Beardslee v. Inflection Energy, LLC

Plaintiffs, various landowners, entered into separate oil and gas leases with Victory Energy Corporation whereby Plaintiffs leased drilling rights to Victory. Victory shared its leasehold interests with Megaenergy, Inc. Inflection Energy, LLC subsequently assumed from Megaenergy the operational rights and responsibilities under most of the leases. Each of the leases contained a force majeure clause, which provided that nonperformance may be excused under certain circumstances, and a habendum clause, which established the primary and definite period during which the energy companies could exercise the drilling rights granted by the leases. After the primary term of the leases had expired with no operations having been conducted upon the leaseholds, Plaintiffs commenced this declaratory judgment action against Inflection, Victory, and Megaenergy, seeking a declaration that the leases had expired by their own terms. The energy companies counterclaimed for a declaration that each lease was extended by operation of the force majeure clause, arguing that New York’s moratorium on the use of horizontal drilling and high-volume hydraulic fracturing triggered the force majeure clause. The district court granted summary judgment to Plaintiffs. On appeal, the Second Circuit certified to the New York Court of Appeals certain questions. The Court of Appeals answered that the force majeure clause did not modify the habendum clause. Therefore, the leases terminated at the conclusion of their primary terms. View "Beardslee v. Inflection Energy, LLC" on Justia Law