US District Court Judge David N. Hurd has issued a pair of rulings in cases that Southern Tier landowners have brought against gas companies to be released from leases that have expired. The gas companies have issued “force majeure” letters insisting that they have the right to unilaterally extend the terms of the leases due to New York State’s functional moratorium on certain types of drilling technologies while the environmental review process continues.
According the reporting on the Binghamton-based Press-Connects site, the majority of the cases are forced out of the federal courts and into arbitration, because the leases landowners signed included an agreement to forgo their right to seek redress through the court system, and settle disputes via arbitration instead. However, the minority of leases that did not include these clauses have been cleared to go forward in the courts. The lawyers for the landowners had been trying to have the court nullify the arbitration clause and allow all the cases to proceed.
“These were documents that were drafted by the gas and oil companies and very rarely did a landowner get an attorney and negotiate with them,” Jones said. “They simply signed a dotted line and didn’t quite understand what all of the fine print meant in these leases.”
In his March 20 order, Hurd granted Chesapeake’s request to force the matter into arbitration.
“There are valid agreements to arbitrate and the disputes raised fall within the scope of the arbitration clause,” Hurd wrote. “Therefore arbitration will be compelled as to those leases that include an arbitration clause.”
However, there may be an appeal.
The second case on which Hurd ruled had already reduced the number of plaintiffs to 32 from an original 160 landowners– leaving only those whose leases did not include an arbitration clause. In that case, Hurd ruled that the case can proceed in federal court, and Chesapeake Energy has a few weeks to submit its response. The lawyer for the landowners in the suit explains that the case hinges on whether or not it was “impossible” for the companies to drill for gas during the lease term– which he says it was not, as conventional drilling and low-volume hydrofracking in formations such as the Trenton-Black River were still available for permit by the DEC during the time in question.
“The concept of force majeure is that there needs to be an impossibility,” Kurkoski said. “And it’s clearly not impossible to drill wells in New York.”