9/23/11 Land deal of 1880s in center court over shale rights – Attorney John Smith quoted

HARRISBURG — A Northern Pennsylvania court will soon take another look at a case stemming from an 1880s land deal in an effort to determine who owns the valuable Marcellus Shale gas deep below the property.

The parties involved are arguing over a 130-year-old Susquehanna County transaction, which reserved “half the minerals and petroleum oils” for those selling the land.

The current owners now say they should be the sole owners of any Marcellus gas produced because that agreement did not mention gas rights.

Legal observers caution that the resulting court decision could have ramifications for shale leases throughout the state.

The lawsuit raises questions about whether there are separate legal rights to the shale rock itself compared to the gas trapped inside, and if so, who can claim which when the paperwork is unclear.

“The practical impact is that right now, a company is not going to know who to deal with,” said Ross Pifer, director of Agricultural Law Resource and Reference Center at Penn State University’s Dickinson School of Law.

The issue of mineral ownership isn’t new: The Superior Court decision that sent the Susquehanna County case back to Common Pleas Court earlier this month cites several opinions familiar to energy lawyers.

One involving ownership of coal-bed methane, known as the Hoge decision, decreed that whoever owns a coal seam also rightfully owns any coal gas contained inside.

“Lawyers out here have floated this notion of, why doesn’t this apply to the shale?” said Washington County attorney John Smith, whose firm, Smith Butz LLC, handles mineral rights cases.

That case law is muddied by an earlier decision that stated any mineral rights reserved by a landowner should not be assumed to include oil or gas unless specifically stated.

“I think the focus in analyzing ownership has been on the natural gas, but the court is essentially saying we have to determine who owns the rock,” Mr. Pifer said.

Regardless, Range Resources spokesman Matt Pitzarella said the company isn’t concerned about potential legal impacts on its leaseholdings. He noted that they do a significant review of ownership paperwork before finalizing a lease.

The Susquehanna County court has not set a hearing to hear expert testimony as the appellate court requested.