P. 6 ~ Continued - Pennsylvania court raises questions about Marcellus shale gas ownership

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As the Cimarron Oil court recognized, the state courts have reached a wide range of differing conclusions on the question of who owns coalbed gas. Cimarron Oil, 909 N.E. 2d at 1122-23 (citing cases). But the outcome in those cases frequently turns on the specific language of the deeds and the courts' conclusions regarding the parties' intent. See id.

After the record in Butler has been further developed and at a stage of the proceedings in which the court need not accept as true all facts alleged by the Powers heirs, the Powers heirs should prevail only if they present clear and convincing evidence that the parties to the 1881 deed intended for the general term "minerals" to include specifically natural gas. Absent such clear and convincing evidence, Pennsylvania courts should be persuaded that a deed's reservation of "minerals"—without any mention of natural gas—does not include the natural gas contained within the Marcellus shale formation.

Such a conclusion will promote the consistency and predictability that has developed over a hundred years of property law and avoid the "eradication of countless oil and gas estates and leases" in Pennsylvania. Hoffman, 2011 WL 1791709, at *1. Thus, even if the Pennsylvania courts were to decide that the Butlers' 1881 deed's reservation of minerals was intended to reserve shale gas, it seems unlikely that the holding would be extended to deeds recorded post-Dunham.

Ever since the 1882 Dunham decision, parties entering into deeds or leases in Pennsylvania have entered into those arrangements with the understanding and intent that if they did not specify gas in their reservation, then they did not reserve gas. Nonetheless, how the Pennsylvania courts rule on these questions has the potential to significantly affect the rights of parties that own rights to minerals or natural gas. For that reason, the Butler litigation warrants attention, and further developments should be closely monitored.

The authors

Mark Robeck ([email protected]) is a partner and co-head of the energy litigation practice group at Baker Botts LLP. He represents clients in energy markets in a broad array of disputes and litigation. He counsels oil and gas producers and marketers, wholesale power generators, and regulated gas and electric utilities.

Jeff McNabb ([email protected]) is a senior associate in the litigation practice at Baker Botts. He represents plaintiffs and defendants in complex business disputes, including energy, securities, and commercial litigation. He also represents corporations, partnerships, and individuals in state and federal courts and before arbitration panels.

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