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State maintains stability on shale

| Saturday, May 4, 2013, 12:01 a.m.

Marcellus shale and its gas might be considered minerals in the scientific sense of the word, but not under Pennsylvania law.

The state Supreme Court unanimously ruled out scientific debate about the nature of shale gas, saying last week that it is more important to keep 130 years of precedent. The decision avoids upsetting decades-old gas contracts across the state because of a contract dispute between two families over gas rights in Susquehanna County.

“It's an important ruling because of how many people rely on it, whether it's buying property or selling property or investing in a natural gas pipeline,” said Greg Krock, a Downtown attorney who won the decision for John E. and Mary Josephine Butler.

“Their case had the possibility of having an impact on the entire oil and gas industry in Pennsylvania, (but) that wasn't their intention when they filed the lawsuit,” Krock said. “They were just trying to resolve a dispute on their property.”

The case started nearly four years ago when the Butlers filed legal papers to clarify a land deal that originated in 1881. The deed for their 244 acres in Apolacon reserved “half the minerals and petroleum oils” there, giving the other half to a man named Charles Powers and his heirs. That transfer to Powers did not mention “gas,” so any natural gas there should be tied to the property, the Butlers argued.

Brothers William and Craig Pritchard intervened, claiming they are Powers' heirs and entitled to shale gas from the land, in the Marcellus shale's northeastern hot spot.

Their lawyers tried to challenge a 131-year-old court precedent known as the “Dunham rule.” It essentially says that deals only mentioning “mineral” rights in Pennsylvania do not include gas — not because gas isn't a mineral, but because Pennsylvanians didn't think of gas as a mineral.

That's not a good rationale, nor is it true for families who signed a deal before the Dunham rule took effect, said Paul Kelly, a retired attorney from Susquehanna County who was one of the first lawyers to represent Charles Powers' heirs.

Their attorneys argued the Dunham rule conflicted with another rule that says gas coming from a mineral — such as coalbed methane — belongs to the mineral owner.

“Bad decisions are bad decisions,” Kelly said about their determination to fight. “This isn't going to change (the Pritchards') lifestyle at all. They've been pursuing it because they felt that they owned the gas rights.”

The Pritchards and the Butlers decided not to talk to reporters and declined interview requests, their attorneys said.

The Pritchards won a brief victory in 2011. A state appeals court ruled there should be a hearing on the science of the shale, rock that holds gas imbedded between its solid molecules. If shale qualified as a mineral, the Dunham rule may not apply and the Pritchards would receive gas royalties from their half of the mineral rights.

The Supreme Court said shale and its gas can't be considered minerals in Pennsylvania because of Dunham's long-standing rule.

There would have been “widespread title problems that would have ensued if Dunham were overruled or weakened,” said Ross Pifer, director of the Agricultural Law Resource and Reference Center at Penn State University's Dickinson School of Law.

“While Dunham's rule is unique to Pennsylvania — and is, in fact, contrary to the law of most states — its application is strongly embedded into Pennsylvania oil and gas law jurisprudence,” Pifer said.

Timothy Puko is a Trib Total Media staff writer. Reach him at 412-320-7991 or tpuko@tribweb.com.

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