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Trans Energy, Inc. v. EQT Prod. Co.

United States Court of Appeals, Fourth Circuit

February 25, 2014

TRANS ENERGY, INC., a Nevada Corporation; REPUBLIC PARTNERS VI, LP, a Texas limited partnership; REPUBLIC ENERGY VENTURES, LLC, a Delaware Limited Liability Company; PRIMA OIL COMPANY, INC., a Delaware Corporation, Plaintiffs - Appellees,
v.
EQT PRODUCTION COMPANY, a Pennsylvania Corporation, Defendant - Appellant

Argued: December 12, 2013.

Page 896

[Copyrighted Material Omitted]

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Appeal from the United States District Court for the Northern District of West Virginia, at Clarksburg. (1:11-cv-00075-FPS-JES). Frederick P. Stamp, Jr., Senior District Judge.

ARGUED:

W. Henry Lawrence, IV, STEPTOE & JOHNSON, PLLC, Bridgeport, West Virginia, for Appellant.

James C. Ho, GIBSON, DUNN & CRUTCHER, LLP, Dallas, Texas; Stuart A. McMillan, BOWLES RICE LLP, Charleston, West Virginia, for Appellees.

ON BRIEF:

Amy Marie Smith, Bridgeport, West Virginia, John Joseph Meadows, STEPTOE & JOHNSON, PLLC, Charleston, West Virginia, for Appellant.

James E. Scott, BOWLES RICE LLP, Charleston, West Virginia; Ashley E. Johnson, GIBSON, DUNN & CRUTCHER LLP, Dallas, Texas, for Appellees.

Before WILKINSON and GREGORY, Circuit Judges, and John A. GIBNEY, Jr., United States District Judge for the Eastern District of Virginia, sitting by designation. Judge Gregory wrote the opinion, in which Judge Wilkinson and Judge Gibney joined.

OPINION

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GREGORY, Circuit Judge:

This appeal arises from an action to quiet title. The parties make competing claims of ownership to the gas rights underlying a 3,800 acre plot of land located in northern West Virginia known as Blackshere.

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The parties filed cross-motions for summary judgment, and the district court ruled in favor of the plaintiffs. The defendant, EQT Production Company (" EPC" ), appealed the district court's decision on the merits, as well as several of its procedural rulings. EPC also makes a new argument on appeal, challenging whether subject matter jurisdiction existed in the district court.

Finding no error in any of the district court's decisions, we affirm the judgment as to three of the four plaintiffs. However, in order to retain jurisdiction, we exercise our authority to dismiss plaintiff Republic Energy Ventures, LLC (" REV" ) from the case, and we vacate the judgment with respect to that party.

I.

In 1892, John Blackshere and South Penn Oil Company (" South Penn" ), which would later become Pennzoil Products Company (" Pennzoil" ), entered into an oil and gas lease covering the Blackshere property (the " Blackshere Lease" or " Lease" ). The transfer was recorded with the Wetzel County Clerk. In 1901 and 1902, South Penn entered into two indenture agreements with Carnegie Natural Gas Company and Hope Natural Gas Company (" Hope" ). The indentures purported to sever South Penn's gas rights from its oil rights and allocate the gas rights to Carnegie and Hope.[1] It is undisputed that these indentures were never recorded.

In 1965, Hope conveyed all of its interests and rights to any property in Wetzel County to Consolidated Gas Supply Corporation (" Consolidated Gas" ). The transfer, which was recorded, did not reference the Blackshere Lease. Consolidated Gas is a predecessor in title to EPC.[2] As a result, the parties agree that EPC's alleged interest in Blackshere's gas rights derives from any right in the property that Hope transferred to Consolidated Gas by way of this 1965 conveyance.

On October 15, 1996, Pennzoil assigned its rights in the Blackshere Lease to Cobham Gas Industries, Inc. (" Cobham" ) through an assignment and bill of sale (the " Assignment" ). The Assignment was recorded through a memorandum of assignment (the " Memorandum" ) filed with the Wetzel County Clerk.

On November 5, 2004, Cobham conveyed its interest in the property (the " 2004 Assignment" ) to plaintiff Prima Oil Company, Inc. (" Prima" ) by way of a recorded transfer (the " 2004 Confirmatory Assignment" ). Prima is a wholly-owned subsidiary of plaintiff Trans Energy, Inc. (" Trans Energy" ). After the 2004 Assignment, Trans Energy assigned half of its portion of the leasehold interest to plaintiff Republic Partners VI, LP (" Republic Partners" ). REV's interest in the matter derives from an overriding royalty interest in whatever production Republic Partners obtains from the lease.

In 2011, Trans Energy was granted a permit by the West Virginia Department of Environmental Protection to drill a new gas well on the property. Prior to drilling the new well, Prima discovered EPC's alleged interest in the Lease resulting from the unrecorded Hope indenture. The plaintiffs then filed this action, seeking to quiet title to the Blackshere Lease and requesting declarations that they have rightful title to the gas rights underlying the property, and that Prima was a bona fide purchaser for value (" BFP" ) with no actual or constructive knowledge of a competing

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interest in the property when it acquired Cobham's interest in 2004.

EPC answered and filed several counterclaims seeking a declaration that it held superior title to Blackshere's gas rights, as well as tort claims for trespass, conversion, and waste.[3]

After significant discovery was undertaken by both sides, EPC filed a motion for an extension of time to complete discovery and to defer consideration of the plaintiffs' anticipated motion for summary judgment. The parties then filed cross-motions for summary judgment. The ...


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