United States: The Applicability Of Pennsylvania’s Mechanics Lien Law To Oil And Gas Well And Pipeline Construction Projects

The owner and contractors on a construction project usually anticipate that all parties will be properly paid for work performed. In reality, however, it is not uncommon for issues to arise related to the payment of a contractor and its subcontractors or suppliers. In addition to bringing a breach of contract action, Pennsylvania's Mechanics Lien Law (the "Lien Law")1 provides an unpaid contractor or subcontractor with a powerful additional legal remedy to obtain payment because a mechanics lien is imposed against the property interest to which qualifying "improvements" were made, creating a "cloud" on the legal title to that property interest.2 With the recent boom in Marcellus shale in Pennsylvania, the question has arisen as to whether or not gas wells or pipelines qualify as "improvements" for purposes of the Lien Law, and therefore can be made the proper subject of a mechanics lien claim filing.

A valid mechanics lien claim must satisfy numerous statutory requirements. One such primary requirement is that work performed by the contractor or subcontractor must constitute an "improvement" in the property, as defined under the Lien Law. The underlying theory is that, if the contractor has provided services which permanently improve the value of the property, then it ought to be paid for the value of such services. Thus, the work done must create a new improvement upon the estate, or make a substantial addition to an existing improvement.3 The statutory language under the Lien Law defines an "improvement" to include "any building, structure or other improvement of whatsoever kind or character erected or constructed on land, together with the fixtures and other personal property used in fitting up and equipping the same for the purpose for which it is intended."4 Pennsylvania courts have further defined an "improvement" as "a permanent addition to real property that enhances its capital value...and is designed to make the property more useful or valuable."5

Does the construction of a gas well or the installation of a gas pipeline fall within this definition? This issue has not been specifically decided by the Pennsylvania courts in any reported decision, but prior decisional law, the legislative history preceding the current version of the Lien Law, and the broader body of out-of-state case law all suggest that that an oil and gas well or pipeline project can be susceptible to mechanics lien filings.

The only reported decision touching upon the subject is Yellow Run Coal Co. v. Yellow Run Energy Co., 420 A. 2d 690 (Pa. Super. Ct. 1979). In that case, the Pennsylvania Superior Court analyzed whether or not mining is an improvement to real property under the Lien Law. The court drew a distinction between strip mining (which involved only activities associated with the excavation of top soil and coal) compared to underground mining (which also includes the erection and construction of permanent improvements). The court in Yellow Run also compared the definition of improvement under the current version of the Lien Law, amended in 1963, with the definition from the 1901 Lien Law.6

The extended legislative history to the current Lien Law is also informative. Before the current Lien Law was enacted, the prior version, Pennsylvania's Mechanics Lien Law of 1901 (the "1901 Lien Law") included a list of structures there were considered improvements.7 Mines, pipelines and wells for the production of gas, oil or other volatile or mineral substances were all specifically listed as "improvements" under the 1901 Lien Law.8 When the Lien Law was amended in 1963, this itemized list of improvements was replaced with the current, more generic definition. However, the comments to the 1963 version of the Lien Law clarify that the legislature's removal of the non-exhaustive list did not intend to modify a party's right to file a lien.9 To the contrary, the legislature removed the itemized list because they thought it was unnecessary.10

A review of recent Pennsylvania filings reveals that at least one contractor has attempted to lien a gas pipeline project, but the matter was resolved without any decision being rendered on the issue. See, e.g., Otis Eastern Services, Inc. v. Chesapeake Midstream Services, L.L.C, Bradford Cty. C.P. Civ.No. 13ML000073. Outside of Pennsylvania, other states' lien laws have generally been interpreted to include gas wells and pipelines as lienable improvements. For example, Indiana's mechanics lien law does not specifically identify construction of a gas pipeline as an item that is considered an improvement, but cases in Indiana have held that mechanics liens can be placed on gas pipelines by contractors who performed construction work on the pipeline.11 Similarly, West Virginia's mechanics lien law does not specifically identify improvements on an oil/gas pipeline as lienable, but the West Virginia courts have permitted mechanics liens for work performed in drilling a well.12

To eliminate any uncertainty in relying on decisional law, some states that previously interpreted general mechanics lien law statutes to be applicable to oil and gas well or pipeline construction projects have now enacted specific lien laws addressing oil and gas projects. For example, New Mexico, Oregon and California's lien laws all now contain specific language regarding oil and gas wells and pipelines, eliminating the need to rely on prior decisional law that had extended the state's general mechanics lien statute to such projects.13 Finally, many of the remaining states have specific statutes in place, separate from their general mechanics lien law, regarding lien rights on oil and gas projects.14 Although some states limit the class of people and interests for filing a lien on a pipeline project, no state has explicitly rejected the applicability of mechanics liens to an oil or gas well or pipeline project altogether.15

In conclusion, while there is currently no case law in Pennsylvania that specifically resolves the question of whether or not an oil or gas well or pipeline constitutes a lienable improvement for purposes of the Lien Law, the broader body of decisional law and legislative history indicates that oil and gas projects may be vulnerable to such claims by unpaid contractors, subcontractors and suppliers—provided the other statutory lien requirements have all been satisfied.16 For owners, developers and project lenders on such projects, this risk underscores the need to investigate and utilize precautions in the Lien Law designed to mitigate the risk of a possible mechanics' lien claim filing, such as: (i) utilizing provisions unique to Pennsylvania's Lien Law that permit the filing of no-lien agreements designed to preclude the ability of subcontractors and suppliers to pursue lien claims; (ii) obtaining partial lien waivers as the work is ongoing to further reduce the risk of a lien filing; (iii) requesting contractual indemnities against liens in the development and construction contracts; and (iv) for lenders, taking advantage of certain lender "super-priority" provisions in the Lien Law designed to protect project lenders if a lien were to be filed.17


1. 49 PURDON'S. STAT. ("P.S.") §§ 1101, et seq. (2010).

2. On a project involving the construction of a building, the mechanics lien claim would typically be filed against the underlying property on which the building was constructed, usually the fee estate. However, on most gas well or gas pipeline projects, the production company does not own the land on which the well or pipeline is being installed, but typically only holds a leasehold or easement interest from the landowner. The Lien Law permits a lien to be asserted against a leasehold or easement interest, but places significant restrictions on the ability to assert a lien beyond the leasehold interest and against the underlying fee estate. See 49 P.S. 1303(d) ("No lien shall be allowed against the estate of an owner in fee by reason of any consent given by such owner to a tenant to improve the leased premises unless it shall appear in writing signed by such owner that the erection, construction, alteration or repair was in fact for the immediate use and benefit of the owner.").

3. 49 P.S. §1201(10); Dollar Bank, FSB v. EM2 Dev. Corp., 716 A. 2d 671, 674 (Pa. Super. 1998).

4. 49 P.S. §1201(1).

5. Sampson–Miller Assoc., Cos., Inc. v. Landmark Realty Co., 303 A. 2d 43, 45 (Pa. Super. 1973).

6. Id. at 691.

7. Mechanics Lien Act of 1901, P.L. 431 § 1.

8. Id.

9. See 49 P.S. § 1201(1), (12), cmt. 1, providing that "the detailed enumeration of the types of structure or improvements such as wharves, docks, bulkheads, conduits, coalbreakers, etc., contained in the Act of 1901 is omitted and the phrase 'structure or improvement of whatsoever kind and character' which is taken verbatim from Section 1 of the Act of 1901 is adopted as a generic definition. This is not intended to abridge or to enlarge the right to lien."

10. Id.

11. McCartin McAuliffe Mech. Constr. v. Midwest Gas Storage, 685 N.E. 2d 165 (Ind. Ct. App. 1997); see also, Mid America Homes, Inc. v. Horn, 396 N.E. 2d 879 (Ind. 1979) (citing Monpelier Light & Water Co. v. Stephenson, 53 N.E. 444 (Ind.1899)) (enforcing mechanics lien for erection of an oil well derrick under Indiana's law).

12. See Kanawha Oil & Gas Co. v. Wenner, 76 S.E. 893 (Va. 1912) (oil and gas well found to be a qualifying structure under West Virginia's mechanics' lien law, W. VA. CODE §§ 38-2-1 et seq. (1985)).

13. See N.M. Albuquerque Foundry & Mach. Works v. Stone, 286 P. 157 (1930); Lakeview Drilling Co. v. Stark, 310 P. 2d 627 (1957); Yearout v. American Pipe & Steel Corp., 168 P. 2d 174 (4th Dist. 1946)(applying New Mexico, Oregon and California's general mechanics lien statute to drilling of an oil well). New Mexico and California have both since passed specific statutes regarding lien rights in oil and gas projects. See N.M. STAT. ANN. §§ 70-4-1 et seq. (1987); CAL. CIV. PROC. CODE §§ 1203.50 et seq.(1981).

14. Alaska, Arizona, Arkansas, California, Colorado, Idaho, Illinois, Iowa, Kansas, Kentucky, Louisiana, Michigan, Montana, New Mexico, Oklahoma, Texas, Utah, Wyoming.

15. See e.g. New York law holding equipment rental relating to pipeline construction not lienable. Butts v. Randall, 260 N.Y.S. 713 (N.Y. Tr. Ct. 1932); Whereas a state court in Kentucky has held that the lienability of rental equipment depends on the type of equipment. Stagg Indus. Dev. Corp. v. General Oil Field Supply Co., Inc., 743 S.W.2d 41 (Ky. Int. App. Ct. 1988). See also Florida, Illinois, Louisiana, Michigan, Ohio, and Arkansas laws for another example of how state lien interests for pipelines differ. These states will expressly grant a lien on a pipeline's production when a contractor has not been paid. 40. FLA. STAT. ANN. § 713.805(3); ILL. REV. STAT. CH. 82, ¶ 503(3); LA. REV. STAT. ANN. § 9:4861(A); MICH. COMP. LAWS ANN. § 26:423(1); OHIO REV. CODE ANN. § 1311.021(A); ARK. STAT. ANN. § 18-44-211.

16. Satisfaction of these other statutory requirements is no easy matter, and can quickly become a daunting task on a large oil and gas project. For example, whether each gas well would be considered to be a separate "improvement" and whether the project is considered a single "plant" or multiple projects, may create complex allocation and apportionment issues for the contractor seeking to assert a lien. See 49 P.S. §1306. Similarly, where a pipeline project extends over more than one parcel or one county, the logistics associated with filing of the claim (e.g., requirements concerning description of the property affected, allocation issues and filing in more than one county) can become very complicated and can furnish a possible basis for striking the lien. See 49 P.S. §§1502, 1503.

17. See, e.g., 49 P.S. §1402 (lien waivers); §1508 (lender priority provisions); see also 42 PA . CONSOL. STAT. §§ 8141(1), 8143(f) (provisions defining qualified purchase money mortgages and open end mortgages).

This article is presented for informational purposes only and is not intended to constitute legal advice.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions