Marcellus Shale Gas and Oil Title Issues in PA
Pennsylvania has a statutory framework which permits the division of the fee simple title of real estate into surface rights and mineral rights. Fee simple is the English name for complete ownership of real estate. Mineral rights, from the point of view of real estate title, are in derogation of the common law. As a result, they exist by statute only. Pennsylvania enacted legislation permitting the severance of coal rights only. When severed, the subsurface rights are superior to the surface rights. They create their own chain of title in the Recorder of Deeds Office.
Because oil and gas were not declared by the legislature to real estate, they are not real estate.
Many people prepare deeds, purporting to sever and convey the oil and gas rights. While these deeds will transfer the oil and gas rights, the transfer, is a transfer of personal property, and not real property. The interest transferred is not capable of being insured under a title insurance policy. This may make it difficult to determine who really owns the right to extract gas.
Just as ownership of the oil and gas rights is not a real estate interest, a gas lease to an operator is not a lease of an interest in real estate. For that reason, operators will often ask for easement rights (which are real estate interest) to enable the extraction of the gas, handling of environmental issues, and transport of the gas. These will be found in the title and are insurable.
There is real value is severing the mineral rights from the surface rights BEFORE a deal is made with a gas operator. This process should be done with the aid of an experienced lawyer.