Common .................................................................................. E-10

D. Duty to Account ......................................................................................... E-11

IV. Implied Rights and Implied Covenants ........................................................... E-12

A. Dominant and Servient Estates –

The Implied Right of Surface Access ......................................................... E-12

B. Implied Covenants of Lessee ..................................................................... E-14

1. Prudent Operator ............................................................................... E-14

2. Implied Covenant to Develop the Leasehold ..................................... E-15

3. Implied Covenant to Avoid Drainage ................................................ E-15

4. Implied Covenant to Develop Unproven Formations ........................ E-15

5. Implied Covenant to Market .............................................................. E-16

6. Implied Covenant to Develop ............................................................. E-16

V. Mineral and Royalty Interests ......................................................................... E-16

A. The Elements of a Mineral Estate ............................................................ E-17

B. Royalty Interest ......................................................................................... E-17

C. Non-Executive Mineral Interest ............................................................... E-18

D. Issues of Interpretation ............................................................................. E-18

E-3

Appendix A: Hypothetical .................................................................................... E-19


E-4

Table of Contents

Chapter F:

PowerPoint: Implied Covenants: Does Pennsylvania Recognize an Implied

Covenant of Further Exploration? ................................................................................. F-5

Robert J. Burnett, Esquire

I. The Role of Implied Covenants in Oil/Gas Leases ............................................. F-5

II. The Rule of Implied Covenants in Oil/Gas Leases ............................................. F-6

III. Where Do Implied Covenants Come From? ....................................................... F-6

A. Implied in Fact ............................................................................................ F-6

B. Implied in Law ............................................................................................. F-6

IV. Origins and Basis of Implied Covenants ............................................................ F-7

V. What Standard to Measure Lessee’s Conduct? .................................................. F-8

A. “Prudent Operator” Standard ..................................................................... F-8

B. Subjective “Good Faith” Standard .............................................................. F-8

VI. What Implied Covenants Exist in an Oil and Gas Lease? ................................. F-9

A. Implied Covenant to Market ....................................................................... F-9

B. Implied Covenant to Prevent Drainage .................................................... F-10

C. Implied Covenant of Reasonable Development ........................................ F-10

1. The Problem ....................................................................................... F-13

D. Implied Covenant of Further Exploration ................................................ F-14

1. Three Compelling Policy Reasons ...................................................... F-14

2. General Test ....................................................................................... F-15

3. Remedy ............................................................................................... F-15

4. What Is “Unreasonable”? ................................................................... F-15

5. “Exploratory” Well vs. “Development” Well....................................... F-16

6. “Proven” vs. “Unproven” Formation .................................................. F-16

7. What States Have Recognized this Covenant? .................................. F-17

8. What States Have Rejected this Covenant? ...................................... F-18

9. Some Early Pennsylvania Cases Suggest

Implied Obligation to “Explore” ......................................................... F-18

Table of Contents

Chapter G:

Ethics in Leasing in the Marcellus Shale ...................................................................... G-5

David G. Ries, Esquire

I. Introduction ........................................................................................................ G-5

II. American Bar Association Developments and Resources .................................. G-5

A. ABA Model Rules of Professional Conduct ................................................. G-5

B. ABA Commission on Ethics 20/20 ............................................................... G-6

C. ABA Center for Professional Responsibility ............................................... G-6

1. ETHICSearch ....................................................................................... G-6

III. Multijurisdictional Practice ................................................................................ G-6

A. Definitions ................................................................................................... G-6

1. Multijurisdictional Practice (MJP) ...................................................... G-6

2. The Home State .................................................................................... G-7

3. The Host State ...................................................................................... G-7

B. MJP Issues Related to Development of the Marcellus Shale ..................... G-7

1. Unauthorized Practice of Law ............................................................. G-7

a. Pennsylvania’s Penalty for Unauthorized Practice of Law ........... G-7

2. Action against Unauthorized Practice of Law ..................................... G-7

C. Recommendations to the ABA Issued by the Commission on

Multijurisdictional Practice in Its Final Report in 2002 ............................ G-8

1. Amendments to the Recommendations .............................................. G-9

2. Provisions Allowing MJP ..................................................................... G-9

a. Subsection (c) – Temporary Basis .................................................. G-9

b. Subsection (d) – Temporary or Continuous Basis ........................ G-10

3. Adoption of Rules Identical/Similar to Model Rule 5.5 ..................... G-10

D. Practice of Law that is Exclusively in Federal

Courts and before Federal Agencies ......................................................... G-10

1. Admissibility....................................................................................... G-11

2. Disciplinary Action for Conduct in Federal Practices ....................... G-11

E. Disciplinary Authority and Choice of Law for Disciplinary Matters ....... G-11

1. Disciplinary Authority ....................................................................... G-11

2. Choice of Law ..................................................................................... G-11

3. Adoption of Rules Identical/Similar to Model Rule 8.5 ..................... G-12

F. In-House Counsel, Admission by Motion, pro hac vice Admission,

and Practice by Foreign Legal Consultants .............................................. G-12

G. Practice before a State Court or Agency May Require Compliance

with Court or Agency Rules and Bar Admission Rules ............................ G-12

H. Model Rule on Admission by Motion Adopted by the ABA ...................... G-12

I. MJP Issues in Practice after the ABA’s Commission Work

and the Adoption of Its Recommendations in 2002 .................................. G-13

1. ABA Commission on Ethics 20/20’s Current Comprehensive

Review of the Model Rules and Comments ....................................... G-13

IV. Doing Business with Clients ............................................................................ G-13

A. Business with a Client Involving the Marcellus Shale Play .................... G-13

B. Special Requirements for Business Transactions between

Lawyers and their Clients included in Model Rule 1.8 ............................ G-13

V. Special Fee Arrangements ................................................................................ G-14

A. Alternative Fee Arrangements .................................................................. G-14

B. Basic Requirements for Fees ..................................................................... G-15

1. Model Rule 1.5, Subpart (a) and (b) – Fees ....................................... G-15

2. Specific Factor for Determining whether Fees are Reasonable ........ G-15

3. Model Rule 1.5. Subpart (c) – Requirements for Contingent Fees .... G-16

C. ABA Ethic’s Opinion Addressing the Issue of Attorneys Obtaining an

Ownership Interest in a Client as a Legal Fee ......................................... G-16

D. Several Court Decisions and Ethics Opinions have

Approved Percentage of Royalties as Fees ................................................ G-17

1. Threshold Requirement in these Kinds of Arrangements................. G-17

2. Hypotheticals Presenting these Issues in a Marcellus Context ........ G-17

VI. Joint Representation ........................................................................................ G-18

A. Definition of Joint Representation ............................................................ G-18

B. Example of Joint Representation .............................................................. G-18

C. Conflict of Interest: Current Clients ......................................................... G-18

D. Risks of Joint Representation ................................................................... G-20

1. A Lawyer may have to Withdraw from Representing

All of the Clients under Model Rule 1.16 ........................................... G-20

2. Challenges Governing Confidentiality ............................................... G-20

VII. Conclusion ......................................................................................................... G-21

VIII. Information Sources ......................................................................................... G-21

Table of Contents

Chapter H

Contractual and Statutory Unitization .........................................................................H-1

Section One:

Pooling and Unitization 101: A Brief Introduction to the Voluntary

and Statutory Integration of Oil and Gas Interests ....................................................H-5

Russell L. Schetroma, Esquire

I. Introduction and Scope .......................................................................................H-7

II. The Background .................................................................................................H-7

A. The Rule of Capture ....................................................................................H-7

B. Adjacent Property Owners ..........................................................................H-7

C. Voluntary Pooling and Unitization .............................................................H-8

1. Contracts ..............................................................................................H-8

2. Correlative Rights ................................................................................H-8

3. Application of the Rule of Capture ......................................................H-8

4. Application of the Rule of Science ........................................................H-8

D. Oil and Gas “Conservation” Legislation .....................................................H-8

1. Cooperation among Producing States ..................................................H-9

2. Interstate Compact Governing Oil and Gas Conservation .................H-9

3. Pennsylvania’s Oil and Gas Conservation Act (OGCA) ......................H-9

III. Pooling and Unitization Distinguished ..............................................................H-9

A. Distinct Meanings of Pooling and Unitization ............................................H-9

1. Pooling ..................................................................................................H-9

2. Unitization ............................................................................................H-9

IV. The Pennsylvania Law of Voluntary Pooling and

Unitization: An Overture in Six Cases ............................................................. H-10

A. Stebbins v. New York State Natural Gas Corp. ........................................ H-10

B. Felmont Oil Corp. v. Cavanaugh ............................................................... H-10

C. Fox v. Wainoco Oil & Gas Co..................................................................... H-10

D. Snyder Brothers v. Peoples Natural Gas ................................................... H-13

E. Kepple v. Fairman Drilling ....................................................................... H-13

F. Coffin v. Medina Revenue Company.......................................................... H-13

V. Statutory Interest Integration in Pennsylvania .............................................. H-14

A. The Oil and Gas Conservation Law of 1961 ............................................. H-14

1. Rights of Parties Recognized by the OGCA ....................................... H-14

2. Rights of the Commonwealth Recognized by the OGCA ................... H-14

3. The OGCA, inter alia ......................................................................... H-14

4. Applying the OGCA to Modern Day Technologies ............................ H-15

Section Two:

Contractual or “Voluntary” Unitization in Pennsylvania ....................................... H-17

Michael A. Dinges, Esquire

I. Unitization ........................................................................................................ H-19

II. Pooling .............................................................................................................. H-19

A. Oil and Gas Conservation Law ................................................................. H-19

B. Marcellus Wells ......................................................................................... H-19

III. Contractual Unitization ................................................................................... H-19

A. Example of a Unitization Provision in an Oil and Gas Lease .................. H-20

B. Desired Landowner Modifications to Unitization Provision .................... H-20

C. Most Significant Effects of Unitization to the Landowner ....................... H-20

D. Formation of the Unit ................................................................................ H-20

E. Example of Unit Designation Language ................................................... H-21

IV. Caselaw ............................................................................................................. H-21

A. Fox v. Wainoco Oil & Gas Co..................................................................... H-21

B. Snyder Brothers, Inc. v. Peoples Natural Gas Co...................................... H-21

V. Landowner’s Challenge to Validity of Contractual Unitization ...................... H-22

Appendix A: PowerPoint: Contractual or “Voluntary”

Unitization in Pennsylvania............................................................................... H-23

Michael A. Dinges, Esquire

Appendix B: Fox v. Wainoco Oil and Gas Co. ................................................... H-33

Submitted by: Michael A. Dinges, Esquire

Appendix C: Snyder Brothers Inc., v. Peoples Natural Gas Co. .................... H-39

Submitted by: Michael A. Dinges, Esquire

Table of Contents

Chapter I:

PowerPoint: Shale-Gas Valuation Issues Pennsylvania - Hydrocarbon Estate ..... I-1

N. Beaumont Beard, Esquire and Jeffrey R. Kern, ASA, AIMA

I. Introduction ......................................................................................................... I-5

A. Rock Correlations ......................................................................................... I-5

B. Gas Source Terminology ............................................................................... I-6

C. North American Shale Gas Plays................................................................. I-6

D. Marcellus Shale Has Excellent ROR............................................................ I-7

1. Drilling the Borehole ............................................................................. I-7

2. Oriskany Sandstone .............................................................................. I-8

3. Horizontal Drilling ................................................................................ I-8

a. Hydraulic Fracturing ...................................................................... I-9

II. Why Appraise ..................................................................................................... I-10

A. Recent Transactions ................................................................................... I-10

1. Market Watch ...................................................................................... I-10

B. Factors ........................................................................................................ I-11

III. Ownership and Title .......................................................................................... I-12

A. Several Mineral (Oil and Gas).................................................................... I-12

B. Creation of an Oil and Gas Estate ............................................................. I-13

C. Is Gas a Mineral? ........................................................................................ I-13

D. Gas Is or Isn’t the Mineral ......................................................................... I-14

IV. Changing Thinking ............................................................................................ I-14

A. Why Do Estimates Change? ....................................................................... I-15

B. Production/Consumption – 2004 Thinking ................................................ I-15

C. Progress in Completion .............................................................................. I-16

D. EIA’s Newest Prediction ............................................................................. I-16

V. Dry ..................................................................................................................... I-17

A. Declining Pattern ....................................................................................... I-17

B. NEPA Single Well Valuation Assumptions ............................................... I-18

C. Single Well Value Brought on Line Today – NEPA .................................. I-18

D. Single Well Value Brought on Line 5 Years – NEPA ................................ I-19

VI. Moving Liquids .................................................................................................. I-19

A. CHK’s Growth Is Shifting to Liquids ......................................................... I-19

B. Price Differential ........................................................................................ I-20

C. Wet Gas Processing .................................................................................... I-20

VII. Wet ..................................................................................................................... I-21

A. SW PA Wet Area Marcellus Type Curve ................................................... I-21

B. SWPA Single Well Valuation Assumptions ............................................... I-22

VIII. Reserve Classification ........................................................................................ I-22

A. Reserve Classifications ............................................................................... I-23

1. Reserve Classification (SEC) .............................................................. I-23

a. Proven Reserves ............................................................................ I-23

b. Probable Reserves.......................................................................... I-24

c. Possible Reserves ........................................................................... I-24

d. Speculative (Prospective) Reserves ............................................... I-24

B. IRS: Reserves to Be Valued ........................................................................ I-25

1. “Reserves” ............................................................................................ I-25

2. Estimates of Reserves of Oil ............................................................... I-25

3. Industry Definitions of Proved Resources .......................................... I-25

4. The Taxpayer’s Reserve Estimation ................................................... I-25

C. Society of Petroleum Engineers ................................................................. I-25

1. Proved Reserves .................................................................................. I-25

2. Unproved Reserves .............................................................................. I-25

D. IRS Statements ........................................................................................... I-26

1. Treas. Reg. 1.611-2(d).......................................................................... I-26

2. Treas. Reg. 1.611-2(d)(2) ..................................................................... I-26

3. Treas. Reg. 1.611-2(e)(4) ..................................................................... I-26

E. What to Consider in Mineral Appraisal (IRS) ........................................... I-27

IX. PA Inheritance Valuation .................................................................................. I-27

A. Property with Production ........................................................................... I-27

B. No Production ............................................................................................. I-27

X. Rule of Capture .................................................................................................. I-28

A. “Held by Production” .................................................................................. I-28

1. Leases Acres Absorption ..................................................................... I-29

2. Properties are not Fully Developed .................................................... I-29

XI. Pooling/Unitization ............................................................................................ I-30

A. Unitization and Drilling ............................................................................. I-30

B. Talisman/Fortuna ....................................................................................... I-31

C. Factors ........................................................................................................ I-32

Table of Contents

Chapter J:

Ethics in Coalition Lease Negotiations ..........................................................................J-1

Robert M. Jochen, Esquire and Michael P. Joy, Esquire

I. Competence ..........................................................................................................J-5

A. PA Rules of Professional Conduct Rule 1.1..................................................J-5

II. Scope of Representation and Allocation of

Authority between Client and Lawyer ................................................................J-6


III. Diligence ..............................................................................................................J-8


IV. Communication ....................................................................................................J-9


V. Fees .................................................................................................................... J-10

A. PA Rules of Professional Conduct Rule 1.5................................................ J-10

VI. Confidentiality of Information ........................................................................... J-12


VII. Conflict of Interest: Current Clients ................................................................. J-12


VIII. Conflict of Interest : Current Clients: Specific Rules........................................ J-14


IX. Advisor ............................................................................................................... J-15


X. Reporting Professional Misconduct ................................................................... J-16


XI. Conclusion .......................................................................................................... J-17

Table of Contents

Chapter K:

PowerPoint: The Pennsylvania Dormant Oil & Gas Act ............................................ K-1

John M. Smith, Esquire

I. Overview of the “DOGA”..................................................................................... K-5

A. Origins of the DOGA: Extent of Property Ownership ................................ K-6

B. Severance of the Oil & Gas Estate .............................................................. K-6

C. Challenges of Subsurface Ownership ......................................................... K-7

II. States Take Action to Address “Dormant” Mineral Estates .............................. K-7

A. Uniform Dormant Mineral Interests Act .................................................... K-8

1. Texaco v Short ...................................................................................... K-9

III. The Dormant Oil & Gas Act: Pennsylvania’s

Approach to Dormant Mineral Interests .......................................................... K-10

A. What Is the DOGA and Where Can I Find It? .......................................... K-10

B. What Is the Purpose of the DOGA? .......................................................... K-11

C. The DOGA Is Not a Transfer of Title ........................................................ K-11

IV. Prosecuting a DOGA Petition: The Multi-Step Process ................................... K-12

A. Where Are DOGA Proceedings Filed? ....................................................... K-12

1. Who Can Petition for Creation of a DOGA Trust? ............................ K-13

2. What Interests Are Subject to Actions Under the DOGA? ................ K-13

B. The Mechanics of Requesting Establishment of a DOGA Trust? ............. K-14

1. What Type of Investigation Must the DOGA Petitioner Undertake

to Attempt to Locate an Owner of the Oil & Gas? ............................. K-14

2. Pennsylvania Rule of Civil Procedure 430 ......................................... K-15

3. What Is Not a ‘Diligent’ Effort to Locate an Individual? ................... K-15

C. The Third Step in Establishing a DOGA Trust ........................................ K-16

1. Appointment & Duties of Trustee ...................................................... K-16

2. Who Can Serve as a DOGA Trustee

and What Is the Trustee’s Role? ........................................................ K-17

3. What Is the DOGA Trustee’s Duty? ................................................... K-17

4. What Funds Are Paid into a DOGA Trust? ....................................... K-18

5. When & How Does a DOGA Trust Terminate? ................................. K-18

D. Insulation of Lessees and Producers from Future

Claims by DOGA Trust Beneficiaries ....................................................... K-19

V. Positive Attributes of the DOGA ...................................................................... K-19

A. The ‘Positives’ of the DOGA ...................................................................... K-20

VI. The DOGA’s Unanswered Questions ............................................................... K-20

A. What Is the Incentive to Locate Individuals

Prior to Creation of a DOGA Trust? .......................................................... K-21

B. When Is an Individual “Unknown” or “Unlocatable”? .............................. K-21

C. What Are the Rights of Beneficiaries? ...................................................... K-22

D. What Is the Role of the Trustee? ............................................................... K-22

E. What Is the Role of the Court? .................................................................. K-23

F. Guidance for Practitioner .......................................................................... K-23

Table of Contents

Chapter L:

Water Resource Management Trends in Shale

Energy Development: Select Topics ............................................................................... L-1

Scott A. Gould, Esquire

Introduction ........................................................................................................ L-5

Water ................................................................................................................... L-5

I. PADEP Regulation of Water Storage at

Well Pads and Centralized Impounds ................................................................ L-5

A. Water and Wastewater Storage on Well Pads ............................................ L-5

B. Water and Wastewater Stored in Centralized Impoundments .................. L-5

C. Current PADEP Worksheet for Permitting of

Pits and Dams for Oil and Gas Operations................................................. L-5

D. Water Stored in Fresh Water Impoundments ............................................ L-6

II. Use of Mine-Impacted Waters ............................................................................ L-7

A. PADEP Issued a Draft “White Paper” for Addressing

the Storage of AMD in Impoundments ....................................................... L-7

B. Process Suggest in the White Paper ........................................................... L-7

C. PADEP’s Priorities ...................................................................................... L-7

D. Criteria for Storing Mitigated or Minimally Impacted

AMD Water Established by the White Paper ............................................. L-7

E. Storage of the AMD Water that Does Not Meet the Criteria ..................... L-8

F. Recommendations for Moving the AMD Use Process Forward .................. L-8

G. Potential for Long-Term Liability for AMD Treatment ............................. L-8

H. Multiple Options for Addressing the Liability Issue .................................. L-8

I. Senate Bill 1346 ........................................................................................... L-9

J. Potential Need for NPDES Discharge Permits

for AMD Treatment Facilities ................................................................... L-10

Wastewater ....................................................................................................... L-11

III. Reusing, Processing and Disposing Drilling Fluids ......................................... L-11

A. Flowback and Produced Water and Other Waste Materials .................... L-11

B. Drilling Fluids, Drill Cuttings, and Flowback and Produced Water ....... L-11

C. Regulation of High TDS Wastewater ........................................................ L-11

D. Residual Waste Beneficial Use General Permits ...................................... L-13

IV. Options for Reuse, Processing or Disposal ....................................................... L-15

A. Drilling Muds/Fluids ................................................................................. L-15

B. Direct Reuse of Flowback/Mobile and On-Site Treatment ....................... L-15

C. Off-Site Disposal or Treatment ................................................................. L-16

Appendix A: PowerPoint: Water Management for Marcellus Natural

Gas Development in Pennsylvania .................................................................... L-19

Scott A. Gould, Esquire and David Yoxtheimer, P.G.

Appendix B: PA DEP’s White Paper: Utilization of AMD

in Well Development for Natural Gas Extraction ........................................... L-35

Submitted by: Scott A. Gould, Esquire

Appendix C: Senate Bill 1346 ............................................................................. L-47


Appendix D: General Permit WMCR123: Processing

and Beneficial Use of Oil and Gas Liquid Waste ............................................ L-65


Table of Contents

Chapter M:

Preparation and Use of Title Opinions ......................................................................... M-1

Sean Cassidy, Esquire

I. Introduction ....................................................................................................... M-5

II. Types of Title Opinions ..................................................................................... M-6

A. Preliminary Title Report ............................................................................ M-6

B. Drill Site Title Opinions ............................................................................. M-7

C. Unit Title Opinion ...................................................................................... M-8

D. Division Order Title Opinion ...................................................................... M-9

E. Clearance Letter ......................................................................................... M-9

F. Coal Title Opinions ..................................................................................... M-9

G. Bank Security Title Opinion .................................................................... M-10

III. Liability of Party Issuing Title Opinion .......................................................... M-10

A. Who May Prepare Title Opinions ............................................................. M-10

B. Liability .................................................................................................... M-11

C. Grounds for Liability ................................................................................ M-12

D. Privity of Contract .................................................................................... M-13

IV. Abstracts .......................................................................................................... M-13

A. Use of Abstracts ........................................................................................ M-14

V. Locating a Skilled Attorney ............................................................................. M-16

VI. Format.............................................................................................................. M-16

A. Caption ...................................................................................................... M-17

B. Title ........................................................................................................... M-17

C. Legal Description ...................................................................................... M-17

D. Records Examined and Extent of Examination ....................................... M-22

E. Record Title ............................................................................................... M-23

1. Computation of Royalty .................................................................... M-24

2. Computation of Leasehold ................................................................ M-25

F. Lease Summary ........................................................................................ M-25

G. Unit Description ....................................................................................... M-26

H. Easements and Leases ............................................................................. M-26

I. Encumbrances .......................................................................................... M-26

J. Taxes ......................................................................................................... M-26

K. Advisory Comments .................................................................................. M-27

L. Curative Requirements ............................................................................ M-27

M. Other Information .................................................................................... M-30

1. Patent ................................................................................................ M-30

2. Title History ...................................................................................... M-30

3. Permitting Requirements.................................................................. M-30

4. Exceptions ......................................................................................... M-30

VII. Company Procedures ....................................................................................... M-32

A. Initial Request .......................................................................................... M-32

B. Use of Title Opinion .................................................................................. M-32

VIII. Conclusion ........................................................................................................ M-33

IX. Appendix Formats for Title Opinions and Related Documents ...................... M-34

A. Exhibit “A” – Preliminary Title Opinion .................................................. M-34

B. Exhibit “B” – Drill Site Title Opinion ...................................................... M-36

C. Exhibit “C” – Drill Site Title Opinion ...................................................... M-41

D. Exhibit “D” – Original Title Opinion ........................................................ M-46

E. Exhibit “E” – Title Abstract Certification ................................................ M-59

F. Exhibit “F” – Bank Security Title Opinion .............................................. M-62

G. Exhibit “G” – Examples of Abstract Items ............................................... M-67

Table of Contents

Chapter N:

When Is A Rod Not 16.5 Feet? .......................................................................................... N-1

Originally Authored by: Knud E. Hermansen, Ph.D., P.L.S., P.E., Esquire

Submitted by: Lester L. Greevy, Jr., Esquire & John A. Shoemaker, Esquire

I. The Science of Geometry and Mathematics ....................................................... N-5

II. Measurements along Boundaries ....................................................................... N-5

III. Comprehend the Basis for the Difference .......................................................... N-6

A. To Further Compound the Problem, Preventative or Curative Actions

Were Prevented ........................................................................................... N-7

IV. Equipment Precision .......................................................................................... N-7

A. The Typical Compass ................................................................................... N-8

B. The Chain .................................................................................................... N-8

VI. Practitioners ....................................................................................................... N-9

VII. Terrain and Site Conditions ............................................................................. N-10

VIII. Land Values ...................................................................................................... N-11

IX. Procedures......................................................................................................... N-11

X. Blunders ............................................................................................................ N-14

Appendix A: Warranty Index Example .............................................................. N-17

Submitted by: Lester L. Greevy, Jr., Esquire and John A. Shoemaker, Esquire

Appendix B: Cherry Township Warrant Map .................................................. N-21


Appendix C: Magnetic Declination Map – Continental US .......................... N-25


Appendix D: Survey Return Example ................................................................ N-29


Table of Contents

Chapter O:

Title Defects and Their Cure ........................................................................................... O-1

Sean Cassidy, Esquire

I. Introduction ........................................................................................................ O-5

II. The Title Opinion ................................................................................................ O-5

A. Basic Purpose .............................................................................................. O-5

B. Standards of Title Examination .................................................................. O-6

C. Statutes Eliminating Defects ...................................................................... O-7

III. Use of Affidavits to Clear Title Defects .............................................................. O-8

A. Purpose of Affidavits ................................................................................... O-8

B. General Characteristics of an Affidavit ...................................................... O-9

C. Affidavit of Adverse Possession ................................................................... O-9

1. Exhibit 1: Affidavit of Adverse Possession ........................................ O-11

2. Exhibit 1-A: Statement of Claim of Title

by Adverse Possession ........................................................................ O-12

3. Exhibit 1-B: Affidavit Relating to Matters

Affecting Title to Real Estate ............................................................. O-13

D. Affidavit of Identity ................................................................................... O-15

1. Exhibit 2: Affidavit of Identity ........................................................... O-16

E. Affidavit of Heirship .................................................................................. O-16

1. Exhibit 3: Affidavit of Heirship .......................................................... O-17

F. Affidavit of Marital Status ........................................................................ O-18

1. Exhibit 4: Affidavit of Marital Status ................................................ O-18

G. Affidavit of Non-Development and Non-Payment of Rental .................... O-19

IV. Use of Deeds to Cure Title Defects ................................................................... O-20

A. General Requirements............................................................................... O-20

B. Quitclaim Deeds ........................................................................................ O-21

C. Correction Deeds ....................................................................................... O-21

V. Action to Quiet Title ......................................................................................... O-22

A. General Characteristics ............................................................................. O-22

B. Use in Cases of Tax Sale ........................................................................... O-23

VI. Release of Liens ................................................................................................ O-24

A. Release and Partial Release ...................................................................... O-24

B. Subordination Agreement ......................................................................... O-25

VII. Defects in the Oil and Gas Lease ..................................................................... O-25

A. Ratification of Lease .................................................................................. O-25

B. Amendment of Lease ................................................................................. O-26

C. Right of Way .............................................................................................. O-27

D. Power of Attorney ...................................................................................... O-27

VIII. Waiver of a Title Defect. ................................................................................... O-28

A. When Waiver May be Used ....................................................................... O-28

B. Considerations for Use of Waiver .............................................................. O-29

IX. Conclusion ......................................................................................................... O-29

Table of Contents

Chapter P:

Act 13 and Local Government Regulation of the Oil and Gas Industry ................. P-1

Blaine A. Lucas, Esquire and Krista M. Staley, Esquire

I. Preemption .......................................................................................................... P-5

II. Related Validity Issues ....................................................................................... P-5

III. Municipal Statutory Authority ........................................................................... P-5

A. Municipal Planning Code ............................................................................ P-5

B. Municipal Enabling Statutes ...................................................................... P-5

IV. Preemption Standards ........................................................................................ P-6

A. Types of Preemption .................................................................................... P-6

B. Tenants of Preemption ................................................................................ P-6

C. Five-Part Test for Preemption .................................................................... P-7

D. Preemption versus Lack of Authority ......................................................... P-7

E. Preemption under the MPC ........................................................................ P-8

V. Preemption under the Oil and Gas Act .............................................................. P-9

A. Pre-Act 13 of 2012........................................................................................ P-9

1. Preemption ........................................................................................... P-9

2. No Preemption .................................................................................... P-10

3. Pre-Act 13: What a Municipality Could Do ....................................... P-14

4. Pre-Act 13: What a Municipality Could Not Do ................................ P-14

5. Pre-Act 13: Municipality’s Authority to Regulate Unresolved .......... P-15

B. Act 13 of 2012 ............................................................................................ P-15

1. Preemption ......................................................................................... P-15

2. Timeline .............................................................................................. P-18

3. Enforcement/Penalty .......................................................................... P-19

C. Robinson, et al. v. Commonwealth of Pennsylvania, et al. ....................... P-20

Table of Contents

Chapter Q

Pipeline and Right-of-Way Issues ................................................................................... Q-1

Section One:

PowerPoint: Negotiating Pipeline Right-of-Way ......................................................... Q-5

Lester L. Greevy, Jr., Esquire

John A. Shoemaker, Esquire

I. Granting Clause .................................................................................................. Q-7

A. Lay Indefinite Number of Pipelines ............................................................ Q-7

B. Transport Gas or Fluids .............................................................................. Q-7

C. Temporary Above-Ground Pipelines ........................................................... Q-8

D. Permanent Above-Ground Facilities ........................................................... Q-8

E. Blanket Easement ..................................................................................... Q-10

F. Cutting Down What is Granted ................................................................ Q-11

G. Modifying the Granting Cause .................................................................. Q-11

H. Fixing the Location .................................................................................... Q-12

I. Pipeline Construction ................................................................................ Q-12

J. Damages .................................................................................................... Q-13

K. Other Considerations ................................................................................ Q-13

L. Calculating Per-Foot Price ........................................................................ Q-14

Appendix A: Template of PA Pipeline Right-of-Way Agreement ................... Q-15

Submitted by: Lester L. Greevy, Esq., Esquire & John A. Shoemaker, Esquire

Appendix B: 1882 Pipeline Right-of-Way Agreement ...................................... Q-21


Appendix C: Pipeline Right-of-Way Grant ........................................................ Q-25


Section Two:

Overview of the Law of Pipeline Easements: Rights of Way ................................... Q-29

George Asimos, Esquire

Richard A. Guerra, Esquire

I. Overview of Easements (Rights of Way) Generally ......................................... Q-31

A. Definition of Easement .............................................................................. Q-31

B. Types of Easements ................................................................................... Q-31

1. Easement Appurtenant ...................................................................... Q-31

2. Easement in Gross ............................................................................. Q-32

C. Creation of Easements .............................................................................. Q-32

1. Express Easements ............................................................................ Q-32

2. Implied Easements ............................................................................. Q-33

a. Easement by Necessity ................................................................. Q-33

b. Easement by Implication .............................................................. Q-33

c. Easement by Prescription ............................................................ Q-33

D. Use of Easements ...................................................................................... Q-33

1. Dominant Estate Owner .................................................................... Q-33

2. Servient Estate Owner ....................................................................... Q-34

3. Purpose of Easement .......................................................................... Q-34

4. General Legal Principle ..................................................................... Q-34

5. An Increase in an Easement’s Degree of Usage ................................ Q-34

E. Maintenance and Improvements .............................................................. Q-34

1. Dominant Estate Owner .................................................................... Q-34

2. Easement Owners .............................................................................. Q-34

F. Alienability ................................................................................................ Q-34

II. Rules and Cases Applied to Pipeline Rights-of-Way........................................ Q-35

A. Interpretation of the Grant ....................................................................... Q-35

B. Duration/Abandonment ............................................................................. Q-35

C. Unrecorded Easement ............................................................................... Q-36

D. Interference with Pipeline Operations by Servient Estate Owner .......... Q-36

E. Dimensions/Width of Easement Where Not Specified in the Grant ........ Q-37

F. Relocation of Pipeline ................................................................................ Q-39

G. Condemnation/Damages Issues ................................................................ Q-40

H. Environmental Law Compliance or Liability ........................................... Q-40

Table of Contents

Chapter R:

Regulatory Update: An Industry Perspective .............................................................. R-1

Andrew T. Bockis, Esquire

I. Introduction ........................................................................................................ R-5

II. Discussion ........................................................................................................... R-5

A. Industry Has Embraced Certain Guiding Principles ................................. R-5

B. Oil and Gas Activities Are Highly Regulated ............................................. R-5

1. There May Be up to a Dozen or More Government Agencies ............. R-5

2. Areas of Oversight ................................................................................ R-6

a. Well Site Planning/Development ................................................... R-6

b. Well Drilling ................................................................................... R-7

c. Water Supply/Storage .................................................................... R-7

d. Residual Waste/Wastewater Management .................................... R-7

e. Site Restoration .............................................................................. R-7

f. Natural Gas Processing Plants ...................................................... R-8

g. Compressor Station Construction .................................................. R-8

h. Pipeline Construction ..................................................................... R-8

C. Industry Best Management Practices Are Consistent with

Pennsylvania Regulations ........................................................................... R-9

1. Site Development and Restoration ...................................................... R-9

2. Health and Safety Considerations ..................................................... R-10

3. Water Issues ....................................................................................... R-10

a. Selection of a Reliable Source of Water ....................................... R-10

b. Transportation of Water to Well Pad ........................................... R-10

c. Hydraulic Fracturing ................................................................... R-11

d. Flowback and Produced Water..................................................... R-12

e. Reuse ............................................................................................. R-13

f. Disposal......................................................................................... R-14

Appendix A: ESCGP-2 – PA DEP’s Permit 11-30-2011 ..................................... R-15

Submitted by: Elizabeth A. Nolan, Esquire

Appendix B: E&S General Permit for Oil and Gas Activities ....................... R-33


Appendix C: Addressing Spills and Releases from

Oil & Gas Wells and Related Operations ......................................................... R-53


Appendix D: Summary of Proposed Conceptual Changes (with brief

justifications) Office of Oil and Gas Management (OOGM) ......................... R-63


Table of Contents

Chapter S:

The Evolving Business of Marcellus Play ..................................................................... S-1

Section One:

PowerPoint: The Shale Gas Resource: Evolving Economics and Trends ............... S-5

Thomas B. Murphy

I. Marcellus Center for Outreach and Research (MCOR) ..................................... S-8

II. Evolving Shale Issues ......................................................................................... S-9

III. Other Shale Targets ......................................................................................... S-10

IV. Multiple Shales ................................................................................................. S-11

V. Marcellus Wells Drilled (7/11/12) ..................................................................... S-12

VI. Wet vs. Dry Gas ................................................................................................ S-13

A. Ohio Rig Locations..................................................................................... S-14

VII. Utica Midstream Buildout ................................................................................ S-16

VIII. New Energy Dynamics? .................................................................................... S-17

IX. U.S. Electricity Production from Coal Declining ............................................. S-18

X. LNG Export ....................................................................................................... S-19

XI. Business Impacts – Rail ................................................................................... S-20

A. Business Impacts Hotel Tax ...................................................................... S-21

XII. Williamsport Employment Growth By Sector ................................................. S-22

XIII. PA Well Inspection Trends ............................................................................... S-23

XIV. Wastewater Options (PA/OH) .......................................................................... S-24

XV. The Economic Potential for The Utica Shale Development in Ohio ................ S-25

XVI. Key Additional Trends ...................................................................................... S-26

Section Two:

PowerPoint: Marcellus Shale and Utica Shale:

Impacts, Regulation, Challenges and Legislation Environmentally

Sound Development of Pennsylvania’s Newest Energy Resource ...................... S-29

Louis D. D’Amico

I. PIOGA/Independent Oil and Gas Producers ................................................... S-31

II. Pennsylvania Oil and Natural Gas History ..................................................... S-32

III. Marcellus Shale Formation .............................................................................. S-33

IV. The Competition ............................................................................................... S-33

V. How the Marcellus Compares .......................................................................... S-34

VI. Natural Gas Facts and Usage .......................................................................... S-34

VII. Potential Permits Required for Gas Well ......................................................... S-35

VIII. Marcellus Shale Development .......................................................................... S-35

A. Water Supply, Storage and Flow Back ..................................................... S-35

B. Flow-back Water Management ................................................................. S-36

C. Consumptive Water Usage ........................................................................ S-36

D. Infrastructure Improvements ................................................................... S-37

E. Restoration ................................................................................................ S-37

IX. Economic Impact in Pennsylvania ................................................................... S-38

X. Marcellus Shale Advisory Commission ............................................................ S-38

A. The Participants on the Commission ........................................................ S-38

B. Purpose of the Commission ....................................................................... S-39

1. Environmental Issues Addressed ...................................................... S-39

XI. Marcellus Shale Commission Recommendations............................................. S-40

A. A Comprehensive, Strategic Plan ............................................................. S-40

B. Stronger Regulations for Drilling ............................................................. S-40

C. Tougher Penalties for Violators ................................................................ S-41

D. Enhance Pennsylvania’s Energy Independence ....................................... S-41

E. Create Jobs for Pennsylvania .................................................................... S-42

F. Train Pennsylvanians for Natural Gas Jobs ............................................ S-42

G. Improve Infrastructure ............................................................................. S-43

H. Protect Public Health and Promote Public Safety .................................... S-43

I. Protect Natural Resources ........................................................................ S-44

J. Help Communities Deal with Impact ....................................................... S-44

XII. Legislative Action ............................................................................................. S-45

XIII. A Significant Opportunity for PA ..................................................................... S-45

XIV. UTICA Shale ..................................................................................................... S-46

A. Where? Why? ............................................................................................. S-46

B. Potential Drawbacks ................................................................................. S-46

XV. Political and Regulatory Considerations .......................................................... S-47

XVI. Our Challenge ................................................................................................... S-47

Table of Contents

Chapter T:

PowerPoint: Oil & Gas Transactions: Due Diligence ................................................. T-1

Bruce F. Rudoy, Esquire

I. Overview ............................................................................................................. T-5

II. Areas of Focus ..................................................................................................... T-6

III. Title Review ........................................................................................................ T-6

A. Purpose ........................................................................................................ T-6

B. Scope of Title Review ................................................................................... T-6

C. Review of Prior Opinions ............................................................................. T-6

D. Review of Abstracts ..................................................................................... T-7

E. Advise Clients of Results of Title Review ................................................... T-7

IV. Lease Review ...................................................................................................... T-7

V. General Corporate Review.................................................................................. T-8

VI. Environmental Review ....................................................................................... T-9

A. Combination of Inside and Outside Due Diligence ..................................... T-9

VII. Final Report ........................................................................................................ T-9

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