In mineral ownership case, PA supremes maintain stability - Beckley, Bluefield & Lewisburg News, Weather, Sports

In mineral ownership case, PA Supreme Court maintains stability

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A court ruling in Pennsylvania this week on mineral ownership may not have implications for West Virginia on its merits, but it has felicitous implications on a broader level.

"To me, the big news is that modern courts in busy states do recognize the importance of stability in the law," said Russell Schetroma of the Pennsylvania Supreme Court's April 24 decision in Butler v. Powers Estate. Schetroma is an energy and oil and gas lawyer of long experience who practices now with Steptoe and Johnson in Pennsylvania.

"I think the big news for business people is that this is evidence that courts recognize the need for stability and are willing to enforce it for the good of all people," Schetroma said.

The unanimous decision in Baker v. Powers overturned a superior court, or appeals court, decision that sought a scientific understanding of oil and gas in shale.

That's as it should be, Schetroma said.

"The unanimous decision says, ‘We told you in this case it's a rule of property.' And again, ‘We told you in this case it's a rule of property,'" he said, distinguishing a rule based on science or fact from one based on property law. "They're saying, ‘Don't fiddle with this because it's a rule of law, not fact.' That's apparently what the superior court got lost in when it said, ‘Let's look at facts.' The supremes said, ‘No, it's a rule of law.'"

The Supreme Court instead reached back to the state's 1882 Dunham Rule and, in so doing, affirmed the practice in property law of regarding gas as separate from the shale rock where it's located.

The implication is that, in Pennsylvania, unless specific reference is made to the oil and gas in a transfer of mineral ownership, the oil and gas are not transferred.

The court also noted the different nature of coalbed methane. With reference to the 1983 United States Steel Corp. v. Hoge, the court recognized that coalbed methane belongs to the owner of the coal.

That makes sense to Kevin West, managing partner of Steptoe's Columbus, Ohio, office and an energy lawyer focusing on oil and gas.

"Folks have viewed coalbed methane as different because shale has no utility in and of itself, only if you release the gas," West said. "Whereas coal is a usable mineral and part of the mineral estate, as well as being able to produce the gas."

The decision leaves in place Marcellus Shale ownership and leases across Pennsylvania that were called into question by the appeals court's earlier ruling.

It has no specific implications for West Virginia, Schetroma said, because only Pennsylvania and Arkansas have rules treating oil and gas as separate from the rock.

But he noted the value for the entire business community of the court's recognition of the importance of stability in property law.

"An essential part of a valid jurisprudence is to have stability and predictability in the law," he said. "By upholding Dunham, I think you have a court saying stability trumps modernization."