NY Judge Rules Gas Drilling Lease Invalid

A Sullivan County, N.Y. trial court ruled against Cabot Oil and Gas by prohibiting the gas company from drilling in a Tusten, N.Y. community. Supreme Court Justice James P. Gilpatric ruled that a housing development’s restrictions against commercial activity applied to gas drilling. Cabot had negotiated a lease with a landowner within the Weiden Lake Community to tap natural gas within the Marcellus Shale. The New York Law Journal reports that Gilpatric said Cabot knew about the housing development’s rules but negotiated the lease anyway.

“[T]he evidence clearly demonstrates that Cabot, a sophisticated business entity, made a calculated and knowing decision to enter into the lease, approve title and pay the signing bonus with full knowledge” of the protective covenant and the opposition of the property owners’ association, Justice Gilpatric held in Weiden Lake Property Owners Association Inc. v. Klansky and Cabot Oil, 3885/09. “Therefore, it is not entitled to rescission of the lease under a mistake of law.”

Gilpatric also ruled that the landowner, Jeff Klansky, can keep his $99,255 signing bonus.

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