This decision reaffirming the Dunham rule was made in relation to a deed executed in 1881 which reserved to the grantor the subsurface and removal rights of "one-half [of] the minerals and Petroleum Oils" contained beneath the property. The Court applied the rule and determined that this reservation did not include natural gas, including that contained in Marcellus Shale, beneath the property.
The Pennsylvania Supreme Court turned aside several challenges to the application of the rule, including an argument that the "trapped" nature of the gas in the Marcellus Shale converted it to a mineral. Additionally, the Court reiterated that any inquiry into the intent as to whether oil and gas would be considered a mineral, e.g., for attempting to rebut the presumption, "may only be shown through parol evidence that indicates the intent of the parties at the time the deed was executed." Moreover, the Supreme Court rejected that this intent can be shown through scientific evidence - "the common, layperson understanding of what is and is not a mineral is the only acceptable construction of a private deed."
In its unwavering affirmation of the Dunham rule, the Pennsylvania Supreme Court found no "compelling reasons of public policy or the imperative demands of justice" to overrule or limit the Dunham rule "that has formed the bedrock for innumerable private, real property transactions for nearly two centuries."
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This article was prepared by Jeremy Mercer (jmercer@fulbright.com or 724 416 0440) and Barclay Nicholson (bnicholson@fulbright.com or 713 651 3662) from Fulbright's Energy Practice Group.
