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Pennsylvania high court hears Marcellus shale case

By Bob Downing Published: October 17, 2012

Pennsylvania's Supreme Court heard arguments Tuesday in a natural gas case that could create chaos for major energy companies and thousands of leaseholders. But the questions from the justices suggested they may be reluctant to cause such disruptions by significantly modifying existing law.

The case concerns an 1881 property deed and established Pennsylvania law that defines minerals as only metallic substances such as gold, silver and iron. In the deed, a man named Charles Powers sold property in Susquehanna County but retained the rights to 50 percent of the "minerals and petroleum oils."

The Powers estate claims that the reference to "minerals" in the old deed gives them part ownership of the natural gas locked in the Marcellus Shale under the property. The estate challenged the natural gas and mineral rights of the property's current owner. Lower courts disagreed about the issue.

The Marcellus is a formation that lies deep under much of Pennsylvania, West Virginia, New York and Ohio. In 1881 the technology didn't exist to extract gas from the shale, but recent advances have made that possible.

The stakes in the case are enormous. In the last four years, the Marcellus Shale has gone from virtually no output to become the most productive natural gas field in the United States. Wholesale revenues from production this year are projected to be in the range of $6 billion to $8 billion, depending on market prices. Landowners get hundreds of millions of dollars in royalty payments out of that total.

If the Supreme Court agrees with the Powers estate, thousands of recent gas drilling leases could be questioned or overturned. But Justice Max Baer noted the 1881 deed could have asked to keep natural gas rights — and it didn't.

"Why did they include oil, and why did they not include gas?" in the deed, Baer asked.

Lawrence Kelly, an attorney representing the Powers estate, said the natural gas is literally a part of the Marcellus Shale.

"If you own the duck, you own the feathers," Kelly said.

But Baer noted that natural gas isn't stationary, and can actually move through rocks and out into the atmosphere.

Justice Debra McCloskey Todd added that the estate's argument departs from Pennsylvania's long-established definition of a mineral.

Gregory Krock, who represents the family that now owns the property, said the case is just about what "ordinary people" meant in the 1881 deed.

"Ordinary people do not use 'mineral' in the same sense a geologist does," Krock said.

The shale gas is extracted using a process called hydraulic fracturing. Large volumes of water, along with sand and hazardous chemicals, are injected deep underground to break rock apart and free the oil and gas.

It's not known when the court will issue a final ruling in the case.

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Utica and Marcellus shale web sites

Ohio Department of Natural Resources' Division of Oil and Gas Resources Management State agency Web site.

ODNR Division of Oil and Gas Resources Management. State drilling permits. List is updated weekly.

ODNR Division of Geological Survey.

Ohio Environmental Protection Agency.

Ohio State University Extension.

Ohio Farm Bureau.

Ohio Oil and Gas Association, a Granville-based group that represents 1,500 Ohio energy-related companies.

Ohio Oil & Gas Energy Education Program.

Energy In Depth, a trade group.

Marcellus and Utica Shale Resource Center by Ohio law firm Bricker & Eckler.

Utica Shale, a compilation of Utica shale activities.

Landman Report Card, a site that looks at companies involved in gas and oil leases.FracFocus, a compilation of chemicals used in fracking individual wells as reported voluntarily by some drillers.

Chesapeake Energy Corp,the Oklahoma-based firm is the No. 1 driller in Ohio.

Rig Count Interactive Map by Baker Hughes, an energy services company.

Shale Sheet Fracking, a Youngstown Vindicator blog.

National Geographic's The Great Shale Rush.

The Ohio Environmental Council, a statewide eco-group based in Columbus.

Buckeye Forest Council.

Earthjustice, a national eco-group.

Stop Fracking Ohio.

People's Oil and Gas Collaborative-Ohio, a grass-roots group in Northeast Ohio.

Concerned Citizens of Medina County, a grass-roots group.

No Frack Ohio, a Columbus-based grass-roots group.

Fracking: Gas Drilling's Environmental Threat by ProPublica, an online journalism site.

Penn State Marcellus Center.

Pipeline, blog from Pittsburgh Post-Gazette on Marcellus shale drilling.

Allegheny Front, environmental public radio for Western Pennsylvania.