SUPERIOR COURT

REAL PROPERTY

Quiet Title • Marcellus Shale • Mineral Rights • Unconventional Gas Reservoir • Dunham Rule

Butler v. Charles Powers Estate, PICS Case No. 11-4055 (Pa. Super. Sept. 7, 2011) Gantman, J. (15 pages).

The court gave the parties the opportunity to obtain experts to determine if Marcellus Shale constituted such a mineral that the gas in it fell within the deed’s reservation. Order sustaining preliminary objections in the nature of a demurrer was reversed.

Appellees John E. and Mary Josephine Butler were the owners in fee simple of 244 acres of land in Apolacon Township, Susquehanna County, Pa. Appellees’ deed to the land reserved, inter alia, one-half the minerals and petroleum oils to Charles Powers and his heirs and assigns.

Appellees filed a complaint to quiet title, naming as defendants Charles Powers’ estate and the estate’s heirs and assigns. Appellees alleged ownership of the land as all “minerals and petroleum oils” based on adverse possession.

Appellees filed an affidavit stating that the identity and whereabouts of defendants were unknown. Appellees’ motion for publication was granted. Appellees filed a motion for judgment.

Appellants William H. Pritchard and Craig L. Pritchard, heirs to the estate of Charles Powers, appeared and ultimately filed for declaratory judgment, claiming the reservation of rights in the deed’s exception included Marcellus Shale gas and disputing appellees’ claim for adverse possession.

Appellees filed preliminary objections, which were sustained by the trial court and appellants’ claim for declaratory judgment was dismissed.

Appellants appealed, challenging only the portion of the court’s order that sustained appellees’ preliminary objections and dismissed appellants’ request for declaratory judgment that natural gas was included in the reservation of the deed.

Appellants’ argued that Marcellus Shale was a mineral consistent with the reservation of rights in appellees’ deed and no Pennsylvania decision has decided that mineral rights exclude Marcellus Shale.

The state Supreme Court has held that an exception reserving “minerals” without specific mention of natural gas or oil, creates a rebuttable presumption that the grantor did not intend for “minerals” to include natural gas or oil.

Appellants contended that Marcellus Shale was an unconventional gas reservoir and did not involve “wild” gas.

In interpreting a deed, a court must ascertain the intent of the parties using traditional rules of construction. Under the Dunham rule, a reservation or exception of “minerals” without any specific mention of natural gas or oil created a rebuttable presumption that “minerals” did not include natural gas or oil. To overcome this presumption, clear and convincing evidence must show that the parties intended the conveyance to include natural gas or oil.

Generally, subterranean gas is owned by whoever had title to the property in which the gas was resting. Here, the court found that the Dunham rule controlled. There was no specific reservation of natural gas; accordingly, the court found it was not reserved in the Charles Powers deed.

The court noted that it had an insufficient understanding of whether Marcellus Shale was a “mineral,” whether Marcellus Shale was conventional natural gas, and if it was similar to coal to the extent that whoever owns the shale owns the shale gas.

The court determined that the parties should obtain experts to determine if Marcellus Shale is the type of mineral such that the gas inside it falls within the deed’s reservation.