IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA
September 2020 Term
_______________ FILED
November 18, 2020
released at 3:00 p.m.
No. 19-0347 EDYTHE NASH GAISER, CLERK
_______________ SUPREME COURT OF APPEALS
OF WEST VIRGINIA
ASCENT RESOURCES – MARCELLUS, LLC,
Plaintiff Below, Petitioner
v.
DONALD E. HUFFMAN and
TRIPLE L LAND AND MINERAL, LLC,
Defendants Below, Respondents
________________________________________________________
Appeal from the Circuit Court of Tyler County
The Honorable Jeffrey D. Cramer, Judge
Civil Action No. 16-C-25-C
AFFIRMED
________________________________________________________
Submitted: October 7, 2020
Filed: November 18, 2020
Kenneth E. Tawney, Esq. Jeremy B. Cooper, Esq.
Dale H. Harrison, Esq. Blackwater Law PLLC
Thomas J. Hurney, Jr., Esq. Aspinwall, Pennsylvania
Jackson Kelly PLLC Counsel for the Respondents
Charleston, West Virginia
Counsel for the Petitioner
JUSTICE HUTCHISON delivered the Opinion of the Court.
SYLLABUS BY THE COURT
1. “A circuit court’s entry of a declaratory judgment is reviewed de
novo.” Syllabus Point 3, Cox v. Amick, 195 W. Va. 608, 466 S.E.2d 459 (1995).
2. “An oil and gas lease (or other mineral lease) is both a conveyance
and a contract. It is designed to accomplish the main purpose of the owner of the land and
of the lessee (or its assignee) as operator of the oil and gas interests: securing production
of oil or gas or both in paying quantities, quickly and for as long as production in paying
quantities is obtainable.” Syllabus Point 1, McCullough Oil, Inc. v. Rezek, 176 W. Va. 638,
346 S.E.2d 788 (1986).
3. “A deed will be interpreted and construed as of the date of its
execution.” Syllabus Point 2, Oresta v. Romano Bros., Inc., 137 W. Va. 633, 73 S.E.2d
622 (1952).
4. A lease will be interpreted and construed as of the date of its
execution.
5. “An oil and gas lease which is clear in its provisions and free from
ambiguity, either latent or patent, should be considered on the basis of its express
provisions and is not subject to a practical construction by the parties.” Syllabus Point 3,
Little Coal Land Co. v. Owens-Illinois Glass Co., 135 W. Va. 277, 63 S.E.2d 528 (1951).
i
6. “A valid written instrument which expresses the intent of the parties
in plain and unambiguous language is not subject to judicial construction or interpretation
but will be applied and enforced according to such intent.” Syllabus Point 1, Cotiga Dev.
Co. v. United Fuel Gas Co., 147 W. Va. 484, 128 S.E.2d 626 (1962).
7. “It is not the right or province of a court to alter, pervert or destroy the
clear meaning and intent of the parties as expressed in unambiguous language in their
written contract or to make a new or different contract for them.” Syllabus Point 3, Cotiga
Dev. Co. v. United Fuel Gas Co., 147 W. Va. 484, 128 S.E.2d 626 (1962).
ii
HUTCHISON, Justice:
In this appeal from the Circuit Court of Tyler County, we are asked to review
an order denying an oil and gas drilling company’s motion for a declaratory judgment. In
the order, the circuit court refused to imply into an existing oil and gas lease a covenant to
pool and unitize the lease with nearby mineral estates.
We find no error in the circuit court’s order. In the absence of language in
an oil and gas lease showing the parties contemplated that a lessor has a right to pool and
unitize the lease with other estates, the circuit court correctly concluded that there can be
no implied covenant to pool or unitize.
I. Factual and Procedural Background
This case concerns a ninety-four-acre tract of land in Tyler County.
Defendants below Roy D. Haught and Betty Hadley owned a 50% interest in the oil and
gas mineral estate beneath the tract. The defendants have since conveyed an unknown
portion of their estate to Donald E. Huffman and Triple L Land and Mineral, LLC, who
are now acting in the place of the defendants in this appeal. On February 6, 1980, the
defendants’ predecessor in interest executed an oil and gas lease permitting the drilling of
wells on the tract to produce oil and gas. The 1980 lease is still in effect because wells on
the tract continue to produce oil and gas.
1
Plaintiff Ascent Resources – Marcellus LLC 1 (“Ascent”) owns the other 50%
interest in the oil and gas estate. Furthermore, Ascent has since become the successor in
interest to the 1980 lease. Hence, Ascent holds the sole right to drill wells on the tract and
to produce oil and gas.
On June 8, 2016, Ascent brought an action against the defendants seeking a
declaratory judgment regarding the 1980 lease. Ascent sought a declaration that the 1980
lease contained an implied covenant to pool or unitize the lease with other mineral interests.
Ascent declared that it wanted to drill modern, horizontal well bores into the Marcellus
shale formation beneath the tract, hydraulically fracture the shale, and produce oil and gas.
However, Ascent contended that oil and gas could only be economically produced from
the Marcellus shale formation if the “drilling units” are large enough to accommodate a
well bore that extends horizontally at least 2,500 feet in length. Ascent maintains that the
parties’ ninety-four-acre tract, operating alone, is too small to support the drilling of the
horizontal well bore.
In its declaratory judgment complaint, Ascent admitted that the 1980 lease
only granted Ascent the right to drill, develop, and operate for oil and gas on the ninety-
four-acre tract. Ascent also admitted that there is no language in the 1980 lease expressly
The record indicates that Ascent Resources—Marcellus, LLC is now known
1
as Tribune Resources, LLC, and is a wholly-owned subsidiary of Tribune Resources, Inc.
2
permitting Ascent to unitize or pool the lease with other nearby mineral interests to create
a drilling unit large enough to justify exploiting the shale formations. 2
To enable Ascent to economically drill the horizontal well bore, it asked the
circuit court for a declaration that the 1980 lease contained an implied covenant to unitize
or pool the lease with other mineral interests. Ascent sought the implied right given that
Although related, “pooling” and “unitization” have different meanings in
2
the context of oil and gas operations:
Generally speaking, pooling arises from the bringing together
of tracts of land for oil and gas drilling based primarily upon
the allowable spacing of wells. The focus of unitization,
however, is more directly on the geologic nature of the
underlying oil and gas reservoir and enhanced-recovery
techniques. See James E. McDaniel, Statutory Pooling and
Unitization in West Virginia: The Case for Protecting Private
Landowners, 118 W.Va. L. Rev. 439, 455 (2015) (Although
“pooling” and “unitization” are often used interchangeably,
pooling occurs “when separately owned tracts of land are
‘pooled’ or joined together in order to comply with spacing
requirements or to have sufficient acreage with which to obtain
a well permit.” By contrast, the goal of unitization “is to
consolidate enough of the interests in a particular reservoir to
allow production to be carried out in the most efficient
manner[.]”). See also Patrick H. Martin and Bruce M. Kramer,
Williams & Myers, Oil and Gas Law, § 901 (LexisNexis
Matthew Bender 2016) (“‘[P]ooling’ means the bringing
together of small tracts sufficient for the granting of a well
permit under applicable spacing rules whereas ‘unitization,’ or,
as it is sometimes described, ‘unit operation,’ means the joint
operation of all or some part of a producing reservoir.”).
Gastar Expl., Inc. v. Contraguerro, 239 W. Va. 305, 307 n.1, 800 S.E.2d 891, 893 n.1
(2017).
3
modern leases often have language that allows lessees to aggregate mineral interests to
create drilling units sufficient in size to support drilling in shale formations.
Ascent subsequently filed a motion for summary judgment, asserting that
there were no questions of material fact existing for resolution. Ascent asked the circuit
court to declare that pooling and unitization are reasonably necessary to develop the
minerals, and that pooling and unitization would place no unreasonable burden on the
owner of any interest in the ninety-four-acre tract. Furthermore, Ascent, as lessee of the
mineral and gas rights, requested a declaration adding five paragraphs to the parties’ 1980
lease. Specifically, Ascent moved the circuit court for an order
declaring that Ascent has the implied right to pool and unitize
the Subject Lease with other mineral leases or mineral interests
as a necessary adjunct to its right to drill and operate the
premises for oil and gas upon the following terms and
conditions:
1. Lessee shall have the right to pool, unitize, or combine all or
parts of the Leasehold with other lands, whether contiguous or
not contiguous, leased or unleased, whether owned by Lessee
or by others, at a time before or after drilling, to create drilling
or production units.
2. Pooling or unitizing in one or more instances shall not
exhaust Lessee’s pooling and unitizing rights, and Lessee shall
have the right to change the size, shape, and conditions of
operation of any unit created and to make concomitant changes
in payments.
3. Lessee shall allocate production from each well in a unit
among each of the leases in the unit as a percentage of that
leasehold’s acreage in the unit compared to the total leasehold
acreage in the unit. Lessee shall then pay the royalties specified
in each lease based upon the sale price of the production
allocated to that lease.
4
4. Drilling, operations in preparation for drilling, production,
shut-in production from the unit, or payment of royalty on any
part of the unit (including non-Leasehold land) shall have the
same effect upon the terms of the Subject Lease as if a well
were located on, or the subject activity were attributable to, the
Leasehold.
5. Lessee shall record among the land records of the county the
declaration of pooling and any amendments thereto and
attempt to furnish a copy to Lessor or their known successors
and assigns, although failure to furnish a copy to any Lessor
shall not operate to void or terminate any drilling unit that has
been formed.
In support of its request that the circuit court incorporate these five terms and conditions
into the 1980 lease, Ascent attached an affidavit from an energy development expert. The
expert opined that the terms “are customary today in the oil and gas industry for pooling.”
Another affidavit attached to the motion attested that the parties’ ninety-four-acre tract had
insufficient space to support drilling a horizontal well in a shale formation, and that the
1980 lease must be pooled with other mineral interests to create a drilling unit large enough
to accommodate horizontal drilling. 3
In an order filed March 5, 2019, the circuit court found the 1980 lease did
not grant Ascent an express right to pool or unitize the lease with other oil and gas interests.
More importantly, the circuit court found that nothing in the lease was unclear or
Ascent also attached a declaratory judgment order signed by a different
3
circuit judge in Tyler County in a different case. That order (which involved a predecessor
corporation of Ascent) implied into a lease a right to pool or unitize the lease and implied
the five new terms into the lease. American Energy – Marcellus, LLC v. Mary Jean
Templeton Poling, et al., Tyler Co. No. 15-C-34-H (April 15, 2016).
5
unambiguous regarding pooling and unitization. The circuit court concluded that, in the
absence of ambiguity, there is nothing for the circuit court to interpret and, therefore, that
the court was powerless to write a new or different contract for the parties. Furthermore,
the circuit court found that implying a covenant of pooling and unitization would impose
burdens upon the estate that were never bargained for or contemplated by the parties in
1980 and are not reflected in the terms of the lease. Hence, the circuit court refused to
imply a new covenant into the 1980 lease permitting pooling and unitization, and refused
to imply the five “customary” terms and conditions regarding pooling and unitization that
Ascent sought to have judicially incorporated into the lease. The circuit court denied the
motion for summary judgment and rejected Ascent’s request for a declaratory judgment. 4
Ascent now appeals the circuit court’s order.
II. Standard of Review
Because the purpose of a declaratory judgment action is to resolve legal
questions, “[a] circuit court’s entry of a declaratory judgment is reviewed de novo.” Syl.
pt. 3, Cox v. Amick, 195 W. Va. 608, 466 S.E.2d 459 (1995). See also, Syl. pt. 1, Painter
v. Peavy, 192 W. Va. 189, 451 S.E.2d 755 (1994) (“A circuit court’s entry of summary
judgment is reviewed de novo.”).
The circuit court also denoted the order as a final judgment pursuant to Rule
4
54(b) of the West Virginia Rules of Civil Procedure, to permit Ascent to appeal the order.
6
III. Discussion
Ascent argues that it presented affidavits to the circuit court and that the
defendants offered nothing to refute the evidence in those affidavits. Ascent claims that
these facts establish that it cannot develop the oil and gas in the Marcellus shale formation
without pooling or unitizing the 1980 lease with other mineral interests in nearby tracts.
Because the circuit court failed to adopt Ascent’s uncontroverted facts, Ascent contends
that the circuit court committed clear error.
Furthermore, Ascent argues that the circuit court erred in finding the 1980
lease was “clear and unambiguous.” Ascent admits that the lease is silent regarding
pooling, unitizing, and technologically-advanced drilling methods, but it argues that the
silence actually created an ambiguity. In other words, Ascent maintains the circuit court
should have equated silence with ambiguity and then determined whether there was an
inchoate or implied right to pool or unitize in the 1980 lease.
Finally, Ascent contends that it is a common practice for courts to imply new
rights into old leases. For instance, this Court has recognized leases may incorporate an
implied covenant requiring the lessee to develop mineral interests (St. Luke’s United
Methodist Church v. CNG Dev. Co., 222 W. Va. 185, 192, 663 S.E.2d 639, 646 (2008));
an implied covenant requiring a lessee to market oil and gas produced from a well
(Wellman v. Energy Res., Inc., 210 W. Va. 200, 211, 557 S.E.2d 254, 265 (2001)); or an
implied obligation requiring the lessee to protect the leased premises from drainage by oil
7
and gas wells placed on adjacent property (Syl. pt. 1, Adkins v. Huntington Dev. & Gas
Co., 113 W. Va. 490, 168 S.E. 366 (1932)). Without an implied covenant permitting
pooling or unitization, Ascent claims that the purpose of the 1980 oil and gas lease is
thwarted, and that the oil and gas in the Marcellus shale will not be developed and will thus
be wasted.
In response, the defendants characterize Ascent’s position as “an expression
of pure sophistry.” The defendants point out that the mineral estate beneath the ninety-
four-acre tract has been developed, can be further developed, and continues to produce, all
without resort to pooling, unitization and horizontal drilling. The defendants contend that
no purpose in the lease is being frustrated or thwarted because, when one examines the
terms and conditions in light of when they were negotiated and signed in 1980, the lease is
clear and the purpose of the lease is currently being achieved. They also point out that the
cases in which this Court has implied a new covenant into a lease have all been covenants
that inure to protect the lessor and impose an obligation upon the lessee; here, Ascent seeks
the inverse, a covenant imposing new burdens on the lessor.
The defendants further argue that the circuit court correctly determined that
it could not incorporate five new paragraphs of highly specific rights and obligations into
an otherwise unambiguous lease. The language that Ascent seeks to imply into the lease
was neither contemplated nor bargained for when the lease was signed in 1980. The circuit
court found that inferring rights to pool and unitize “would materially alter the terms of the
clear and unambiguous language of the [l]lease without fair consideration for such terms,”
8
and the defendants assert this finding is correct. The defendants argue that, at its core,
Ascent wants to have this and other decades-old leases rewritten and converted into a
portfolio of modern leases, all without paying the consideration paid in the current oil and
gas market. The defendants contend that the circuit court was right when it declared that
5
“the parties need to return to the negotiating table to see if they can reach an amendment
as to pooling for due consideration.”
To begin, the 1980 lease at issue is “to be construed like any other contract.”
Chesapeake Appalachia, L.L.C. v. Hickman, 236 W. Va. 421, 434, 781 S.E.2d 198, 211
(2015).
An oil and gas lease (or other mineral lease) is both a
conveyance and a contract. It is designed to accomplish the
main purpose of the owner of the land and of the lessee (or its
assignee) as operator of the oil and gas interests: securing
production of oil or gas or both in paying quantities, quickly
and for as long as production in paying quantities is obtainable.
Syl. pt. 1, McCullough Oil, Inc. v. Rezek, 176 W. Va. 638, 346 S.E.2d 788 (1986). See
also, Teller v. McCoy, 162 W. Va. 367, 383, 253 S.E.2d 114, 124 (1978) (“The authorities
agree today that the modern lease is both a conveyance and a contract.”); Phillip T. Glyptis,
“Viability of Arbitration Clauses in West Virginia Oil and Gas Leases: It Is All About the
Lease!!!,” 115 W. Va.L.Rev. 1005, 1007 (2013) (“[A] lease is by definition a contract. All
The 1980 lease requires the lessee “to pay rental at the rate of $4.00 per
5
acre, per year ($376) . . . until, but not after, a well yielding royalty to the Lessors is drilled
on the leased premises.” Thereafter, the lease requires a payment equal to 1/8 of the value
at the well of all oil and gas produced.
9
rights and protections are controlled by the principles of contract law and depend on the
proper construction.”).
Like a lease, this Court has held that deeds are also interpreted and construed
under principles of contract law. Faith United Methodist Church & Cemetery of Terra
Alta v. Morgan, 231 W. Va. 423, 443, 745 S.E.2d 461, 481 (2013) (“Deeds are subject to
the principles of interpretation and construction that govern contracts generally.”). We
have often applied the principle that “[a] deed will be interpreted and construed as of the
date of its execution.” Syllabus Point 2, Oresta v. Romano Bros., Inc., 137 W. Va. 633, 73
S.E.2d 622 (1952). See also Bruen v. Thaxton, 126 W. Va. 330, 340, 28 S.E.2d 59, 64
(1943) (When construing a deed, “[i]t goes without saying that the intent of the parties
sought to be reached is [the] intent existing at the time the contract was made.”). We have
just as often said this principle applies to oil and gas leases. See Energy Dev. Corp. v.
Moss, 214 W. Va. 577, 586, 591 S.E.2d 135, 144 (2003) (interpreting and construing oil
and gas lease as of the date of its execution); Cotiga Dev. Co. v. United Fuel Gas Co., 147
W. Va. 484, 495, 128 S.E.2d 626, 634 (1962) (discussing use of a “universal custom” that
existed “at the time of the making of the lease” to interpret lease). Accordingly, we hold
that a lease will be interpreted and construed as of the date of its execution.
Before a lease may be interpreted and construed, a court must find that the
lease is ambiguous. If the lease is not ambiguous and plainly expresses the intent of the
parties, then it must be enforced according to that intent. “An oil and gas lease which is
clear in its provisions and free from ambiguity, either latent or patent, should be considered
10
on the basis of its express provisions and is not subject to a practical construction by the
parties.” Syllabus Point 3, Little Coal Land Co. v. Owens-Illinois Glass Co., 135 W. Va.
277, 63 S.E.2d 528 (1951). As we said in Syllabus Points 1 and 3 of Cotiga Development
Company, 147 W. Va. at 484, 128 S.E.2d at 628:
A valid written instrument which expresses the intent of
the parties in plain and unambiguous language is not subject to
judicial construction or interpretation but will be applied and
enforced according to such intent.
It is not the right or province of a court to alter, pervert
or destroy the clear meaning and intent of the parties as
expressed in unambiguous language in their written contract or
to make a new or different contract for them.
In the instant case, the circuit court found that the 1980 lease was
unambiguous, and we find no error in that conclusion. The lease contains no language
suggesting that pooling and unitization were considered by the parties when they
negotiated and executed the document. 6 The lease secured production of oil and gas in
paying quantities, quickly, and for the last four decades has permitted production from the
mineral estate under the ninety-four-acre tract without need for pooling and unitization.
This is not to say that pooling and unitization would not result in the
production of greater quantities of oil and gas. The record supports Ascent’s claim that
Compare Stern v. Columbia Gas Transmission, LLC, No. 5:15CV98, 2016
6
WL 7053702 (N.D.W. Va. Dec. 5, 2016) (lease permitting operation “alone and conjointly
with other lands for the production and transportation of oil and gas” supports finding lease
permits pooling or unitization).
11
pooling the ninety-four-acre tract with surrounding tracts could permit the economical use
of horizontal drilling. But the circuit court did not have the right to alter, pervert or destroy
the clear meaning and intent of the parties to the 1980 lease. If the circuit court had inferred
the existence of a covenant to pool or unitize, then it would have substantially and
materially altered the anticipated burden on the estate.
In the absence of language in an oil and gas lease expressing a right to pool
or unitize the lease with other mineral estates, this Court will not infer such a right. In the
instant case, Ascent wants to impute a covenant to pool or unitize, accompanied by five
paragraphs of specific rights and obligations, without paying additional consideration. The
implied covenant Ascent seeks was neither contemplated nor bargained for when the lease
was signed. Therefore, we find no error in the circuit court’s decision refusing Ascent’s
invitation to rewrite the parties’ lease.
IV. Conclusion
We find no error in the circuit court’s March 5, 2019, order, denying Ascent’s
motion for summary judgment and denying Ascent a favorable declaratory judgment.
Affirmed.
12