The state Supreme Court has been asked to stop a scientific debate over whether the shale in the Marcellus Shale formation is a “mineral” before the debate even begins.
Last month, the state Superior Court allowed a dispute over land rights to move forward so experts could determine whether shale is a “mineral” whose owners would also own the natural gas contained within.
But a petition for allowance of appeal to the Supreme Court filed last week on behalf of the plaintiffs by lawyers at Pittsburgh-based Buchanan Ingersoll & Rooney said the question should not even be considered because it’s irrelevant to this case.
Sean W. Moran, chair of Buchanan Ingersoll’s energy section and oil and gas practice group, said the firm filed the petition now rather than waiting for a ruling on remand in hopes of cutting off the litigation before the plaintiffs incur “significant unnecessary expert and legal costs.”
Kevin M. Gormly, an Indiana, Pa.-based oil, gas and mineral law attorney who is not involved in the case, told the Pennsylvania Law Weekly , an affiliate of the Legal , last month that a determination by Pennsylvania courts that shale is a mineral could conceivably cause “title chaos” in the state.
But Moran declined to speculate on that possibility Thursday, saying he was confident the courts would not reach that conclusion.
In September, a three-judge panel in Butler v. Charles Powers Estate unanimously reversed a Susquehanna County trial judge’s order sustaining the plaintiff’s preliminary objections to a request for declaratory judgment filed by the heirs of a landowner’s estate who claimed the exception in the land deed reserving “minerals” entitled them to a piece of the Marcellus Shale.
Judge Susan Peikes Gantman remanded the case, saying there are still questions as to whether shale is a mineral, whether shale gas is conventional natural gas and whether shale is analogous to coal in that its owner also owns the gas contained within it.
“On this record, we are unable to say with certainty that appellants have no cognizable claim based on the facts averred,” Gantman said. “Consequently, the parties should have the opportunity to obtain appropriate experts on whether Marcellus Shale constitutes a type of mineral such that the gas in it falls within the deed’s reservation.”
Gantman was joined by President Judge Correale F. Stevens and Judge James J. Fitzgerald III.
But in their petition for allowance of appeal to the Supreme Court, the plaintiffs said Gantman had misinterpreted case law established nearly 130 years ago and had needlessly remanded a case involving a simple land conveyance for “irrelevant” scientific analysis.
In Butler , plaintiffs John E. and Mary Josephine Butler were the owners of a 244-acre piece of land in Apolacon Township, Susquehanna County, according to Gantman’s opinion.
The defendants, William H. Pritchard and Craig L. Pritchard, were the heirs to the estate of Charles Powers and had a deed that contained an exception reserving for them half of “the minerals and petroleum oils” contained on the land, Gantman said.
In July 2009, the plaintiffs filed a complaint to quiet title, alleging ownership of the land and adverse possession of the “minerals and petroleum oils” referred to in the deed’s exception, Gantman said.
In November 2009, the defendants filed for a declaratory judgment, claiming the reservation of rights in the deed’s exception included gas from the Marcellus Shale and disputing the plaintiffs’ adverse possession claim, according to Gantman.
The plaintiffs filed preliminary objections claiming the defendants lacked standing, should have filed separate declaratory judgment actions rather than a motion for declaratory judgment and failed to state a claim upon which relief can be granted, Gantman said.
The trial court sustained these objections, according to Gantman, and dismissed with prejudice the defendants’ request for a declaratory judgment that natural gas is included in the reservation of the deed.
On appeal to the Superior Court, the defendants asked whether the trial court had erred in ruling that natural gas was not included in the deed’s reservation, according to Gantman.
The defendants said shale is a mineral covered by the reservation of rights in the deed because a mineral is defined as any inorganic object that can be removed from soil and used commercially, according to Gantman.
The defense also argued that coal and shale gas are similar in that they can both only be extracted while the coal or shale is still in the ground, citing the Supreme Court’s 1983 ruling in U.S. Steel Corp. v. Hoge , which held that the owner of coal owns the gas contained in the coal while any coal bed gas that makes its way into the surrounding property belongs to the owner of the surrounding property, according to Gantman.
In remanding the case, Gantman said the question of whether coal and shale are similar was one that needed to be answered.
In their petition to the Supreme Court, however, the plaintiffs argued that Gantman misinterpreted the Supreme Court’s 1882 ruling in Dunham v. Kirkpatrick , which held that a reservation or exception in a deed reserving “minerals” that does not explicitly mention natural gas or oil creates a rebuttable presumption that the term “minerals” was not intended to include natural gas or oil.
This eventually became known as the ” Dunham rule.”
Susquehanna County President Judge Kenneth W. Seamans had found that Dunham was controlling in this case but Gantman disagreed, saying Dunham and the high court’s similar 1960 ruling in Highland v. Commonwealth “do not end the analysis, absent a more sufficient understanding of whether, inter alia (1) Marcellus Shale constitutes a ‘mineral’; (2) Marcellus Shale gas constitutes the type of conventional natural gas contemplated in Dunham and Highland ; and (3) Marcellus Shale is similar to coal to the extent that whoever owns the shale, owns the shale gas.”
The plaintiffs argued in their petition, however, that while Gantman appeared to acknowledge that the Dunham rule created a presumption that the parties to the deed in Butler did not intend to include natural gas in their definition of “minerals,” the judge “failed to recognize that Dunham also requires courts to presume that the parties additionally intended to exclude other non-metallic substances, including Marcellus Shale, from the term ‘minerals.’”
The plaintiffs added in their petition that the Superior Court “compounded this error by disregarding the most fundamental tenet of contract interpretation: that courts must ascertain and imply the intent of the parties.”
“In particular, the Superior Court remanded the case so that the trial court could consider scientific evidence as to whether Marcellus Shale is a mineral and expert testimony regarding the manner in which natural gas is contained within Marcellus Shale — the very evidence that the Supreme Court has repeatedly held to be insufficient, as a matter of law, to rebut the Dunham presumption about ordinary people’s intent,” the plaintiffs said in the petition.
The plaintiffs argued that the scientific question of whether shale is a mineral is “wholly irrelevant” to Butler .
Instead, the courts must only consider whether the individuals who negotiated the deed in 1881 intended to include Marcellus Shale in their definition of “minerals,” the petition said.
The plaintiffs also argued in their petition that Gantman misconstrued the Hoge ruling.
According to the plaintiffs, the court in Hoge was asked to interpret the term “gas,” not “mineral.”
“In particular, the court needed to determine whether the parties intended the reservation to permit the surface owner to extract only the natural gas located underneath the coal vein, or also permitted the surface owner to recover the coalbed gas contained in the coal vein by stimulating its release through hydrofracturing,” the plaintiffs said in the petition, adding that Hoge might have applied to Butler if Charles Powers had expressly reserved Marcellus Shale, but he did not.
The defendants’ attorney, Laurence M. Kelly of Kelly & Kelly in Montrose, Pa., declined to comment on the case but said he would be filing a response to the petition.