I have written
about wildlife and the public trust. Part of the reason is that I
would also like to discuss how other natural resources should also be
part of the public trust. The Environmental Amendment, in fact,
makes this imperative.
Pennsylvania is
currently in the midst of an oil and gas boom. The Marcellus and
Utica Shales. Much information about this can be found on the
websites for the Pennsylvania State University Extension Service, or
even found in any Google search. There can (and should) be a
discussion of whether this is good or bad. However, there should
also be a discussion of the nature of the rights in oil and gas. I
will use this as a jumping off point for the discussion of natural
resources in general.
First, let's
start where we were and discuss deer. Deer are very important to the
Commonwealth. They are the state animal. Throughout the years, they
have provided food for Pennsylvanians, as well as an export to cities
such as New York City. So successful was this export that deer
needed to be protected and the taking and possession of deer, among
other wildlife, is highly regulated pursuant to the Game and Wildlife
Code, 324 P.S. §§101, et seq. The Pennsylvania Game Commission is even charged with
managing wildlife with due regard for the Commonwealth’s hunting
and trapping heritage.
Deer are wildlife
that move freely on and off property. They are ferae naturae.
An individual can only legally possess in accordance with the Game
and Wildlife Code, 34 Pa.C.S. §§101, et seq., which requires
certain paperwork. Simply shooting a deer does not make it the
shooter’s property. A shooter must have a license and must inflict
the mortal wound and then tag the deer before it can be legally
possessed. A landowner cannot fence their property and take
ownership of the deer on the property, they must have a permit to be
the owner of the deer behind the fence. In fact, with fencing and
the associated paperwork someone can own a deer, but if the deer
escapes and is legally shot and tagged by someone else, the prior
ownership can be lost. See Potts v. Davis, 149 Pa.Cmwlth 8
(1990), citing Douglas v. Seacoast Products, Inc., 431 U.S.
265, 97 S.Ct. 1740, 52 L.Ed.2d 304 (1977) where the Commonwealth
Court noted, “it is pure fantasy to talk of ‘owning’ wild
birds, fish or animals…”.
Likewise, oil and
gas are important to the Commonwealth. Drake’s well was drilled in
the Commonwealth. There are many jobs that depend upon the oil and
gas industry. Oil and gas provide energy not just for Pennsylvania,
but also for the lucrative eastern market. There are impacts to the
environment because of oil and gas and the oil and gas industry. In
addition, the oil and gas industry is highly regulated. See, e.g.,
Title 58 of Purdon’s. Oil and gas moves freely on and off
property. They have been termed ferae naturae. Westmoreland
& Cambria Natural Gas Co. v. DeWitt, et al, 130 Pa. 235, 18
A. 724 (1889). An individual can only possess oil and gas with the
proper paperwork. Drilling alone does not make oil and gas the
driller’s property. A producer must have a permit and take
physical possession of oil or gas before the oil and gas can be said
to be legally possessed. A producer cannot simply lease a property
and take ownership of the oil and gas on the property, they must have
a permit to drill, drill and remove gas. In fact, even if a property
is leased, someone with a right to drill in the same strata can
remove all the gas and the first producer’s ability to remove oil
and gas can be lost. Jones v. Forest Oil Co., 194 Pa. 379, 44
A. 1074 (1900).
Commonwealth case
law has long recognized that oil and gas are different by their very
nature than coal, minerals or real property. Id. While the
previous paragraphs’ assertions regarding oil and gas are seemingly
radical, they are, in fact, based upon sound law in this
Commonwealth. First, oil and gas leases and reservations are
interpreted with respect to the intent of the parties at the time of
entering into the contract. Szymanowski v. Brace, __ A.2d
___, 2009 WL 3790561 ( Pa. Super. November 13, 2009). The current
oil and gas activity in the Utica and Marcellus Shales was certainly
not contemplated. Second, recent cases have begun to develop a
jurisprudence of natural resources law. Cases have recognized the
difference between ownership of a natural resource and actual
production rights to that resource. Moore v. Commonwealth,
Department of Environmental Resources, 129, Pa.Cmwlth. 628, 566
A.2d 905 (1989); Belden and Blake v. Commonwealth, Department of
Conservation and Natural Resources, 600 Pa. 559, 969 A.2d 528
(Pa. 2009). In addition, cases have recognized that oil and gas are
not “land” within the classic meaning of that term. Independent
Oil and Gas Association of Pennsylvania, et al., v. Board of
Assessment Appeals of Fayette County, 572 Pa 240, 814 A.2d 180
(Pa. 2002). Finally, such developing jurisprudence is in accord with
the best interests of the Commonwealth when dealing with other
natural resources.
First, the intent of
the parties must be examined. Many times courts observe the plain
language of the document. Very few older documents speak about size
of well pad sites, how roads are determined, what use can be made of
minerals or water, or any number of any other rights necessary for
production of gas shales.
In the 1930’s,
wells were vertical wells with 40 acre drainage areas. Well sites
may have been the size of a small truck and the expected life of a
well may have been 25 or 30 years. Thus, when a buyer of the surface
evaluated a reservation, they could reasonably expect a small surface
impact for a relatively short period of time. Conversely, they did
not expect that 79 years after their purchase, millions of gallons of
water would be used to fracture subsurface zones, that such water
would be injected, stored and transported in and through his
property, and that 10 acre well pads with cleared pipelines would
crisscross the property rendering large areas unusable. Based on the
producers’ theories, if the Marcellus was pumped to exhaustion this
year, the producer could come back 100 years later and pump it again
using new technology. The surface owner would never be able to
quietly and peaceably enjoy the estate for which they bargained.
Producers, likewise
could not reasonably expect the result urged in case law across the
Commonwealth. Coal, can be drilled located and tested, and the
extent and quality of which can be measured with some accuracy.
Thus, someone reserving coal knows what they will have in 100 years
with a high degree of certainty. By contrast, an oil and gas
producer will have no guaranty gas will be there tomorrow, let alone
100 in years. By fact of nature and geology, gas reservation are
time sensitive and economic and law must recognize this time
sensitive component to the rights of production.
In
terms of pure real property law, these issues are not issues of oil
and gas ownership, but rather of production rights and what those
rights constitute. Recognition of oil and gas as ferae naturae,
not subject to ownership as land, but only recoverable through the
exercise of production rights is perfectly logical. In fact, the law
has a word for such a right: profit a prendre. Such a profit a
prendre is not listed as the subject of a quiet title action.
Likewise,
jurisprudence that is developing seemingly struggles with questions
of ownership of oil and gas and the exercise of rights of production.
In the case of Independent Oil and Gas Association of
Pennsylvania, et al., v. Board of Assessment Appeals of Fayette
County, 572 Pa 240, 814 A.2d 180 (Pa. 2002), the Supreme Court
found that oil and gas were not land subject to taxation. The
majority based this on the principle of ejusdem generis, but Justice
Nigro in concurrence (joined by Justice Saylor) made a different
observation. “…I would simply hold that Appellees lacked the
statutory authority to tax Appellant’s interests because oil and
gas are of a fundamentally different character than real estate.”
Id., at 185 [Emphasis added]. Recognition of this difference can be
found in cases decided both before and after the Independent Oil
and Gas Association case.
The case of Moore
v. Commonwealth, Department of Environmental Resources, 129,
Pa.Cmwlth. 628, 566 A.2d 905 (1989) involved a situation of interest.
Moore claimed oil and gas ownership through a reservation in the
chain of title to lands owned by the Department of Environmental
Resources (DER). The facts and reasoning are not particularly useful
here, as they were very case-specific. However, the holding is
significant. Ultimately, Commonwealth Court found that Moore had
title to the mineral estate (the case involved oil, gas and coal),
but that the rights of ingress, egress had lapsed and were subject to
reasonable regulations of DER. Thus, the court split the rights of
production from the rights to the natural resource itself.
Of course this begs
the question of what value oil and gas is if there are no production
rights. In fact, it is the production rights which have any value at
all. The industry itself recognizes this distinction and the
importance of production rights as it relies heavily on leases of
production rights, not outright purchase of oil and gas. There is
case law calling leases sales, and the industry wants the public to
believe that a lease carries rights forever. However, the contract
itself, the intent of the parties, is what should govern. As we have
examined, an outright sale of rights forever simply could not have
been contemplated.
Courts also
recognize this distinction and courts have implied production rights.
The recent case of Belden and Blake v. Commonwealth, Department
of Conservation and Natural Resources, 600 Pa. 559, 969 A.2d 528
(Pa. 2009), is just the latest incarnation. That case involved an
alleged oil and gas owner and the attempt by the Department of
Conservation and Natural Resources (DCNR) to impose rights by virtue
of their status as a Commonwealth agency under the Environmental
Amendment. The Court rejected these “superpowers” on the part of
DCNR. However, the court also explicitly recognized that implied
rights – the rights to produce – were limited to reasonable use.
The Court also indicated that landowners could seek reasonable
restrictions on use and could seek redress for unreasonable use.
What these cases
show are courts grappling with questions of natural resources law and
how to deal with those resources in the best interests of the
Commonwealth. While industry wishes the courts to treat oil and gas
as real property, the people can insist it be treated like what it
is: energy. You can certainly feel the wind, but you cannot own
it. You may, however lease your property for production of wind
energy. The value is in the production rights. You can see, feel
and even be burned by the sun. But you cannot own the sun or
sunlight. You can however, lease your property for a solar farm.
The value again is in the production rights. These production rights
are not land or real property interests.
These questions seem
esoteric, but as courts deal with natural resources issues in the
next century, they will become more and more real. There will be
questions who owns the ozone above the earth, the water below the
earth, and even the radiation that may come from the earth. We can
choose to treat these issues with the limited concepts of real
property law, with its notions of ownership and try to decide who the
lucky winners are. Or we can treat these with concepts of equity, as
being a Commonwealth would suggest, and develop case law that suits
the circumstances. Chartiers Block Coal Company, 152 Pa.
286, 25 A.597 (Pa. 1893), a case relied upon in Belden and Blake,
foreshadowed this moment. They noted:
This is a new
question, and one that is full of difficulty. The discovery of new
sources of wealth, and the springing up of new industries which were
never dreamed of half a century ago, sometimes present questions to
which it is difficult to apply the law, as it has heretofore existed.
It is the crowning merit of the common law, however, that it is not
composed of ironclad rules, but may be modified to a reasonable
extent to meet new questions as they arise. This may be called the
‘expansive property of the common law.’ Mining rights are
peculiar, and exist from necessity, and the necessity must be
recognized, and the rights of mine and land owners adjusted and
protected accordingly.
Id., at 294, 295.
This is what it
means to be a Commonwealth and to redefine the nature of government.
What happens when the second wind farm gets in the way of the first?
Oil and gas themselves should be utilized for the benefit of all citizens. The interests that allow that development are more akin to personal property, and should be protected. However, as a Commonwealth, for the good of all, we cannot permit the public benefit to be held hostage by a few. Are all cases to be treated individually, or are we going to have an
orderly development for the good of the Commonwealth as a whole? The
system as it is set up favors those with money and those with
influence. In a sense, those with something of value to lose. I would suggest, that is true when it comes to the rights to exploit a natural resource. However, when it comes to the natural resource itself, everyone stands to win or lose. The people of the Commonwealth will need to use influence
and strategy to plan appropriately.
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