Porter, J. v. Chevron Appalachia , 204 A.3d 411 ( 2019 )

J-A20024-18
2019 Pa. Super. 31
JAMES E. PORTER, JR. AND MARY : IN THE SUPERIOR COURT OF
PORTER, HUSBAND AND WIFE : PENNSYLVANIA
:
Appellants :
:
:
v. :
:
: No. 16 WDA 2018
CHEVRON APPALACHIA, LLC :
Appeal from the Order November 28, 2017
In the Court of Common Pleas of Fayette County Civil Division at No(s):
1612 of 2017 G.D.
BEFORE: BENDER, P.J.E., LAZARUS, J., and MUSMANNO, J.
OPINION BY LAZARUS, J.: FILED FEBRUARY 8, 2019
James E. Porter, Jr., and Mary Porter, h/w (collectively, the “Porters”),
appeal from the order entered in the Court of Common Pleas of Fayette
County, granting the motion of Chevron Appalachia, LLC (“Chevron”), for a
preliminary injunction. Upon careful review, we affirm.
The Porters are the owners of a 76-acre parcel of land in Lucerne
Township, Fayette County, which is subject to an oil and gas lease entered
into between the Porters and Atlas America, Inc., Chevron’s predecessor-in-
interest, on October 20, 2002 (“Lease”). Paragraph 1 of the Lease grants
Chevron exclusive rights as lessee:
for the purpose of drilling, operation for, producing, and removing
of oil and gas and all the constituents thereof, and of injecting air,
gas, brine, and other substances from any source and into any
subsurface strata and to transport by pipelines or otherwise across
and through said lands oil, gas, and their constituents from the
subject and other lands, regardless of the source of such gas or
the location of the wells, which right to transport gas from other
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properties across the leasehold premises shall survive the term of
this lease for so long as the transportation of such gas may be
desired by the Lessee, and of placing of tanks, equipment, roads,
and structures thereon to procure and operate for the said
products, together with the right to enter into and upon the lease
premises at all times for the aforesaid purposes. . . .
Oil and Gas Lease, 10/20/02, at ¶ 1 (emphasis added).
Paragraph 10 of the Lease provides that:
The Lessor hereby grants in the Lessee the right at any time to
consolidate the leased premises or any part thereof or strata
therein with other lands to form an oil and gas development unit
or units of not more than 640 acres, or such larger unit as m[a]y
be required by state law or regulation for the purpose of drilling a
well thereon, but the Lessee shall in no event be required to drill
more than one well on any such unit or units.
...
The Lessee shall effect such consolidations by executing a
declaration of consolidation with the same formality as this oil and
gas lease setting forth the leases or portions thereof consolidated,
the royalty distribution and recording the same in the recorder’s
office at the courthouse in the county in which the leased premises
are located and by mailing a copy thereof to the Lessor at the
address herein above provided for such use shall be payable to
the owners of the parcels of land comprising said unit or units in
the proportion that the acreage of each parcel bears to the entire
acreage consolidated. Lessee shall have the right to amend, alter,
or correct any such consolidation at any time in the same manner
as herein provided.
Id. at ¶ 10.
Prior to Chevron succeeding to Atlas’s interests in the lease, Atlas had
drilled multiple conventional, vertical wells on the Porters’ property that were
used to produce oil and gas from the Porters’ land. In or about 2017, Chevron
gave notice to the Porters that it intended to develop and construct a well pad
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on the Porters’ property to accommodate multiple, unconventional wells to
produce oil and gas from neighboring properties.
On July 26, 2017, the Porters filed a complaint against Chevron, asking
the court to declare that Chevron may not use the surface of their land to
construct either a well pad site for use in the production of oil and gas from
adjoining lands, or an access road to and from the well pad site. The Porters
also requested preliminarily and permanent injunctions. On August 16, 2017,
Chevron filed preliminary objections in the form of a demurrer. The Porters
filed an answer to Chevron’s preliminary objections on August 21, 2107.
While the preliminary objections were pending, Chevron notified the
Porters, through counsel, that it would be visiting the site to conduct an
environmental assessment and geotechnical investigation of the property in
preparation for the filing of an application for a permit with the Pennsylvania
Department of Environmental Protection (“DEP”). Chevron also notified the
Porters that it would be “staking” the property in order to comply with
Pennsylvania’s One Call System, which requires excavators to mark digging
sites in order to prevent interference with utility lines.
On October 10, 2017, Chevron personnel, including Rodney Frazee, the
Surface Land Term Lead for Chevron, arrived at the property to begin staking
and found a lock on the gate to Porter’s property, which prevented vehicle
access. After staking the property, Frazee was approached by Mr. Porter, who
asked them to remove the stakes. Frazee indicated that he could not remove
the stakes, after which Mr. Porter threatened to remove them himself. When
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Frazee later returned to verify whether Mr. Porter had, in fact, removed the
stakes, he again encountered Mr. Porter, who told him “you best get off my
property while the getting’s good.” N.T. Preliminary Injunction Hearing,
11/22/17, at 36. Interpreting Mr. Porter’s statement as a threat, Chevron
personnel left the property.
On October 18, 2017, Chevron filed a motion for preliminary injunction,
seeking to enjoin the Porters from “preventing access to and development of
Chevron’s oil and gas rights.” Motion For Preliminary Injunction, 10/18/17, at
¶ 15. The Porters filed an answer and new matter, in which it asserted that
Chevron was not entitled to injunctive relief because it had not asserted any
cause of action against the Porters. Thereafter, Chevron withdrew its
preliminary objections to the Porters’ complaint and, on November 16, 2017,
filed an answer thereto, as well as a counterclaim seeking declaratory and
injunctive relief. On November 22, 2017, the court held a hearing on
Chevron’s preliminary injunction motion and, by order dated November 29,
2017, granted the requested relief. This timely appeal follows, in which the
Porters raise the following claims for our review:
1. Whether the trial court abused its discretion by ordering the
Porters to permit Chevron to conduct geotechnical testing on the
surface of the Porter Farm where Chevron failed to provide any
clear evidence that it would suffer immediate and irreparable
harm if such testing was delayed?
2. Where Chevron had never previously entered onto the surface
of the Porter Farm to conduct any activities relative to the
production of oil and gas from beneath adjoining lands, whether
the trial court erred or abused its discretion by effectively
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changing that status quo by ordering the Porters to permit
Chevron such access?
3. Whether the trial court committed an error of law or abused
its discretion by effectively determining on the merits that
Chevron has an absolute right to operate on the surface of the
Porter Farm to produce oil and gas from beneath adjoining lands
in order to support its grant of a mandatory preliminary
injunction?
Brief of Appellants, at 3.
Our review of a trial court’s order granting or denying preliminary
injunctive relief is “highly deferential”.1 Warehime v. Warehime, 860 A.2d
41, 46 (Pa. 2004). Thus, in reviewing the grant or denial of a preliminary
injunction, an appellate court is directed to “examine the record to determine
if there were any apparently reasonable grounds for the action of the court
below.” Id. The scope of our review is plenary. Id. at n.7.
A petitioner seeking a preliminary injunction must establish six
prerequisites; failure to establish any one of them results in the denial of relief.
To obtain a preliminary injunction, a petitioner must establish
that: (1) relief is necessary to prevent immediate and irreparable
harm that cannot be adequately compensated by money
damages; (2) greater injury will occur from refusing to grant the
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1 In their appellate brief, the Porters assert that the relief granted by the trial
court constitutes a mandatory injunction, which would require greater scrutiny
on appellate review. See Kessler v. Broder, 851 A.2d 944, 947 (Pa. Super.
2004), quoting Mazzie v. Commonwealth, 432 A.2d 985, 988 (Pa. 1981)
(“[I]n reviewing the grant of a mandatory injunction, we have insisted that a
clear right to relief in the plaintiff be established.”). However, in this case,
the injunctive relief is merely prohibitory, requiring that the Porters refrain
“from taking any actions inconsistent or in interference with Chevron’s rights
to perform activities related to permitting and site testing on the Porter
property[.]” Order, 11/28/17.
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injunction than from granting it; (3) the injunction will restore the
parties to their status quo as it existed before the alleged wrongful
conduct; (4) the petitioner is likely to prevail on the merits; (5)
the injunction is reasonably suited to abate the offending activity;
and (6) the public interest will not be harmed if the injunction is
granted.
Brayman Const. Corp. v. Com., Dep't of Transp., 13 A.3d 925, 935 (Pa.
2011), citing Summit Towne Centre, Inc. v. Shoe Show of Rocky Mt.,
Inc., 828 A.2d 995, 1001 (Pa. 2003).
The Porters first allege that the court erred in finding that Chevron
established the existence of immediate and irreparable harm, not
compensable by money damages. They argue that Chevron made no showing
that a delay in performing the geotechnical testing “might result in the
expiration or termination of oil and gas leases, cause the loss of business or
marketing opportunities, waste resources already invested, jeopardize
existing contracts with third parties, or forfeit any favorable feature of current
market or regulatory conditions[.]” Brief of Appellants, at 12. Rather, the
Porters argue, the only delay-related harm shown in the record is the
inconvenience to Chevron of having to wait to conduct the tests at a later
time.
The trial court was satisfied that Chevron established irreparable harm
not compensable by money damages. First, the court noted our Supreme
Court’s pronouncement that, “[i]n light of the unique and intrinsic value of
land, interference with . . . contractual rights to ownership of that land must
be deemed irreparable harm.” Trial Court Opinion, at 7, quoting New
Eastwick Corp. v. Philadelphia Builders Eastwick Corp., 241 A.2d 766,
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770 (Pa. 1968). In addition, the court found that inability to access the
Porters’ land would cause continued delay in Chevron’s operations, which
would not only push back production on the well pad to be erected on the
Porters’ property, but also effect other unrelated production plans due to
resulting equipment delays. The court found this possibility of delay
particularly significant because Chevron could only complete the necessary
geotechnical testing at certain times of the year when the ground was not
frozen.
In light of the foregoing, we find the record contains reasonable grounds
for the court to conclude that Chevron would suffer irreparable harm in the
absence of an injunction. Warehime, supra. The Porters’ actions deprived
Chevron of contractual rights in land pursuant to the 2002 lease, which in and
of itself supports a finding of irreparable harm. See New Eastwick Corp.,
supra. Moreover, the testimony presented by Chevron supports a finding that
interference with Chevron’s access to perform the necessary testing would
result in delay-related costs that would be impossible to quantify.
The Porters next assert that the trial court erred in finding that an
injunction will restore the parties to the status quo as it existed immediately
prior to the alleged wrongful conduct. Rather, the Porters argue that, because
Chevron had never previously entered or attempted to enter the land or
conducted any activities thereon, the injunction allowing Chevron access to
the land actually created a new status quo.
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The trial court found that the status quo existing immediately prior to
the wrongful conduct was that “Chevron’s predecessor, Atlas, had access to
the Porters’ land under the Lease as well as in practice. Chevron, as
successor-in-interest to Atlas under the Lease, is entitled to the same status.”
Trial Court Opinion, at 9.
We agree with the trial court that whether Chevron itself had actually
exercised its rights under the Lease prior to the Porters’ wrongfully denying it
access to the land is irrelevant. “The status quo to be maintained by a
preliminary injunction is the last actual, peaceable and lawful noncontested
status which preceded the pending controversy.” Allegheny
Anesthesiology Associates, Inc. v. Allegheny Gen. Hosp., 826 A.2d 886,
894 (Pa. Super. 2003). Here, that “noncontested status” was Chevron’s
contractual right of access to the land for the purposes set forth in the Lease
agreement, which its predecessor-in-interest had exercised without
interference. In denying Chevron access, the Porters interfered with the
status quo. Accordingly, there were reasonable grounds for the court to
conclude that an injunction was necessary to restore the status quo.
Finally, the Porters claim that the trial court erred by effectively reaching
the ultimate issue in this case and determining that Chevron “has the absolute
right to use the Porter Farm for whatever oil and production activities it
wants.” Brief of Appellants, at 15. The Porters claim that the trial court’s
interpretation of the Lease is incorrect and, properly interpreted, the Lease
limits Chevron to the drilling of one well. The Porters cite the following
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language from Paragraph 10 to support their “one well” interpretation, which
grants:
Lessee the right at any time to consolidate the leased premises or
any part thereof . . . with other lands to form an oil and gas
development unit or units . . . for the purpose of drilling a well
thereon, but the Lessee shall in no event be required to drill more
than one well on any such unit or units.
Oil and Gas Lease, 10/20/02, at ¶ 10 (emphasis added). The Porters further
argue that, although the unitization clause in Paragraph 10 authorizes
Chevron to “consolidate” the Porter Farm with other land to create oil and gas
development units, Chevron has not done so in accordance with the terms of
the Lease. In any case, the Porters argue, Paragraph 10 limits Chevron to the
drilling of “a well” on any such unit.
We begin by noting that
oil and gas leases are subject to the same contract law principles
that apply to contract interpretation generally. When a writing is
clear and unequivocal, its meaning must be determined by its
contents alone. We must be mindful that the object in interpreting
instruments relating to oil and gas interests, like any written
instrument, is to ascertain and effectuate the intention of the
parties.
Loughman v. Equitable Gas Co., LLC, 134 A.3d 470, 474 (Pa. Super. 2016)
(internal citations and brackets omitted). In construing a contract, we must
give effect to all of the provisions therein. Capek v. Devito, 767 A.2d 1047,
1050 (Pa. 2001). “An interpretation will not be given to one part of the
contract which will annul another part of it.” Id., quoting Cerceo v.
DeMarco, 137 A.2d 296, 298 (Pa. 1958) (citations omitted).
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Here, the trial court interpreted Paragraph 10 to permit the drilling of
multiple wells. The court reasoned as follows:
[The Porters] read “a well” to mean “only one well, and no more.”
However, the indefinite article “a” does not always lend itself to
this definition, and it must be interpreted within the larger context
of the sentence[.] As an example, Article I, Section 5 of the United
States Constitution states that “[e]ach House may determine the
Rules of its Proceedings, punish its Members for disorderly
Behavior, and, with the Concurrence of two thirds, expel a
member.” [U.S. Const. art. 1, § 5] (emphasis added). Certainly,
the [Framers did not] intend for each House of Congress to only
have the ability to expel one member ever. Likewise, the sentence
in Paragraph 10 of the Lease must be construed as a whole. After
the sentence that states that Chevron can drill “a well thereon,” it
continues by stating that “. . . Lessee shall in no event be required
to drill more than one well on any such unit or units.” This clearly
contemplates that Chevron may drill multiple wells on
consolidated units. The language here does not limit Chevron to
drilling only one well; it just provides that Chevron is not required
to drill more than one well.
Trial Court Opinion, at 10-11. The trial court further found that the
consolidation argument raised by the Porters was unavailing, because there
would be nothing to prevent Chevron from unitizing if required by the court.
We can discern no error in the trial court’s reasoning.
Initially, the Porters’ assertion that the court determined that Chevron
had “the absolute right to use the Porter Farm for whatever oil and production
activities it wants” is factually incorrect. The trial court, at this preliminary
injunction stage, did not conclude that Chevron possessed an “absolute right”
to use the property for any and all oil and production activities. Rather, the
court’s grant of relief was limited to allowing Chevron access to the Porters’
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land “for the limited purpose of conducting necessary testing required to
obtain a DEP permit.” Trial Court Opinion, 2/27/18, at 13.
In addition, the court did not exceed the proper scope of inquiry
regarding the ultimate merits of the case. In a preliminary injunction action,
the moving party, in order to prove that it is likely to prevail on the merits,
must establish a prima facie right to relief. Synthes USA Sales, LLC v.
Harrison, 83 A.3d 242, 249 (Pa. Super. 2013) Thus, where the terms of a
lease form the basis for a party’s request for injunctive relief, a court must,
necessarily, address the underlying merits by analyzing the terms of the lease
and interpreting its provisions in order to determine whether the party is likely
to prevail on the merits.2 See Santoro v. Morse, 781 A.2d 1220, 1229 (Pa.
Super. 2001) (because moving party must show he has reasonable likelihood
of success on merits, it is entirely reasonable and proper for court to consider
testimony going to merits at time of preliminary injunction hearing).
Accordingly, it was entirely proper for the court to interpret the terms of the
Lease in making a preliminary determination as to Chevron’s likelihood of
success on the merits. We further find the trial court’s above-quoted
interpretation of Paragraph 10 to be reasonable, particularly in light of the
contract-law precepts that, in construing a contract, we must give effect to all
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2 Of course, a preliminary injunction proceeding does not fully and finally
adjudicate the parties’ rights, and the principles of res judicata and collateral
estoppel are inapplicable to any findings made by the court during those
proceedings. Santoro, 781 A.2d at 1229.
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its provisions and that an interpretation will not be given to one part of the
contract which will annul another part of it. Capek, supra.
Because there existed reasonable grounds for the grant of a preliminary
injunction in favor of Chevron, Warehime, supra, we affirm the order of the
trial court.
Order affirmed.
Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 2/8/2019
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