On September 7, 2011, Pennsylvania's Superior Court issued an opinion in
Butler v. Powers, No. 1795 MDA 2010. The decision did not change existing
law or introduce new law, but opened a series of questions related to what
previously was regarded as settled law regarding ownership of shale gas.
In Butler, the plaintiff filed an action seeking a declaratory
judgment that its deed which included all of the minerals underlying the subject
property included the Marcellus Shale formation and, therefore, included the
Marcellus gas as well. The trial court cited to the "Dunham Rule" and granted
the gas owners preliminary objections to the complaint. On appeal, the Superior
Court remanded on the basis that it could not determine from the record whether
the deed intended to include the Marcellus Shale in the term "mineral." The
court posed three questions and held that the parties needed to introduce expert
testimony at trial in support of their position. The three questions were 1)
whether Marcellus Shale constitutes a "mineral"; 2) whether Marcellus Shale gas
constitutes the type of conventional natural gas contemplated in Dunham and
Highland; and 3) whether Marcellus Shale is similar to coal to the extent that
whoever owns the shale, owns the shale gas.
Although the decision did not change Pennsylvania law, this case should be
monitored carefully because current production of some Marcellus Shale gas rests
on conveyances of oil and gas where the “minerals” are owned by another.