The Wyoming Supreme Court heard arguments in a related case on December 16, 2015 (“Pennaco II”). In its appeal mandate, Pennaco II described Pennaco II as “the same question/question – in another agreement on the use of the surface – as presented” in Pennaco I. Before considering the Pennaco II case, Pennaco filed an application for a hearing of Pennaco I. Pennaco therefore concentrated his oral argument in Pennaco II on why the Court of Justice`s decision in pennaco I was wrong. The Wyoming Supreme Court accepted KD Company`s contractual approach, despite strong evidence that the commitments were designed as alliances with the country, including the language that these alliances would be ongoing with surface ownership. Instead, the Court argued that if the parties intended to enter into the parties` commitments and rights with the country, they should have contained a language that explicitly stated that the obligations, such as rights, were also managed with the mineral product. Thus, the Court found that, although Pennaco`s rights ended with the assignment, their obligations continued because they were not ongoing alliances with the mineral product and there was no express provision in the LYT that gave Pennaco the assignment of liability. The purpose of these guidelines is to provide useful advice to landowners negotiating mining contracts or land use agreements. The guidelines were developed in coordination and with support from the Converse County Landers Association, the Oil and Gas Accountability Project and the Powder River Resource Council. There is nothing in this document that provides legal advice. The information provided by this document is intended exclusively for information. In response to questions from the judges, Pennaco also attempted to distinguish the two cases by referring to additional language in the Pennaco II SUA, in which it was said that the rights were alliances that ran with the country.
However, a judge asked whether Pennaco felt that the owner of the surface was aware of the land and intended that Pennaco could develop the ores, but then transfer the lease and the SUA shortly before the maturity of the salvage obligation, thereby passing on the salvage obligation. The facts of the case emphasized this concern, as Pennaco had given written assurance to the surface owner three weeks prior to the award of the lease and the OAS to a small business that had gone bankrupt prior to the recovery of the area. Thus, it seems likely that the result of Pennaco II will be the same as in Pennaco I. Pennaco could not refer to a language in that OAS that frees them from their obligations after the assignment, and the court did not seem inclined to believe that the surface owner intended to allow the OAS to do so. In Pennaco Energy Inc. v. KD Company LLC, 2015 WL 7758324 (Wyo.) (“Pennaco I”), the Wyoming Supreme Court recently upheld a precedent that places Plaute and operators liable for the actions and failures of successors in surface use agreements. This was Pennaco`s ongoing liability for the obligations contained in a surface use agreement (“SUA”) between Pennaco and the lessor.
Under the terms of the SUA, Pennaco was required to make annual payments to the lessor and recover the surface after wells were clogged and abandoned. Pennaco, which fulfilled all of its commitments while holding the land subject to the SUA, transferred the land and rights under the LYT to a successor who failed to meet those obligations and ultimately declared bankruptcy. In this complaint to hold Pennaco liable for the failings of its successor, the parties took very different approaches to the law that should control the obligations imposed in an NAS.