By: Marshall Chriswell
This week, the Pennsylvania Supreme Court issued an interesting decision about shale gas that has many Western Pennsylvania landowners breathing a sigh of relief.
Nearly everyone in Western Pennsylvania has been affected by, or at least heard about, shale gas. The Marcellus shale formation (and increasingly the Utica formation) have brought both economic activity and incredible amounts of controversy, to our region.
Shale gas has also caused plenty of activity in the Pennsylvania courts. Why would that be? Especially when natural gas has been extracted from Western PA wells for over a century? The answer is obvious: gas rights have become exponentially more valuable with the advent of shale gas, and now folks are disputing who actually owns those rights.
A little background: When someone sells or transfers a piece of property, but wants to retain the gas, oil, or mineral rights (i.e. the right to royalties) for themselves, their attorney makes sure that the deed specifically states that the seller is retaining those rights. If it’s gas rights, the deed says the seller is reserving the “gas” or “natural gas.” If it’s oil rights, the deed says the seller is reserving “oil,” and if the seller is retaining coal, rock, or any metallic substance, the deed says the seller is reserving “minerals.”
In this most recent case, Butler v. Powers, the deed in question was Mr. Powers’ deed from way back in 1881. That deed only said that Mr. Powers owned the “minerals and petroleum oils.” Then, in 2009, Mr. Powers’ heirs appeared in court and argued that they should own the shale gas rights, too. Why? Because shale gas is actually located inside the shale, and shale is a mineral. Essentially, they argued that because they owned the shale, they also own the shale gas.
This was a very clever argument, and several courts heard the case, and disagreed on the right answer. Finally, this week, the Supreme Court settled the argument once and for all. The Court did the sensible thing. The Justices unanimously decided not to overturn 100+ years of property law. So, in order to retain gas rights, a deed still must specifically state that the owner is reserving the “gas” or “natural gas.”
Had the Supreme Court agreed with Mr. Powers’ family, and reversed the law, it would have thrown many deeds into question, causing big problems for landowners, and possibly stalled shale gas development in Pennsylvania.
This case also illustrates how important it is that deeds are always drafted properly, and with the assistance of an attorney.
Do you have a real estate or natural gas issue? I would be happy to help. Call to schedule a consultation today.