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Second Circuit Affirms Narrow Reading of Force Majeure Clause in New York Oil and Gas Leases in Connection with Fracking Moratorium, Environmental Liability, Enforcement & Penalties Reporter

October 2015

The Second Circuit has dealt another blow to the oil and gas industry, affirming a 2012 New York District Court holding that a number of oil and gas leases had expired at the conclusion of the subject leases' primary terms because no oil and gas operations occurred on the properties during that time.

The Second Circuit held that the force majeure clauses of the subject leases did not modify the primary term of those leases' habendum clauses. Taking its lead from the New York State Court of Appeals, the Second Circuit concluded that even if New York's moratorium on high volume hydraulic fracturing and horizontal drilling could be considered as unforeseeable and beyond the lessee energy companies' control as to trigger the leases' force majeure clauses, the leases' force majeure classes did not apply to the expired five-year primary terms of the leases.

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