Marcellus Natural Gas Rights Are Separate From Mineral Rights

Marcellus natural gas isn't a mineral according to last week's Pennsylvania Supreme Court ruling.

Published on: Apr 30, 2013

Last Wednesday, Pennsylvania Supreme Court finally settled a long-standing Marcellus natural gas rights dispute. The "Dunham rule" rules.

In brief, that rule says, for purposes of deeds, contracts and leases, natural gas is not a mineral right. If you want to sell or convey the rights to natural gas under your property in Pennsylvania, you have to specifically state "natural gas" in a deed, lease or contract.

In most states, deed and lease agreement for mineral rights include natural gas. That's based on the theory that the gas comes from shale rock, a mineral.

Not in Pennsylvania, though.  "Dunham rule" case law since 1882 has separated natural gas rights from mineral rights. And in the long-disputed Butler vs Powers case, the court affirmed the rule.

Marcellus Natural Gas Rights Are Separate From Mineral Rights
Marcellus Natural Gas Rights Are Separate From Mineral Rights

One family (the Butlers) sued the heirs of another family (the Powers) claiming the gas under their property was all theirs. In 1881 (one year before the Dunham rule), the Butler forebear deeded half of the mineral rights under the property to the forebear of the Powers family.

Powers' descendants claimed natural gas was part of the original deal. But the Butlers maintain because "natural gas" was not specifically mentioned, the gas rights were not part of the deal, according to the Dunham rule.

The case went from a Susquehanna County court to Pennsylvania's Superior Court, and finally to the Supreme Court. Overturning the Dunham rule and join gas and mineral rights back together would have been disastrous for thousands of lease and royalty agreements already in place.

It would have "changed the rules of the game" long after the game had started and likely would have thrown the drilling industry into chaos. It could have halted drilling activity until agreements could be renegotiated and/or litigated.

Information courtesy of Marcellus Drilling News