Bankruptcy: Executory Contracts Oil and Gas Leases: Landlord/Tenant Law Not Applicable; Pennsylvania

摘要

The Debtor executed a lease on 107 acres in 2005. SWEPI, LP is the current lessee. Debtor has been receiving $3.00/acre annual delay rental payments through the time that he filed his Chapter 13 bankruptcy petition in November 2011. The original Chapter 13 plan had the Debtor assuming the lease and using the expected royalty payments to fund the plan. No drilling occurred and the Debtor changed his mind and filed a motion to reject the oil and gas lease. SWEPI filed a motion in opposition to the Debtor's motion. The Debtor asserts that he has received an offer to lease his mineral estate from a third party on much better terms. He argues that the original lease was grossly inadequate in terms of the recent offer. SWEPI argues that the oil and gas lease is not the same as a regular landlord/tenant lease which is subject to assumption or rejection under the Bankruptcy Act (11 U.S.C. § 365(d)(2)). Executory contracts and unexpired leases are clearly subject to the § 365 power. Normally a decision to assume or reject by the Debtor must be in the best interest of the bankruptcy estate. Both the Bankruptcy Court and the District Court found that the oil and gas lease should not be rejected. Held: affirmed. While again relying on the analysis of both the Bankruptcy and District Court opinions, the Third Circuit clearly enunciates the basic proposition that oil and gas leases are not governed by the Pennsylvania Landlord and Tenant Act of 1951 (68 Pa. Stat. §§ 250.101 et seq.). Therefore the lease is not an "at will" lease that the lessor may terminate at any time. Finally, the court also recognizes that the current lessee has a possessory interest in the mineral estate until, at least, the end of the primary term.