Today the Pa Superior Court issued a published decision in which the Court went into a detailed analyses of coal, oil and gas rights in Pennsylvania. Part of the decision turned on the Pa Supreme Court decision of US Steel v. Hoge 468 A. 2d 1380 and part turned on the Court's interpretation of deeds which date back to 1932.
While the decision is interesting the alarming part of the decision is that deeds that were drafted over 75 years ago can have an important impact on oil and gas ownership rights today. Furthermore, when those deeds were drafted the drafters may not have been aware of the value of certain oil and gas rights today.
In summary, as a result of a 1932 deed the Kennedys retained coal and oil and gas rights in a tract of land. In subsequent deeds the rights to the coal were acquired by Console Energy Inc. ("Console") The Kennedys retained the oil and gas rights. At the time that the coal and oil and gas rights were excepted and reserved in the 1932 deed it was unknown that there was value to methane gas contained in the coal which is referred to as coalbed methane gas.
In recent years Console began to extract the coalbed methane gas since they owned the coal. The Kennedys brought an action to quiet title, among other actions, claiming that they as the owners of the oil and gas rights were also the owners of the coalbed methane gas. The trial ruled again the Kennedys and the Pa Superior Court affirmed. In doing so, the trial court relied upon the Hoge case which found that the owner of the coal is the owner of the coalbed methane gas. The Pa Superior Court followed Hoge and in doing so found that Hoge must be followed unless the deed provided that the parties intended that the owner of coalbed methane gas be separate and apart from the owner of the coal. In this case, the court found that the language in the 1932 deed reserving the oil and gas rights was not specific enough to retain the rights to the coalbed gas.
So what can you learn from this decision. First, if you are representing a client who is purchasing a property you will need to carefully review any old deeds and determine what rights were and were not retained. Second, in drafting deeds and reserving rights you need to be careful in what rights are and are not reserved. The problem is when this deed was drafted there was no value in coalbed methane gas. However, with modern technology what might be considered waste or a nuisance today might be valuable to someone else tomorrow. A frightening reality!
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