Shale Gas & Oil Development
In a 6-0 decision which has been much anticipated by both natural gas producers and landowners, the Pennsylvania Supreme Court finally cleared up confusion about who owns the mineral rights to shale gas in Butler v. Powers Estate, No. 27 MAP 2012, 2013 Pa. LEXIS 789 (Pa. Apr. 24, 2013) ("Butler"). The bottom line is that in Pennsylvania, "minerals" in a deed reservation does not include shale gas, and unless the reservation shows specific intent to reserve the right to the shale gas, a general reservation for "minerals" does not do the trick. The Butler court upheld the age-old "Dunham Rule," a principle of Pennsylvania real property law dating from 1882, which holds that there is a rebuttable presumption that a reservation in a conveyance for "minerals" without any specific mention of natural gas or oil does not include natural gas or oil. See Dunham & Shortt v. Kirkpatrick,101 Pa. 36 (1882).
Background
Appellants, Jon and Mary Josephine Butler (the "Butlers"), own 244 acres of property located in Susquehanna County, Pennsylvania. The deed by which the Butlers acquired their property contained a reservation of "one-half the minerals and Petroleum Oils to said Charles Powers his heirs and assigns forever." The reservation dated back to 1881, when a predecessor in title to the Butlers acquired the property from Charles Powers.
In 2009, the Butlers filed a complaint against the Estate of Charles Powers (the "Powers Estate") to quiet title on the property, which included the natural gas from the Marcellus shale located beneath the property, on the basis that natural gas was not expressly identified in the 1881 deed reservation. The trial court agreed, explaining that in accordance with the Dunham Rule, a rebuttable presumption exists that natural gas or oil is not included in a reservation of "minerals" unless natural gas or oil is specifically identified in the reservation. Butler, 2013 Pa. LEXIS at *5 (citing Highland v. Commonwealth, 161 A.2d 390 (Pa. 1960); Dunham, 101 Pa. at 44).
On appeal, the Pennsylvania Superior Court reversed and remanded the trial court's decision, ordering an evidentiary hearing as to whether Marcellus shale is the type of mineral such that the natural gas within it would be included in the deed reservation. The Superior Court, although acknowledging Dunham and its progeny, relied instead on a 1983 Pennsylvania Supreme Court decision in which the Court held that a party which owns the rights to mine and remove coal within a coal seam also owns the coalbed gas within that...
