PA Supreme Court Reaffirms Property Rights
Marcellus Shale Formation is not a “mineral”… In a unanimous opinion by Justice Baer issued April 24, 2013, the Pennsylvania Supreme Court reaffirmed the Dunham Rule, holding that a reservation of minerals in a deed does not reserve the gas in unconventional formations, such as the Marcellus Shale. The Pennsylvania Supreme Court reaffirmed the state’s 131-year history of the mineral rights law, ruling in favor of a Susquehanna County couple that had filed suit over the rights to the Marcellus Shale gas under their property. John and Mary Butler, who currently own the land, filed a lawsuit in 2010, arguing that since Powers didn’t include “natural gas” in the deed, his heirs have no right to the gas. Ultimately, the six-judge Supreme Court panel decided that the 1882 landmark decision in the case Dunham & Shortt v. Kirkpatrick should be their guide. The “Dunham Rule” maintains that a reservation of minerals in a deed does not reserve the gas in unconventional formations, such as the Marcellus Shale. The nineteenth century case created a rebuttable presumption that a reservation of “minerals” does not reserve the oil and gas.
We at PAOG report are not surprised at this ruling, as even though the “Dunham” rule is arcane and outdated, (and the minority rule as compared to just about every other state in America that near unanimously classify oil and gas as “minerals”) it is the standard of oil and gas title law that has controlled transactions during the early years of the Marcellus Shale boom in Pennsylvania. From a practical standpoint, if the Dunham rule was overturned, such a ruling could have lead to wide spread uncertainty which in turn could have bogged down the oil and gas industry moving forward. The Supreme Court erred on the side of caution and chose not to kill or even slow down the golden goose of Marcellus Shale development in PA. The Court may have reasoned that the cost of cleaning up an outdated rule that quite frankly doesn’t make much sense and is the exception to the rule of legally defining “minerals” in the United States was not worth creating legal uncertainty and perhaps panic within the industry.
