PA Supreme Court to Consider Shale Gas Mineral Rights Case

court gavelAn update on what could be a very important case for many landowners in Pennsylvania: On Tuesday, April 3, the PA Supreme Court agreed to hear a Susquehanna County case called Butler v Powers estate. The case concerns whether or not natural gas rights are a part of “mineral rights” in old leases where it’s not specifically spelled out. PA law precedent since 1882 known as the “Dunham rule” is that natural gas is not part of mineral rights unless specifically stated as such. If the Supreme Court overturns that precedent, it would threaten hundreds of drilling leases now in place throughout PA.

The Butler v. Powers case started two years ago when John E. and Mary Josephine Butler filed a title complaint on a land deal that originated in 1881. The deed for their 244 acres in Apolacon reserves "half the minerals and petroleum oils," giving the other half to a man named Charles Powers and his heirs. Natural gas was not listed among the rights, so all of the gas should belong to the property, the Butlers argued.*

Based on the law and the Dunham rule, the case was clear and the Butlers won in lower court with a decision that natural gas is not a mineral right under longstanding PA law. However, on appeal, the Superior Court ordered the lower court to reconsider its decision and not use the Dunham rule as the deciding factor. The Superior Court instructed the lower court to hear testimony from scientific experts on whether or not natural gas should be considered a mineral right (see this MDN story). It seems as though the Superior Court is attempting to overturn the Dunham rule and 130 years of oil and gas law precedent in Pennsylvania.

The Butler family attorney appealed to the PA Supreme Court and now the highest court in the state has agreed to hear the case, even though it’s still an active lower court case—something unusual. According to the Butler attorney, the Supreme Court will not mess about with considering scientific arguments but will instead concentrate on what the families originally intended in 1881 when the agreement was created.

The Supreme Court will not hear a scientific case with expert testimony on that question, but will decide only whether the Superior Court could legitimately ask for that type of hearing. This case should be decided only on what the Butler and Power families intended in 1881, not how modern science has changed our understanding of what minerals are and how they’re extracted, said Gregory Krock, the Butlers’ attorney who asked the high court to take the case.

"Science really has nothing to do with the dispute," said Krock, of Buchanan Ingersoll & Rooney PC, Downtown. "It’s old law but it’s established law — and what it established and why it’s important today, is that when people buy and sell their properties they often have a different idea of what mineral means to them compared to what it means to scientists and geologists."*

The importance of the decision in this case cannot be overstated.

*Pittsburgh Tribune-Review (Apr 5, 2012) – State’s top court to decide if Marcellus shale is a mineral