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The Butler
Decision and Its
Implications
Is the
Marcellus shale that underlies a significant
part of western and central Pennsylvania itself
a "mineral"? Is Marcellus shale gas the type of
natural gas contemplated in prior Pennsylvania
case law, or something different? Is the
Marcellus shale similar to coal, so that whoever
owns the shale owns the gas that is embedded in
that shale?
In reversing and remanding
the decision by the Susquehanna County Court of
Common Pleas, a three judge panel of the
Pennsylvania Superior Court asked, but did not
answer, those questions of first impression. The
lower court had based its decision on case law,
dating back to 1882, relating to the
interpretation of reservations of "minerals" and
whether or not oil and gas are included in the
reservations. The decision has set off a bit of
a fire storm among commentators, and it has
injected concern about what might possibly
happen, and when, in the high stakes world of
Marcellus shale gas ownership, control,
extraction and sale.
The case, John
E. and Mary Josephine Butler v. Charles Powers
Estate, et al, William H. Pritchard and Craig l.
Pritchard, 1795 MDA 2010 (Pa. Super.,
September 7, 2011), involves a reservation in a
1881 Deed of "one-half of the minerals and
Petroleum Oils" under a 244 acre parcel in
Apolacon Township, Susquehanna County. The
Butlers acquired title to the 244 acre tract,
subject to the reservation that was originally
set forth in a Deed, recorded October 25, 1881,
from the Estate of Charles Powers to the
Butler's predecessor in title. In July, 2009,
the Butlers brought a quiet title action,
claiming ownership of all minerals and petroleum
oils underlying the property by adverse
possession. Based upon the relevant chain of
Pennsylvania cases on the topic over the last
130 years, the Butlers believed that they owned
100% of the Marcellus shale underlying the
property, as well as the gas embedded in it,
because the reservation by the Charles Powers
Estate did not include any reference to "gas" or
"natural gas." Over the course of the
proceedings, the heirs of the Estate of the
long-deceased Charles Powers became aware of the
action and came forward to file a Declaratory
Judgment action, challenging the claim of
adverse possession, and also requesting that the
Court declare that the reservation of one-half
of the "minerals" included one-half of the
now-valuable gas within the Marcellus
shale.
Pennsylvania's "Dunham Rule"
originated in the Supreme Court's Opinion in
Dunham and Shortt v. Kirkpatrick, 101
Pa. 36 (1882), where the Court began with the
recognition that prior cases found "minerals" to
be things "of a metallic nature, such as gold,
silver, copper, lead [etc]" (Dunham,
101 Pa. 36 at 39). The rule that followed is
most clearly stated in the Supreme Court's
Highland v. Commonwealth of
Pennsylvania, 161 A.2d 390 (Pa. 1960)
decision: "In Dunham, the Court
enunciated a rule of construction of the word
'minerals' to be applied when determining the
inclusion therein or the exclusion therefrom of
natural gas or oil.... [i]f, in connection with
the conveyance of land, there is a reservation
or an exception of 'minerals' without any
specific mention of natural gas or oil, a
presumption, rebuttable in nature, arises that
the word 'minerals' was not intended by the
parties to include natural gas or oil."
Highland, 161 A.2d 390 at 398. The
Court eliminated any distinction between whether
the language appears in a reservation or a
grant, and then stated that '[t]o rebut the
presumption... that natural gas or oil is not
included within the word 'minerals' there must
be clear and convincing evidence that the
parties to the conveyance intended to include
natural gas or oil within such word."
Highland, 161 A.2d 390 at 399. Further,
the Highland Court stated that the rule
had been in effect for decades, that its
application has formed the basis to many titles
to land, and that it had become a rule of
property law that was not to be disturbed or
overthrown "except for compelling reasons of
public policy or the imperative demands of
justice." highland, 161 A.2d 390 at
399.
U.S. Steel Corporation v.
Hoge, 468 A.2d 1380 (Pa. 1983), involved a
dispute between the owner of a coal seam and the
lessee under a gas lease. In Hoge, the
Pennsylvania Supreme Court stated that natural
gas, while capable of migrating, is owned by
whoever has title to the property in which the
gas is resting, then ruled that coalbed methane
trapped in the coal seam is therefore owned by,
and under the control of, the owner of that seam
until that gas migrates on its own to the
property of another. Coal mining operations
typically vent the gas in order to reduce the
danger of explosion or inhalation, but the Court
also explained that hydrofracturing is a method
that is available to capture the gas from the
relatively impermeable coal seam.
Read
the full article on our website.
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Determination of
Pa. PUC Jurisdiction Over Mid-stream Developers
Delayed
by Barry A.
Naum
Harrisburg,
Pa. In a
somewhat surprising turn of events in the question
of potential Pennsylvania Public Utility
Commission ("Pa. PUC" or "Commission") regulation
over midstream Marcellus Shale development
entities, on September 8, 2011, Laser Northeast
Gathering Company, LLC ("Laser") petitioned the
Pa. PUC to withdraw its pending application for
Certificate of Public Convenience to act as Public
Utility. This surprise development follows the
recent favorable ruling that Laser received from
the Commission finding that Laser qualified as a
"public utility" under the Pa. PUC regulations and
remanding to the presiding Administrative Law
Judge ("ALJ") the question of whether Laser's
request for certification to operate as a public
utility in Pennsylvania would be in the public
interest.
Read the full article on our website.
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Peters Township,
Pa. Group Wants to Ban
Fracking
by Kevin M. Eddy
Pittsburgh,
Pa.
Activists
opposed to natural gas drilling are taking a
unique approach in an attempt to ban hydraulic
fracturing in Peters Township, which is located in
Washington County, Pennsylvania. The Peters
Township Marcellus Shale Awareness group is
attempting to have township residents vote on a
referendum that amends the home rule charter to
ban hydraulic fracturing. It is believed that no
municipality has ever held a voter referendum
initiative to ban hydraulic fracturing, though
there have been several attempts, most notably in
the city of Pittsburgh.
Read the full article on our website.
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Stakeholder
Relations:
the Underpinning
of Success
in
Shale
by Skip
Lineberg
Charleston,
W.Va.
As leases
are negotiated, permits are filed and shales are
fractured across America, energy companies
encounter the public. Some of these interactions
are direct, while others are through the actions
of a contracted service provider or partner.
Still, the vast majority of first impressions will
be presented to the public through the lens of the
media, whether traditional or
social. Across this broad spectrum, one
universal truth reigns supreme: public perception
is reality. Regardless of the company's capital
investment, jobs, corporate philanthropy and best
intentions, the company's public identity will be
defined by the perception of residents in the
communities where it operates.
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Pa. Infrastructure
Damage Caused by Drilling Activity Down for
2011
The
Pennsylvania Department of Transportation reports
a drastic reduction in the number of miles of road
in the Commonwealth with major damage caused, at
least in part, by heavy vehicle traffic related to
drilling activities in the Marcellus Shale. As this article notes,
last year at this time there were approximately
400 miles of roads in Pennsylvania with such
damage, while this year that number is reduced to
only 10 miles of road. This is the latest example
of the oil and gas industry working with
stakeholders in state and local government to
streamline operations such that the steadily
increasing drilling and related activities in the
Commonwealth have as little negative impact on all
stakeholders as possible.
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Useful
Resource: Chesapeake Energy Hydraulic
Fracturing Overview Video
Chesapeake
Energy Corp. has developed a video providing an
overview of the hydraulic fracturing process.
Click here to view the video.
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Marcellus
Shale Team Member
Barry
A. Naum (Harrisburg)
Barry
primarily practices energy and utility law before the
Pennsylvania Public Utility Commission and the Public Service
Commission of West Virginia, and he has represented a wide
array of clients, including natural gas gathering pipelines,
energy suppliers and large end-users in a variety of utility
regulatory matters. Barry also has experience representing
clients in utility supply contract issues in Pennsylvania,
West Virginia and New York. To view Barry's full professional
biography, click here. |
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Please be aware that this email publication is
distributed with the understanding that the author, publisher
and distributor are not rendering legal or other professional
advice on specific facts or matters and, accordingly, assume
no liability whatsoever in connection with its use.
Responsible Attorney: Michael J.
Basile | | | |
