Shale Daily / NGI All News Access

Pennsylvania Supreme Court to Hear Marcellus Gas Rights Appeal

The Pennsylvania Supreme Court agreed Tuesday to hear an appeal of a property rights case and rule on whether the owner of the property in the Marcellus Shale also owns the shale gas it contains.

At issue in the case Butler v. Charles Powers Estate (No. 760 MAL 2011) is whether shale meets the state's legal definition of a "mineral." Under that scenario, shale gas would be considered a commodity in the same manner as coalbed methane is a commodity derived from coal. In Pennsylvania, commodities must be specifically mentioned in lease agreements to be valid.

The plaintiffs John and Mary Butler of Apolacon Township in Susquehanna County, who own 244 acres of land fee simple, allege that the Pennsylvania Superior Court, an intermediate appeals court, erred when it remanded their case back to the Susquehanna County Court of Common Pleas last September, on the grounds that both parties should have the opportunity to interview experts on whether Marcellus Shale gas qualifies as a "mineral" (see Shale Daily, Sept. 19, 2011).

After the Superior Court's decision two Marcellus producers, Range Resources Corp. and Cabot Oil & Gas Corp., said a ruling one way or the other would have little to no impact on their operations (see Shale Daily, Sept. 28, 2011).

"It's just a normal course of business for us," Range Senior Vice President Rodney Waller told NGI's Shale Daily on Wednesday. "It's a very isolated case. We just want whatever party owns the interest to be credited. This is just another title issue we have to deal with, although it's not the one we typically have. Usually we're dealing with succession and someone not leaving a will. We do abstracts and look at titles every day. This won't affect us per se, but it could add more time when we return these deeds back to the attorneys and ask, 'Who owns this?'"

Last September Range officials said their largest leases in Lycoming County, PA, were acquired from owners who had acquired their interests from mineral tax assessments created by reservations that specifically treated "minerals" and "gas" on the same basis. The company also claimed that 85% of sampled leases in southwestern Pennsylvania were from owners with full ownership of oil, gas and minerals. Range officials said they would analyze the specific language for the remaining 15% of leases to determine if other parties held partial interests or rights.

The Butler case is not unusual, said Waller. "The case law in every state and county is different. They go through the [legal] process, but they usually end up at the same answer. Pennsylvania is pretty typical; if you didn't reserve it, if you didn't specifically name what you reserved, there's usually not an inference that you did reserve something. That's why you need to be very specific as to what you reserve."

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