When the Pennsylvania Superior Court issued its opinion in Butler v. Charles Powers Estate in 2011, it seemed to cast doubt on the ongoing applicability of either the longstanding Dunham Rule or the rule announced in United States Steel Corporation v. Hoge. On April 24, 2013, the Pennsylvania Supreme Court issued a decision in Butler v. Charles Powers Estate, No. 27 MAP 2012, 2013 Pa. LEXIS 789 (Pa. April 24, 2013), walking a narrow path to reaffirm the viability of these seminal cases regarding the ownership of natural gas and coalbed methane gas in Pennsylvania.
The deed at issue in Butler reserved the “minerals and Petroleum Oils” underlying the subject property and made no reference to natural gas. Appellees argued that the Dunham Rule and its rebuttable presumption that an exception or reservation of “minerals” does not include natural gas were not applicable to the gas in the Marcellus Shale in light of the holding in Hoge that “as a general rule, subterranean gas is owned by whoever has title to the property in which the gas is resting.”
The Court rejected the appellees’ arguments, noting that “the Dunham Rule and its longstanding progeny … have formed the bedrock for innumerable private, real property transactions for nearly two centuries” and “the Dunham Rule has now been an unaltered, unwavering rule of property law for 131 years.” Reconciling the rule announced in Hoge with the Dunham Rule, the Court based its interpretation on the “critical distinction” that the deed reservation at issue in Hoge concerned coal rights and the related right of ventilation of coalbed gas. In contrast, in Butler, which involved natural gas, the Court reaffirmed the long-standing Dunham Rule and held that natural gas is presumptively not a mineral for purposes of private deeds. The decision restores certainty to the question of ownership of shale gas by reaffirming the presumption underlying countless oil and gas transactions that the owner of the gas estate owns the Marcellus gas.