This article appears in the April 2021 issue of The PIOGA Press.

In a case that had potentially significant adverse consequences for our industry, the Pennsylvania Supreme Court on March 24 ruled against Pennsylvania Attorney General Josh Shapiro’s attempt to bring claims under Pennsylvania’s consumer protection law on behalf of private landowners against a natural gas exploration and production company for its alleged deceptive, misleading and unfair practices in obtaining natural gas leases from the landowners.

The attorney general also pursued antitrust remedies under the same statute, the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL), but the court concluded that neither of these legal “theories are cognizable under the UTPCPL,” which, as the title of the law states, “aims to protect the consumers [or purchasers] of the Commonwealth against fraud and unfair or deceptive business practices.” Commonwealth of Pennsylvania v. Anadarko Petroleum Corporation and Anadarko E&P Onshore, L.L.C., No. 81 MAP 2019.

PIOGA, along with the Marcellus Shale Coalition and the American Petroleum Institute, had filed an amicus brief arguing that an oil and gas “lease,” through which an E&P company seeks to obtain a fee simple determinable in the landowner’s oil and gas estate, is not a consumer transaction―the company is not offering to sell or distribute any goods, services or property, as the company is the purchaser, not the seller. In addition, as noted by the court, industry’s joint amicus brief also pointed out that the legislature has regulated the oil and gas industry outside of the UTPCPL, referring to the Oil and Gas Lease Act and the Recording of Surrender Documents from Oil and Gas Lease Act.

Finally, industry argued that applying the UTPCPL to our industry would introduce a great deal of uncertainty and complication into oil and gas leasing transactions that have been carried on in the Commonwealth for almost 200 years and would impact the entire industry―including small family-owned operators, companies qualifying as small business and publicly traded companies―whether they are engaged in lease transactions regarding unconventional shale formations or traditional shallower conventional formations.

Supreme Court action in another UTPCPL case

The significance to our industry of the court’s decision in the Anadarko case is emphasized by the Pennsylvania Supreme Court’s decision about five weeks earlier in another UTPCPL case. On February 17, in a 4-3 decision the court held―for the first time―that a business’s state of mind is not relevant for a consumer to sustain a private cause of action under the UTPCPL’s “catch-all” provision, which makes it unlawful to engage in “fraudulent or deceptive conduct which creates a likelihood of confusion or of misunderstanding.” The court stated that without a state of mind requirement, the catch-all provision “fairly may be characterized as a strict liability offense.” Gregg v. Amerprise Financial Inc., No. 29 WAP 2019.

It is apparent that a ruling applying the UTPCPL to our industry, along with the decision in the Gregg case, would have created even more problems for our industry than we had suggested in our joint amicus brief.

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