Natural Gas a Mineral? Not in Pennsylvania… (And Other Fracking Law News)

Earlier this month, the Pennsylvania Supreme Court held that Marcellus shale gas is not a “mineral,” and that subsequently private deeds in the state that make reference to mineral rights do not encompass natural gas rights.

Levi Jones of law firm Schnader explains:

“The Court reaffirmed the ‘Dunham Rule,’ which applies the common, layperson understanding of what is and is not a mineral. The ‘rule in Pennsylvania is that natural gas and oil simply are not minerals because they are not of a metallic nature, as the common person would understand minerals.’”

It’s an important distinction for landowners and developers in the state. And, if you will, a victory for plain English interpretation of legal documents…

But the Pennsylvania “Dunham Rule” decision isn’t the only development of note for the fracking industry. Far from it, as this roundup of recent fracking-related commentary and analysis demonstrates:

Butler v. Charles Powers Estate: Owners of Marcellus Shale Gas May Now Rest Easily (Saul Ewing LLP):

“The Dunham Rule is alive and well in Pennsylvania and thousands of titles to Marcellus shale gas will not be impacted by any change in the law. Pennsylvania’s peculiar rule of property law—that says that oil and gas are not minerals—had been challenged and questioned in a 2011 decision of the Superior Court. On April 24, 2013, the Pennsylvania Supreme Court released its much anticipated opinion in Butler v. Charles Powers Estate, and reversed the Superior Court, upholding Pennsylvania’s unique Dunham Rule. For owners of Marcellus shale gas, the Butler decision slammed the door on arguments that might have resulted in a reexamination of thousands of titles.” Read on>>

Pa. Supreme Court Issues Decision in Butler Case (Spilman Thomas & Battle, PLLC):

“The Dunham Rule requires that, for an interest in oil and gas rights to be reserved in a deed, the term ‘natural gas’ must be specified in the reservation. At issue in the case was whether a reservation of ‘minerals’ in an 1882 deed included Marcellus Shale gas. The trial court applied the Dunham Rule to find that the reservation did not include Marcellus Shale gas.” Read on>>

Pennsylvania Supreme Court Reaffirms Dunham Rule, Confirms that Marcellus Shale Natural Gas is not a “Mineral” (Schnader Harrison Segal & Lewis LLP):

“In reaffirming the validity of the Dunham Rule and reinstating the trial court’s decision, the Supreme Court explained that ‘the Dunham Rule has now been an unaltered, unwavering rule of property law for 131 years,’ with its origin actually dating back 177 years. In Gibson v. Tyson, a case from 1836, the Pennsylvania Supreme Court first held that when interpreting the language of a deed and related reservations of rights, the first and only consideration for the court is the intent of the parties to the transaction.” Read on>>

The Supreme Court of Pennsylvania in Butler Affirms the Long-Standing Dunham Rule and Brings Certainty to Marcellus Shale Natural Gas Rights (Dechert LLP):

“The Dunham Rule owes its name to the 1882 Supreme Court of Pennsylvania case Dunham & Shortt v. Kirkpatrick. In Dunham, the Supreme Court, relying in part on earlier Pennsylvania jurisprudence defining a mineral to be of ‘metallic nature,’ concluded that when interpreting a deed reservation, the term ‘mineral’ should not encompass oil. As a result of the ruling in Dunham, for a deed reservation to include oil in Pennsylvania, it must specifically be included within the clause. This bright-line rule has been consistently reaffirmed by Pennsylvania courts for more than a century, despite being a minority rule best described as ‘idiosyncratic.’” Read on>>

Pennsylvania Supreme Court Upholds Statewide Oil And Gas Conveyance Rules (BakerHostetler):

“Before the Supreme Court, appellants claimed 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 argued that shale gas must be treated differently than conventional gas due to geological concerns and the differing methods in extracting the gas. Among other arguments, appellees compared Marcellus Shale ‘to Coca-Cola and the shale gas as the “fizz” that emanates from the liquid soda, arguing that no court could ever reason that the “fizz” is separate and apart from the Coca-Cola liquid.’” Read on>>

Pennsylvania Supreme Court Confirms The Dunham Rule (Looper Reed & McGraw, P.C.):

“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.” Read on>>

Fracking and Trade Secrets: An Introduction (Clingen Callow & McLean, LLC):

“Oil and gas producers largely believe their fluid compositions (or hydraulic fracturing chemicals) are trade secrets. But state laws require producers to disclose these compositions as part of the permitting process. If publicly filed, those fluid compositions then can be obtained through freedom of information laws. Unless…they’re trade secrets.” Read on>>

SCAQMD First in California to Regulate Hydraulic Fracturing (Snell & Wilmer L.L.P.):

“Fracking in California currently is allowed without any special authorization from the Department of Oil and Gas and Geothermal Resources (DOGGR) or any other agency. In response to public concern over the possibility of substantially increased fracking, the DOGGR last year released a draft rule proposing to regulate fracking. In addition, several bills have been introduced during the current legislative session that would regulate fracking in California… There also have been two well-publicized suits brought by the Center for Biological Diversity and others seeking to curtail fracking operations. In the meantime, however, the South Coast Air Quality Management District (SCAQMD) on April 5 passed the first enforceable rule that could result in the comprehensive regulation of fracking in Southern California.” Read on>>

Appeals Court Upholds Drilling Bans (Phillips Lytle):

“In twin decisions handed down today, the [New York] Supreme Court, Appellate Division, Third Department upheld two local zoning laws that prohibit activities related to oil and gas development (commonly referred to as ‘hydraulic fracturing’).” Read on>>

Part II – How Will North Carolina Handle Forced Pooling? (Spilman Thomas & Battle, PLLC):

“Currently, North Carolina is a ‘free ride’ state according to the 1945 statute which governs drilling and exploration of oil and gas in the state. The statute is outdated, however, because it does not account for or consider the horizontal drilling involved in fracking. Therefore, if the N.C. MEC decides to recommend forced pooling for hydraulic fracturing, it must also decide which approach North Carolina should adopt.” Read on>>

Part I – How will North Carolina Handle Forced Pooling? (Spilman Thomas & Battle, PLLC):

“By October 1, 2013, the North Carolina Mining and Energy Commission (‘N.C. MEC’) must report its findings and recommendations for hydraulic fracturing to the Joint Legislative Commission on Energy Policy and the Environmental Review Commission. One of the issues being considered by the N.C. MEC is whether the state will permit forced pooling by oil and gas companies. So, what is forced pooling and where does it stand in North Carolina?” Read on>>

U.S. District Court Says BLM Must Address Environmental Impacts of Fracking – Court Finds Fracking Operations are Subject to NEPA Requirements (Best Best & Krieger LLP):

“In an order addressing hydraulic fracturing (fracking) on federal lands, the U.S. District Court for the Northern District of California ruled that the Bureau of Land Management (BLM) violated the National Environmental Policy Act by improperly issuing four oil and gas leases in Monterey and Fresno counties without addressing the environmental impacts of this controversial extraction technique.” Read on>>

A Look at the Obama Administration’s Upcoming Hydraulic Fracturing Regulations (Sedgwick LLP):

“This spring, the oil industry and environmental groups are expecting the Department of Interior’s Bureau of Land Management (BLM) to issue a revised rule that will regulate hydraulic fracturing (fracking) on federal and tribal lands… The revised rule comes on the heels of a proposed rule that BLM issued back in May 2012, which called for the expansion of fracking on federally protected lands. Upon its release, the rule drew the attention – and ire – of industry and environmental groups. While the industry declared that the proposed rule added unnecessary federal red tape, environmentalists contended that the proposed rule did not do enough to protect public lands and the environment.” Read on>>

Predictions of Single-Issue Energy Legislation, Hydraulic Fracturing, and American Energy Independence (Mintz Levin):

“… the Environmental Protection Agency (EPA) announced the formation of a panel designed to peer-review congressionally-mandated research on the health impacts of hydraulic fracturing, and the House Energy and Commerce Subcommittee on Energy and Power released its agenda for 2013, which aims to make the country a net energy exporter in the next 10 years, but does not mention fracking legislation in the agenda.” Read on>>

Texas Railroad Commission Amends Fracturing Fluid Recycling Rules to Encourage Water Conservation (BakerHostetler):

“Under rules adopted by the Texas Railroad Commission on March 26, 2013, effective April 15, 2013, Texas hydraulic fracturing operators may recycle fracturing fluids on their own leased or owned land used for fracturing activities or may transfer the fluids for recycling on the land of another operator without a permit.” Read on>>

Oil and Gas Companies Partner with Environmental Groups to Develop Performance Standards for the Industry (Reed Smith):

“The Center for Sustainable Shale Development, an environmental organization located in Pittsburgh, Pa., has announced a program of Performance Standards that has been mutually agreed to by a number of environmental groups and oil and gas companies. The program is voluntary and does not create any new requirements or restrictions for oil and gas companies.” Read on>>

U.S. EPA Announces Peer Review Panel For Hydraulic Fracturing Study (BakerHostetler):

“On Monday, March 25, the USEPA’s Science Advisory Board (SAB) announced that it has formed an independent body of experts to peer-review the agency’s ongoing hydraulic fracturing research. Specifically, the Hydraulic Fracturing Research Advisory Panel (Panel) will review USEPA’s Congressionally-mandated draft report from its national study on any potential impacts of hydraulic fracturing on drinking water resources. That report is due to be released next year.” Read on>>

Unconventional Compromises on Natural Gas Regulation (Phillips Lytle):

“While New York’s natural gas resources remain locked down between perpetual regulatory limbo and extreme polarization among interest groups, recent events have proven that compromise is possible. Last month, a coalition of environmentalists, industry representatives and lawmakers in Illinois reached a tentative agreement that would allow development of that state’s shale resources, ironically named the New Albany formation, to move forward.” Read on>>

Industry, Environmentalists Agree On Voluntary Hydraulic Fracturing Standards (BakerHostetler):

“The [Center for Sustainable Shale Development] will operate as an independent entity with an initial budget of $800,000, to be funded in part by the participating energy companies and in part by other organizations. Its board is comprised of 12 members — 4 from industry, 4 from environmental groups, and 4 independent members. Energy companies can begin seeking certification from the CSSD starting later in 2013.” Read on>>

Youngstown City Hydraulic Fracturing Ban Approved for May Ballot (BakerHostetler):

“In late February, we covered the state and federal legislative and enforcement responses to the release of hydraulic fracturing waste into a Youngstown, Ohio area tributary by a local oil and gas drilling operator. Shortly after the announcement of federal criminal charges and state civil enforcement actions and related legislation, the Youngstown City Council (Council) approved an ordinance submitting for a vote in the May 7 primary elections a city charter amendment banning oil and gas drilling activities within city limits.” Read on>>

Would a Ban on Fracking Constitute a Takings? (Nancie G. Marzulla):

“Fracking is all the rage these days, a means of increasing domestic energy production by injecting fluid into cracks that exists in rock formations to open them up and allow oil and gas to flow out and be collected. There is a great national debate taking place over fracking, which to date remains largely unregulated. Many argue that fracking should be limited or banned due to environmental concerns about polluting the water basin and creation of toxic waste based on chemicals in the liquid being injected, as well as other concerns.” Read on>>

Also watch:

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Uncertainty Surrounds Illinois’s Nationally-Watched Collaborative Legislation On Fracking (LXBN)

Find additional updates on Fracking at JD Supra Law News>>