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(Zoonar/P.Malyshev)

What happens when a deed is unclear and the parties to a transaction involving oil and gas interests are long deceased? How do the heirs to the parties involved resolve their disputes? This is a relevant issue courts and practitioners in Pennsylvania have faced for a long time. A recent Pennsylvania Supreme Court decision, Shedden v. Anadarko E&P, No. 103 MAP 2014, A.3d (Pa. 2016), applied the doctrine of estoppel by deed to an oil and gas lease, precluding the lessors from denying that the lease at issue covered the lessors’ after-acquired interest in the oil and gas rights. Estoppel by deed may be further extended to resolve these thorny disputes.

The Sheddens entered into an oil and gas lease with Anadarko E&P Co., in 2006, for their 62-acre tract. Subsequent to entering into the lease, Anadarko’s agent discovered that under an 1894 deed, Ezra and Emma Baxter reserved one-half of the oil and gas rights to this property. Anadarko paid the Sheddens half of the bonus payment for entering into the lease on account of their half-interest. The Sheddens commenced a quiet title action in connection with the Baxters’ one-half reserved interest, and in 2008, a court ordered that the Sheddens owned in fee simple all of the oil and gas rights associated with the property. Anadarko subsequently exercised an option to extend the term of the lease and tendered a payment to the Sheddens for the full 62-acre interest. The Sheddens rejected the payment, contending that the lease covered only one-half of their interest in the tract. In the litigation that ensued between the Sheddens and Anadarko, the Sheddens asserted that Anadarko’s original payment for a half-interest under the lease operated as an amendment to the lease, leaving the Sheddens free to lease the other one-half interest.

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