{"id":146,"date":"2013-02-21T23:37:53","date_gmt":"2013-02-22T03:37:53","guid":{"rendered":"http:\/\/sites.law.duq.edu\/juris\/?p=146"},"modified":"2013-09-05T00:03:02","modified_gmt":"2013-09-05T04:03:02","slug":"possible-complications-as-pa-supreme-court-deliberates-mineral-rights","status":"publish","type":"post","link":"https:\/\/sites.law.duq.edu\/juris\/2013\/02\/21\/possible-complications-as-pa-supreme-court-deliberates-mineral-rights\/","title":{"rendered":"Possible Complications as PA Supreme Court Deliberates Mineral Rights"},"content":{"rendered":"
\"Photo<\/a>
Photo courtesy of Shutterstock.com<\/figcaption><\/figure>\n

by Zack Bombatch, Staff Writer<\/p>\n

\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 In October 2012, the Pennsylvania Supreme Court heard oral arguments for Butler v. Powers Estate<\/i>, a case that may impact mineral rights in Pennsylvania and has the potential to create a significant disturbance in the already chaotic energy industry.<\/p>\n

In an 1881 deed, Charles Powers transferred a 244-acre farm in Susquehanna County to Patrick Fitzmartin.\u00a0 The deed contained a reservation for half of the property\u2019s \u201cminerals\u201d and \u201cpetroleum oils\u201d which Mr. Powers assigned to his heirs.\u00a0 In 2009, the Butlers (heirs to Fitzmartin) brought an action against the Powers (heirs to Charles Powers) to quiet title to the natural gas within Marcellus shale underneath the farm.\u00a0 The Powers conversely sought declaratory judgment stating that they owned the natural gas because of the reservation of \u201cminerals\u201d in the 1881 deed.\u00a0 The issue before the Court is whether the deed reserved rights to the natural gas from the Marcellus shale through the reservation of \u201cminerals.\u201d<\/p>\n

Traditionally, Pennsylvania courts interpret deeds and any reservations by examining the parties\u2019 intent.\u00a0 This interpretation has been guided by an 1882 case where the Pennsylvania Supreme Court established the Dunham<\/i> Rule.\u00a0 The rule prohibits the inclusion of natural gas in mineral rights, and it requires that a separate conveyance or reservation be made for natural gas and oil.\u00a0 The rule has been applied to natural gas trapped within coal seams, even when the gas\u2019 existence is unbeknownst to landowners or grantees. However, the presumption of the Dunham <\/i>Rule may be overcome if a party may demonstrate \u201cclear and convincing evidence\u201d that the oil and natural gas in question was intended to be included within a \u201cmineral\u201d reservation.<\/p>\n

The Butlers argue that the reservation of \u201cminerals\u201d and \u201cpetroleum oils,\u201d under the Dunham<\/i> Rule, does not include natural gas trapped within Marcellus shale.\u00a0 However, the Powers argue that the Dunham<\/i> Rule applies only to \u201cwild gas\u201d and that gas trapped in very small quantities throughout the Marcellus shale is \u201cunconventional gas.\u201d\u00a0 The Powers attempt to analogize \u201cunconventional gas\u201d to coalbed methane.\u00a0 Occasionally, thin pools of methane are trapped within a seams of coal.\u00a0 The traditional rule for coalbed methane grants ownership of the methane to whoever owns the coalbed.<\/p>\n

Until contemporary times, Marcellus shale was considered a useless geological formation.\u00a0 It seems unlikely that the parties in 1881 could have determined a need for the reservation of a seemingly useless material.<\/p>\n

Further, mineral rights generally concern geological formations that may be mined and sold, such as gold or coal.\u00a0 Marcellus shale is a solid rock with little to no value beyond the natural gas trapped within it.\u00a0 Moreover, it is difficult to make a determination of \u201cwild gas\u201d versus \u201cunconventional gas\u201d because both forms of gas are trapped beneath the surface of the Earth by some sort of solid geological formation.\u00a0 An application of the Dunham<\/i> Rule over two purported types of gases may lead to difficulties in determining if gas is \u201cunconventional\u201d enough to escape the Dunham<\/i> presumption.<\/p>\n

The energy industry and associated law firms are paying close attention to the Court\u2019s ruling because the decision could impact thousands of deeds and leases that permit natural gas production operations.<\/p>\n

The case presents significant practical concerns that will impact the effectiveness of leases signed within the previous decades and current natural gas drilling operations.<\/p>\n

If the Court chooses to strictly apply the Dunham<\/i> Rule, the energy industry and attorneys involved in property law will be negatively impacted because of the uncertainty such a holding would create. A strict application of the Rule would send attorneys and landowners scrambling to review the specificity of deeds, reservations, and leases from previous decades.<\/p>\n

This uncertainty will no doubt lead to economic disruption and decline.\u00a0 This economic decline would certainly impact the energy industry in the short-term, but may also affect the longevity of energy companies and lease brokers if they are forced to re-enter and redesign leases with landowners where they have current or eminent drilling operations.<\/p>\n

It is hoped that the looming decision of the Court is released soon, and its release is definitely worth watching.<\/p>\n

 <\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

by Zack Bombatch, Staff Writer \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 In October 2012, the Pennsylvania Supreme Court heard oral arguments for Butler v. Powers Estate, a case that may impact mineral rights in Pennsylvania and has the potential to create a significant disturbance in the already chaotic energy industry. In [\u2026] <\/p>\n

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