The future shape of hydraulic fracturing development in Pennsylvania now rests in the hands of the Pennsylvania Supreme Court.  On consecutive days last week in Pittsburgh, the Court heard oral argument in two key cases that may transform the state’s legal and regulatory landscape as to natural gas exploration and development.

First, on Tuesday, October 16, the Court heard argument in Butler et al. v. Charles Powers Estate, an appeal from a decision of the Pennsylvania Superior Court.  Butler requires the Court to determine whether shale gas rights are included as part of an oil and gas reservation of rights to “minerals and petroleum oils”.  In other words, the critical issue is whether shale gas counts as a “mineral” under state property law.  Appellants claim that since the gas is trapped within the Marcellus Shale, it must be included as part of their claim to rights on “minerals and petroleum oils.”  They also claim that natural gas is a product of petroleum and therefore could not be considered separate from it.   Their opponents contend that shale gas must be treated differently than conventional gas due to geological concerns and the differing methods in extracting the gas.   

Under the longstanding Dunham rule, which has been in place since the Court’s 1882 decision in Dunham & Short v. Kirkpatrick and has governed transactions involving subsurface rights in Pennsylvania ever since, a provision in a deed reserving “minerals” without mentioning natural gas or oil creates a rebuttable presumption that the grantor did not intend to reserve natural gas or oil rights.  Were the Court to overturn the Dunham rule, many already-negotiated transactions involving subsurface rights likely would be called into question, throwing the leasing of shale gas rights into disarray.

The next day, the Court heard oral argument on the state’s appeal of the Robinson Township opinion from earlier this year by the Commonwealth Court of Pennsylvania.  We previously blogged about that 4-3 decision striking down the zoning aspects of Act 13, which overhauled state oil & gas law and required local units of government to allow hydraulic fracturing in all areas within their jurisdiction — even ones not zoned for industrial or commercial use.  The Court currently has only six judges (three Republicans and three Democrats), and cannot overturn the Commonwealth Court’s decision striking down parts of Act 13 on a 3-3 ruling.   Media coverage of oral arguments in the Robinson Township case can be found here, here, and here.

This blog will continue to monitor developments in the Butler and Robinson Township cases, and will provide timely updates when the Pennsylvania Supreme Court issues a decision in either case.