A group of about 89 landowners in western New York state filed a lawsuit in a U.S. bankruptcy court against Norse Energy Corp. USA on Friday after the company declared a force majeure and extended its oil and gas leases.

The company, which filed for bankruptcy protection last December (see Shale Daily, Dec. 10, 2012), cites the ongoing moratorium on high-volume hydraulic fracturing (HVHF) in New York as the rationale for declaring a force majeure.

According to court documents, the Norse leases cover about 6,314 acres in Broome, Chenango and Madison counties. All but four of the leases have since expired, with the remainder set to do so in July.

“Despite requests from landowners, Norse has refused to provide documents cancelling the lease as of record,” Robert Jones, plaintiffs’ attorney with the Binghamton, NY-based firm Coughlin & Gerhart LLP, said in court documents. “None of the leases here involved stipulate that the ability to conduct operations with HVHF is a basis of the bargain between the parties.”

Jones argues that Norse knew it would not have been permitted to drill wells and stimulate them with HVHF — specifically with more than 80,000 gallons of fracking fluids — but did not amend the leases to reflect the limitation.

“Despite knowledge of regulations affecting HVHF, Norse inserted nothing in its lease providing that the ability to use HVHF was material to the lease term,” Jones said. “The leases involved are silent as to the type of drilling to be used or the formation to be targeted.”

Norse began issuing notices of force majeure to its leaseholders in January 2011, extending the leases for 1,500-2,000 landowners (see Shale Daily, March 3, 2011; Jan. 18, 2011). The company cited the moratorium on HVHF for its decision.

Norse Executive Vice President Dennis Holbrook told NGI’s Shale Daily the company gave appropriate notice of force majeure. “We believe that the cirsumstances in New York gives rise to force majeure under our leases and that the courts will utlimately confirm that,” Holbrook said Tuesday. “This is consistent with the language that both sides agreed to when they entered the lease.”

In December 2011, Bradford Drilling Associates LP sued Norse over a halted joint venture (JV) drilling program. Eleven months later, a state Supreme Court judge denied Bradford a motion for summary judgment, but ordered Norse to deposit $7.65 million — the amount Bradford was seeking — into an escrow account pending a result in the case, which is expected to go to court in the second half of 2013.

The high court’s ruling in the Bradford case effectively pushed the company, a subsidiary of Norwegian Norse Energy Corp. ASA, into bankruptcy.

Holbrook said that as part of its refinancing in bankruptcy, Norse will put some of its assets up for sale this summer or early fall, “to at least pay back what we’ve borrowed as part of the bankruptcy proceedings.”

The company holds about 130,000 net acres in New York’s portion of the Marcellus and Utica shales: about 100,000 net acres in central New York and 30,000 net acres in western New York. Holbrook said he anticipates a combination of central and western New York acres will ultimately be sold, and that some of the 6,314 acres at stake in the lawsuit will be included.

“Those are still valuable assets that we anticipate having the opportunity to utilize down the road,” Holbrook said.

In fall 2011, the company put its acreage up for sale, began looking for JV partners and considered shifting its attention to opportunities in Pennsylvania (see Shale Daily, Oct. 31, 2011; Oct. 25, 2011). The company sold two natural gas pipeline subsidiaries to Appalachian Transportation and Marketing LLC for $20.7 million in 2011, and its operated production in New York to EmKey Resources LLC for $37 million in 2012 (see Shale Daily, March 19, 2012; May 25, 2011).

Judge Carl Bucki is presiding over the case, Blackman et al v. Norse Energy Corp. USA (No. 1-12-13685-CLB), in U.S. Bankruptcy Court in Buffalo.