United States: Pennsylvania Supreme Court Clarifies Shale Gas Leasehold Rights

Shale Gas & Oil Development

In a 6-0 decision which has been much anticipated by both natural gas producers and landowners, the Pennsylvania Supreme Court finally cleared up confusion about who owns the mineral rights to shale gas in Butler v. Powers Estate, No. 27 MAP 2012, 2013 Pa. LEXIS 789 (Pa. Apr. 24, 2013) ("Butler"). The bottom line is that in Pennsylvania, "minerals" in a deed reservation does not include shale gas, and unless the reservation shows specific intent to reserve the right to the shale gas, a general reservation for "minerals" does not do the trick. The Butler court upheld the age-old "Dunham Rule," a principle of Pennsylvania real property law dating from 1882, which holds that there is a rebuttable presumption that a reservation in a conveyance for "minerals" without any specific mention of natural gas or oil does not include natural gas or oil. See Dunham & Shortt v. Kirkpatrick,101 Pa. 36 (1882). 


Appellants, Jon and Mary Josephine Butler (the "Butlers"), own 244 acres of property located in Susquehanna County, Pennsylvania. The deed by which the Butlers acquired their property contained a reservation of "one-half the minerals and Petroleum Oils to said Charles Powers his heirs and assigns forever." The reservation dated back to 1881, when a predecessor in title to the Butlers acquired the property from Charles Powers.

In 2009, the Butlers filed a complaint against the Estate of Charles Powers (the "Powers Estate") to quiet title on the property, which included the natural gas from the Marcellus shale located beneath the property, on the basis that natural gas was not expressly identified in the 1881 deed reservation. The trial court agreed, explaining that in accordance with the Dunham Rule, a rebuttable presumption exists that natural gas or oil is not included in a reservation of "minerals" unless natural gas or oil is specifically identified in the reservation. Butler, 2013 Pa. LEXIS at *5 (citing Highland v. Commonwealth, 161 A.2d 390 (Pa. 1960); Dunham, 101 Pa. at 44).

On appeal, the Pennsylvania Superior Court reversed and remanded the trial court's decision, ordering an evidentiary hearing as to whether Marcellus shale is the type of mineral such that the natural gas within it would be included in the deed reservation. The Superior Court, although acknowledging Dunham and its progeny, relied instead on a 1983 Pennsylvania Supreme Court decision in which the Court held that a party which owns the rights to mine and remove coal within a coal seam also owns the coalbed gas within that seam.United States Steel Corporation v. Hoge, 468 A.2d 1380 (Pa. 1983) ("Hoge II"). The Court inHoge II viewed coalbed gas as a dangerous waste product of coal mining that is distinct from commercially exploitable gas and explained that it "strains credulity" to think that the grantor of a reservation intended to reserve theright to extract a valueless and dangerous waste product. Therefore, the Superior Court inButler ruled that the trial court erred by not first conducting an evidentiary hearing to determine whether Marcellus shale natural gas is the type of commercially valuable natural gas contemplated under theDunham Rule, or whether it is similar to coalbed gas such thatHoge II applies to the Butlers' deed reservation. The Butlers appealed the Superior Court's decision to the Pennsylvania Supreme Court. 

Dunham Case

The Dunham Rule has been a rule of Pennsylvania property law for over 130 years. The Rule creates a rebuttable presumption that a deed reservation for "minerals" does not include natural gas or oil absent clear and convincing parol evidence that the parties to the original deed intended to include natural gas or oil in the reservation.

In Dunham, the Court examined a deed containing a reservation of timber and "all minerals" in order to determine whether the phrase "all minerals" included oil. The Court, following a prior opinion in which the Court determined that "minerals" are commonly understood to be of a metallic nature, held that the common understanding of the word "minerals" should be used; therefore, absent specific mention of oil, or clear and convincing evidence of the intent of the parties to include oil in the deed reservation, oil is not included in a reservation of "minerals" because oil is not commonly understood to be of a metallic nature.Dunham, 101 Pa. at 37; Gibson v. Tyson, 5 Watts 34 (Pa. 1836). In 1906, the Court expanded the application of the Dunham Rule to natural gas in Silver v. Bush, 62 A. 832, 833-34 (Pa. 1906).

In 1960, the Court reiterated the applicability of the Dunham Rule in a situation where a reservation of "minerals" does not expressly identify oil or natural gas in the reservation. Highland v. Commonwealth, 161 A.2d 390, 398-99 (Pa. 1960). The Court based its affirmation of the Dunham Rule on the "long-standing jurisprudence" of Pennsylvania property law: "A rule of property law long acquiesced in should not be overthrown except for compelling reasons of public property or the imperative demands of justice." Id. at 399 n.5. 

Issues on Appeal

On appeal, the Butlers argued that, in accordance with the Dunham Rule, a deed reservation must be construed consistent with the common understanding of a layperson at the time the deed was executed. The Butlers argued that the common understanding of "minerals" at the time of the 1881 deed reservation was that minerals had a "metallic character." Therefore, because natural gas does not have a "metallic character," it must be presumed that there was no intent by the parties in 1881 for natural gas to be included in the deed reservation. The Butlers also argued that the Superior Court erred in remanding the case to the trial court for an evidentiary hearing because scientific evidence as to whether Marcellus shale is or is not now considered a mineral has no bearing on the Powers Estate's burden of proving, by clear and convincing evidence, that a layperson in 1881 would have considered the Marcellus shale and the natural gas contained within it to be a mineral.

In response, the Powers Estate argued the case could be decided on the plain language of the deed reservation because natural gas is an appurtenance of oil and is included in the plain language of the 1881 deed reservation. The Powers Estate questioned whether theDunham Rule even applied to this matter because Dunham was not decided until one year after the 1881 reservation was executed. The Powers Estate also questioned the continued viability of theDunham Rule in the face of various Pennsylvania statutes, Hoge II, and decisions from other jurisdictions, all of which state generally that natural gas is a mineral. 

The Court's Opinion

The Court ruled 6-0 for the Butlers on all issues. The Court recognized that scientifically and commercially, the term "minerals," as used today, includes natural gas, but in the nineteenth century, the term "minerals" included only materials of a "metallic nature"—which is the basis to the Dunham Rule. The Court, however, seemed resigned to having to employ the nineteenth century way of looking at the question and to leaving theDunham Rule intact. Justice Saylor, in concurring, even noted that the "nineteenth century rationale for the Dunham Rule [is] cryptic, conclusory, and highly debatable."

The only issue arguably left open is the interesting one of whether the term "Petroleum Oils" includes shale gas. Regretfully for the Powers Estate, it did not raise this issue below and the Court held the issue waived. The Court gave a clear signal on this, though, in a footnote in which it observed that the Court has always "treated oil and natural gas as separate substances for purposes of private deeds" and "[i]f oil and gas were intended to be included in the 'minerals' reserved, then why was the oil expressly reserved?"Butler, 2013 Pa. LEXIS at *14 (citing Bundy v. Myers, 94 A.2d 724, 726 (Pa. 1953)).

The Court distinguished Hoge II on the basis that Hoge II made no reference to theDunham Rule. In addition, the Court found no merit to applying the ruling of Hoge II in this matter, explaining that unlike the coal and coalbed gas that was the subject of the Hoge II opinion, there is no merit to the argument that natural gas is a mineral merely because it is contained in the Marcellus shale.

The Court strongly affirmed the continued viability and control of the Dunham Rule as the law of Pennsylvania. The Court also strongly affirmed the applicability of the Dunham Rule to the Butlers' 1881 deed reservation. The Court explained that the Dunham Rule and its progeny have never been explicitly questioned, and that there is no compelling reason to overturn the Rule. Butler, 2013 Pa. LEXIS at *33-34 (citing Highland, 161 A.2d at 388 n.5). The Court acknowledged that various Pennsylvania statutes have categorized natural gas as a mineral, but explained that the issue before the Court is one of common law and not statutory law, and that under Pennsylvania common law there is a "rebuttable presumption in the context of a private deed conveyance that the term 'mineral' does not include oil or gas." Butler, 2013 Pa. LEXIS at *28-29 (citing Huntley & Huntley, Inc. v Borough of Oakmont, 964 A.2d 855, 858 (Pa. 2009)).

Finally, and most importantly, the Court clearly stated that 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." As a result, the Court expressly held that "Marcellus shale natural gas cannot, consistent with the Dunham Rule, be considered a mineral for private deed purposes." 


Butler finally brings to an end the confusion and uncertainty created by the Superior Court in connection with rights to Marcellus shale natural gas. It is now clear to royalty payers and lease-holders who the parties are which own the rights to the natural gas and are entitled to payments under a natural gas lease. It remains the law in Pennsylvania, as it has been since early in the 1800s, that a reservation of "minerals" contained in a deed does not include natural gas absent clear and convincing evidence that natural gas was intended to be included in that reservation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Michael L. Krancer
Heather L. Demirjian
Margaret A. Hill
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.