In Caldwell v. Kriebel Resources, Co., et al., decided on June 21, 2013, the Caldwells attempted to invalidate an oil and gas lease encumbering their property. Although the Caldwells conceded that Kriebel had drilled shallow natural gas wells on the property and gas was being produced therefrom, the Caldwells argued that the lease should be invalidated because there had been no development or production of natural gas from the Marcellus shale formation. Kriebel had assigned the “deep rights” to Range Resources – Appalachia, LLC. Both Kriebel and Range Resources argued that the lease remained valid and in effect as a result of the development and production of gas from the shallow wells on the property.
The Caldwells argued that Pennsylvania's implied duty to develop should be expanded to include an implied duty to develop different strata. The Superior Court disagreed, finding that there is no precedent in Pennsylvania which requires an operator to develop all depths. The Court noted that the lease in question expressly disclaimed all implied warranties. Importantly, though, the Court also stated that it was not persuaded that such an implied duty exists in Pennsylvania.
The Court also rejected the Caldwells' argument that Defendants had to produce oil and gas in "paying quantities" as to all strata. Although the phrase “paying quantities” was not found in the lease, the Court concluded that the current production from shallow gas wells would be considered production in “paying quantities” under Pennsylvania law.
Finally, the Court rejected the Caldwells’ contention that there is an implied “good faith standard for all aspects of the [gas] industry that affect production of lessors' natural gas."