In 2012, the Supreme Court of Pennsylvania endeavored to bring the 1899 decision in Young v Forest Oil Co. into the twenty-first century via T.W. Phillips Oil & Gas Co. v. Jedlicka. The Court implemented the good faith business judgment standard as the criterion for determining whether an oil and gas lease is producing “in paying quantities.” This Note examines how courts interpreted the term “in paying quantities” prior to Jedlicka. The Author argues that the good faith business judgment standard was inappropriately included in the test for determining when an oil and gas lease is producing in paying quantities and thereby created indefinite terms in oil and gas leases. The business judgment standard states that so long as an oil and gas company subjectively believes that it is continuing production activities for a profit, the lease will continue. Furthermore, the standard places an excessive burden of proof on a landowner attempting to terminate a lease due to unprofitable production. By enforcing such stringent requirements for terminating a lease, and incorporating a subjective good faith component, the Supreme Court of Pennsylvania encourages a significant imbalance among various interests at odds in oil and gas lease litigation. A test like the “reasonable prudent operator standard” would be more appropriate for regulating production quantities and promoting impartiality and balance in assessment of oil and gas lease litigation.
Joseph R. Plukas, ENERGY LAW—NOT BALANCING WELL INTERESTS WELL: HOW THE SUPREME COURT OF PENNSYLVANIA MISMANAGED OIL AND GAS LEASE POLICY IN T.W. PHILLIPS GAS &OIL CO. V. JEDLICKA, 36 W. New Eng. L. Rev. 68 (2014), http://digitalcommons.law.wne.edu/lawreview/vol36/iss1/3