Is gas a mineral? This issue is the subject of a pending appeal before the Supreme Court of Pennsylvania. On April 3, 2011 the Supreme Court per curiam granted an Allowance of Appeal of the decision of the Superior Court in Butler v. Charles Powers Estate, 2011 Pa. Super. 198 (September 7, 2011). At issue in the case is whether a prior reservation of “minerals” in the chain of title includes the Marcellus shale and natural gas trapped therein. The trial court concluded that gas was not a mineral under existing case law; on appeal, however, the Superior Court reversed and remanded to the trial court to permit a record to be developed concerning the issue.
There is some precedential authority for the suggested treatment of shale gas as belonging to the mineral owner: prior Pennsylvania decisions have established that coal bed methane trapped in a coal seam belongs to the coal owner and not the owner of the oil and gas. One difference between coal and shale, however, is obvious: although some small outcroppings of the Marcellus shale may have been quarried on a limited basis in the past, the Marcellus shale itself has not generally been mined or quarried for substantial economic benefit. Unlike coal, the Marcellus shale lacks intrinsic value separate and independent from the value of the methane trapped inside. This may be a key factor in the Court’s treatment of this matter.
In an apparent response to the uncertainty presented by the Butler appeal, and to ensure the right to produce gas contained within an existing unconventional shale gas formation, some gas companies have revised their lease forms to add language purporting to include “minerals” in the estate or interests subject to lease. This has resulted in significant confusion among landowners who may wish to execute an oil and gas lease but who object to the mining or removal of minerals.
Stay tuned…
