Pa. justices: Shale, natural gas not minerals

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The state Supreme Court has decided there is no need for a scientific debate over whether shale and the natural gas contained within it fall under the definition of "minerals" for the purposes of deed reservations.

Instead, the justices said, the Dunham Rule, named after the 1882 Supreme Court case Dunham & Shortt v. Kirkpatrick, requires courts interpreting deed reservations that do not specifically mention shale or natural gas to rely only on the layperson's understanding of what a mineral is: a substance of a metallic nature.

In Butler v. Charles Powers Estate, the six-justice court unanimously overturned a state Superior Court ruling, which had reversed an order by Susquehanna County Court of Common Pleas President Judge Kenneth W. Seamans and remanded the case back to the trial court so experts could present scientific and historic evidence as to whether shale and natural gas constitute minerals.

Justice Max Baer, writing for the court, said the Superior Court's order for an evidentiary hearing "violated the Dunham jurisprudence."

In addition, Justice Baer said, the fact that other jurisdictions and state statutes have classified natural gas as a mineral is of no consequence, because the Dunham Rule clearly states that "the common, layperson understanding of what is and is not a mineral is the only acceptable construction of a private deed."

"Notwithstanding different interpretations proffered by other jurisdictions, the rule in Pennsylvania is that natural gas and oil simply are not minerals because they are not of a metallic nature, as the common person would understand minerals," Baer said.

Justice Baer was joined by Chief Justice Ronald D. Castille and Justices Thomas G. Saylor, J. Michael Eakin, Debra Todd and Seamus P. McCaffery.

But Justice Saylor penned a concurring opinion saying he finds "the original, 19th-century rationale for the Dunham Rule to be cryptic, conclusory and highly debatable."

For this reason, Justice Saylor said, parties drafting deeds today should clearly state whether they intend to reserve natural gas rights.

In Butler v. Charles Powers Estate, the deed in question contained an exemption, reserving "one half the minerals and Petroleum Oils to said Charles Powers and his heirs and assigns forever."

In 2009, the owners of the surface estate went to battle with the heirs to Powers' estate, which sought a judgment that the deed's exemption included Marcellus Shale gas, in addition to minerals and oil.

marcellusshale - legalnews

Zack Needles: zneedles@alm.com or 215-557-2493. To read more articles like this, visit www.thelegalintelligencer.com.


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