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.

In association with
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
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

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