The Pennsylvania Supreme Court has a really cool opinion that considers whether an 1881 grant, “which reserved to the grantor the subsurface and removal rights of “one-half [of] the minerals and Petroleum Oils” provides a right to natural gas derived from the Marcellus Shale. The Court, sticking with an 1882 opinion, holds that it does not.
The trial court in this matter, relying on the 1882 decision of this Court in Dunham & Shortt v. Kirkpatrick, 101 Pa. 36 (Pa. 1882), and its progeny held that because the deed reservation did not specifically reference natural gas, any natural gas found within the Marcellus Shale beneath the subject land was not intended by the executing parties to the deed to be encompassed within the reservation. The Superior Court reversed that decision and remanded the case with instructions to the trial court to hold an evidentiary hearing complete with expert, scientific testimony to examine whether: (1) the gas contained within the Marcellus Shale is “conventional natural gas”; (2) Marcellus shale is a “mineral”; and (3) the entity that owns the rights to the shale found beneath the property also owns the rights to the gas contained within that shale. See Butler v. Powers Estate, 29 A.3d 35, 43 (Pa. Super. 2011). For the reasons that follow, we respectfully hold that the Superior Court erred in ordering the remand for an evidentiary hearing and reinstate the order of the trial court.
The Court specifically addresses the validity of this long-standing rule:
We thus turn to the continuing viability of the Dunham Rule, and we reaffirm that the rule continues to be the law of Pennsylvania. First, as has been related herein, this Court has never explicitly questioned the vitality of the Dunham Rule. Like the Silver Court did in 1906, we recognize that the Dunham Rule has now been an unaltered, unwavering rule of property law for 131 years; indeed its origins actually date back to the Gibson decision, placing the rule’s age at 177 years. As noted by this Court in Highland, “[a] rule of property long acquiesced in should not be overthrown except for compelling reasons of public policy or the imperative demands of justice.” 161 A.2d at 399 n.5. In our view, neither the Superior Court nor Appellees have provided any justification for overruling or limiting the Dunham Rule and its longstanding progeny that have formed the bedrock for innumerable private, real property transactions for nearly two centuries.
It’s very rare that a modern-day court has to consider whether contracting parties over a century ago intended a contract to cover something (natural gas from shale) that did not exist at the time. Of course, the Supreme Court does this with originalism-style inquiries all the time. But here, we are talking about something much simpler. Is “natural gas” a “mineral.” The court holds that those who wrote the deed in 1881 would not have intended to include “natural gas” as a “mineral.” Thus it is not.
Totally random aside, but I saw a citation to a case involving Penn Coal, that I’m positive is the same company involved in Penn Coal v. Mahon!
Shortly thereafter, this Court again reaffirmed Dunham, and indeed Silver, in Preston v. S. Penn Oil Co., 86 A. 203 (Pa. 1913).
H/T ABA Journal