Perceived Ambiguity Threatens Easement
A Pennsylvania court recently decided that drilling for natural gas was “not clearly and unambiguously prohibited by the conservation easement” and denied the easement holder’s motion to dismiss the landowner’s case to drill for natural gas on the protected property.
The conservation easement’s stated purpose is “preserving the Conservation Values of the Property; the protection of plant life and wildlife biodiversity and the protection of wildlife habitats; and conserving and protecting the Property from soil erosion, water pollution, development, fragmentation, and other occurrences which might interfere with the Property's Conservation Values, or with the beauty and unique character of the Property...”
The conservation easement prohibits, among other activities, the following: (a)“industrial or commercial uses of any kind… except home occupations,” (b) “commercial mining and/or quarrying of any kind. However, quarrying for the personal use of the Grantee … shall be permitted,” (c) “depositing, dumping, abandoning, or release of any solid waste or debris, or liquid wastes or chemical substances … except … fertilizers, herbicides and pesticides,” and (d) “New roads, except to provide low-impact temporary access to logging.”
In 2002, the Stockport Mountain Corporation LLC (Stockport) bought the 2,000-acre protected property from Stockport Forest Preservation, LLC, a wholly owned subsidiary of the Norcross Wildlife Foundation, the easement holder. Several years later, Stockport sought Norcross’s approval of a natural gas hydrofracture drilling lease. Stockport claimed the lease would affect only five acres of the protected property. Norcross denied approval, and Stockport sued.
In a memorandum opinion (Stockport Mountain Corporation LLC v. Norcross Wildlife Foundation, Inc., No. 3:11cv514 (M.D. Pa. March 1, 2012)), the court denied Norcross’ claim that the proposed drilling lease clearly violated four provisions of the conservation easement and therefore the complaint should be dismissed without further argument. First, the court held that the purpose provision, in and of itself, was too vague and subjective to prohibit drilling. Next, the court held that the terms “commercial” and “industrial” were not defined in the easement, and that other sections of the easement allow certain such uses, thus creating enough ambiguity to survive the motion to dismiss. Similarly, the court held that it was ambiguous whether the release of chemicals below the surface of the protected property, as opposed to on or above the surface, is prohibited by the easement. Finally, the court found that Stockport’s contention that the drilling activities would use existing roads and that new roads would be “largely unnecessary,” was enough to show an ambiguity about whether the roads restriction of the easement would be violated. The court found that at this stage of the proceedings it was premature to say that the gas lease is clearly and unambiguously prohibited by the conservation easement.
The court elaborated on ambiguities in “crucial provisions” that would require further discovery to resolve. For example, in interpreting the easement’s purpose to protect the property from “occurrences which might interfere with the Property’s Conservation Values,” the court said that the conservation values “are not known at this time as they are not attached as an exhibit to the complaint” (which included the conservation easement as an exhibit).
The court also suggested that ambiguity was created by “the conservation easement’s express approval of many activities that are contrary to its purpose, such as allowing limited timbering, quarrying, ATV/snowmobile use and the construction of four residences.” Norcross pointed to the Pennsylvania conservation easement enabling statute’s provision that “conservation or preservation easements shall be liberally construed in favor of the grants contained therein to affect the purpose of those easements and the policy and purpose of this act,” but the court did not credit this argument.
Although conservationists hope, and assume, that Norcross will eventually prevail, it will now have to spend time, effort and funds on discovery and further litigation proceedings. Easement drafters should review their templates to see how they would stack up against this court’s interpretations. Some drafting suggestions include:
- Craft a clear, unambiguous and sufficiently detailed conservation purposes clause.
- Identify conservation attributes and values and clearly articulate what makes those attributes important.
- Elaborate on the purposes, attributes and values in the baseline documentation report.
- Ensure that every reserved right does not impair the property’s conservation values.
- Articulate how the reserved rights are not inconsistent with the stated conservation purposes.
- Consider defining critical terms but use extreme caution and balance the use of definitions against the risk of them becoming obsolete.
- Include language that gives the land trust discretion to determine if any activity, use or structure is inconsistent with the purposes of the easement.
- If necessary to protect the property’s conservation values, consider drafting your easement’s mineral clause restriction to prohibit the leasing or sale of mineral rights and the exploration for, or development or extraction of, minerals or hydrocarbons from on or under the surface of the protected property by hydrofracturing, directional drilling or other methods.