If it ain’t broke, don’t fix it. Or, as said by the Pennsylvania Supreme Court, “A rule of property long acquiesced in should not be overthrown except for compelling reasons of public policy or the imperative demands of justice.”  There were no such imperatives in Butler vs. Charles Powers Estate, in which the Court upheld the “Dunham Rule” in Pennsylvania oil and gas law.

The Dunham Rule, stated simply:

It is a rebuttable presumption that if in connection with a conveyance of land there is a reservation or an exception of “minerals” without any specific mention of natural gas or oil, then the word “minerals” was not intended by the parties to include natural gas or oil. The presumption may be rebutted by a challenge through clear and convincing evidence that the intent of the parties at the time of the conveyance was to include natural gas and/or oil.

The high court reversed an appellate court ruling that remanded the case to a trial court for an evidentiary hearing including expert testimony on whether (1) the gas within the Marcellus Shale is “conventional natural gas”; (2) shale is a mineral, and (3) the entity that owns the rights to shale beneath the property also owns the right to the gas within that shale.

The winners:

  • Title examiners
  • Clients of title examiners
  • Anyone who has taken a lease on a tract where there has been a mineral reservation
  • Anyone who benefits from stability of land titles

The losers:

  • Those who thrive on chaos and uncertainty
  • Those who reserved minerals without mentioning oil and gas, possibly thinking, if they were outsiders, that Pennsylvania is like most other places, where minerals includes oil and gas

To say Dunham was “longstanding’  says a lot. Butler interpreted a deed from 1881, and the Dunham Rule itself dates back to 1882.

Kudos to counsel for the Powers Estate (identified on the docket sheet as Thomas Meagher III of the Law Office of Michael Giangrieco) for creativity.  Arguing the proposition that “he who owns the shale owns the gas” (referring to another Pennsylvania case), they likened the Marcellus Shale to Coca Cola and the shale gas as the “fizz” emanating therefrom. No court, said the appellee, could ever reason that the “fizz” is separate and apart from the Coke. 

A concurring opinion, agreeing with the result because the law was long- settled, criticized the rule as contrary to the law of virtually every other producing state and characterizing the rule’s “19th century rationale” as “cryptic, conclusory and highly debatable.”  Read the opinion and you will understand what he means.

That’s George Jones at the top of the entry.  This week can’t pass without a tribute to the Possum – the saddest voice in country music: