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Harrison v. Cabot Oil & Gas Corp.

ELR Citation: 45 ELR 20037
Nos. J-95-2014, (Pa., 02/17/2015)

The Pennsylvania Supreme Court held that oil and gas leases need not be extended where the lessor has pursued an unsuccessful lawsuit challenging the validity of the lease. An oil company that had been unsuccessfully sued by its lessor argued that it would be appropriate for the courts to award an extension of the primary lease term, measured by the length of time the unsuccessful lawsuit was pending. It asserted that the lessor's conduct in seeking a judicial declaration that the lease was invalid amounted to an "anticipatory repudiation" of the lease. But the court disagreed. The filing of a declaratory judgment action merely contesting the validity or scope of an agreement does not entail an unequivocal refusal to perform. In addition, oil companies are readily capable of negotiating appropriate tolling provisions in connection with their leases to account for the prospect of delay occasioned by lessors' validity challenges.