Contractual Interpretation of Mineral Rights in Marcellus Shale-Related Claim

Butler v. Charles Powers Estate, By Charles A. Warren, Administrator of the Estate of Charles Powers, 2012 Pa LEXIS 716 (2012) (Petition for Allowance of Appeal granted on April 3, 2012)

As the Marcellus shale boom continues to spark controversy on both sides of the issue, the inevitable litigation concerning rights to the profitable substance can be expected. In this particular claim, the appellees are the owners in fee simple of two-hundred and forty-four acres of land in Apolacon Township, Susquehanna County, Pennsylvania. The appellees’ deed to the land contains the following exception reserving:

[O]ne half the minerals and Petroleum Oils to said Charles Powers his heirs and assigns forever together with all and singular the buildings, water courses ways waters water courses rights liberties privileges hereditaments and appurtenances whatsoever there unto belonging or in any wise appertaining and the reversions and remainders rents issues and profits thereof; And also all the estate right, title interest property claimed and demand whatsoever there unto belonging or in any wise appertaining in law equity or otherwise however of in to or out of the same … .

The Superior Court recounted the lengthy procedural history of this claim in its decision, including the trial court’s dismissal with prejudice appellants’request for a declaratory judgment that natural gas is included in the reservation of the deed. The Superior Court, however, ultimately concluded that a remand was necessary to determine whether

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.

Leave was granted to the Supreme Court to determine whether the remand was proper in light of the fact that the Supreme Court has held that:

1. a rebuttable presumption exists that parties intend the term ‘minerals’ to include only metallic substances, and
2. only the parties’ intent can rebut the presumption to include nonmetallic substances.

Ultimately, the Supreme Court will provide valuable further guidance as to the meaning of the term “minerals,” which may be at the center of several Marcellus shale litigations.