Billman Geologic

As a geologist … a scientist (and certainly not a lawyer), we know the answer is, “No”. Correct? TheFreeDictionary.com defines a mineral as, “A naturally occurring, homogeneous inorganic solid substance having a definite chemical composition and characteristic crystalline structure, color, and hardness.” This is likely close to the definition we all learned, as geologists, in Physical Geology 101.

Interestingly enough, the second listed definition at the same source states that a mineral is, “Any of various natural substances, as: a. An element, such as gold or silver., b. An organic derivative, such as coal or petroleum., c. A substance, such as stone, sand, salt, or coal, that is extracted or obtained from the ground or water and used in economic activities.”

What gives? Obviously, those are two entirely different definitions. The first is the scientific definition and the second is what we might call the “legal” definition.

Legally, the definition of whether the Marcellus Shale, and the natural gas that is produced from it, is in question within the Commonwealth of Pennsylvania. Butler v. Charles Powers Estate is a case that will be in front of Pennsylvania’s Supreme Court. The court will decide if natural gas produced from the Marcellus Shale and the shale itself are legally considered a mineral.

The first question to ponder: “Is the Marcellus Shale itself a mineral, similar to coal?” Coal can be an economically mineable “mineral”. We know that. But, we also know that the economics of a coal mine depends on the volume of coal recoverable at a specific depth. How thin is too thin and how deep is too deep, for a coal mine to remain economic? Is the Marcellus Shale an economically, mineable “mineral”? The shale itself has minimal value as a mineable stone, regardless of depth. Short of a “shale pit”, on a farmer’s back forty, where he might use outcropping Marcellus Shale for fill material or road rock on his own property, the shale has minimal “mineable” value. At the depth of your average Marcellus Shale natural gas reservoir, 6,000 to 8,000 feet deep, the answer to the question of the Marcellus Shale’s economics as a “mineable mineral” is, “Certainly not.”

In the initial case of Butler v. Charles Powers Estate, the court noted that previous rulings in Pennsylvania (namely Dunham v. Highland) dealt with conventional natural gas reserves and that the Marcellus Shale gas is an unconventional reservoir. Of course, what the court likely doesn’t appreciate (as there are few judges that also happen to be petroleum geologists) is that a shale reservoir isn’t the only type of unconventional reservoir. Coal Bed Methane (CBM) is an unconventional reservoir and it is tempting for the court to only compare the Marcellus Shale to CBM, as both reservoirs have retained the hydrocarbon generated in the unit itself.

Harris Cander (2012) of BP Exploration and Production, defined unconventional reservoirs as, “… those petroleum reservoirs whose permeability/viscosity ratio requires use of technology to alter either the rock permeability or the fluid viscosity in order to produce the petroleum at commercially competitive rates. Conversely, conventional resources are those that can be produced commercially without altering permeability or viscosity.” In the case of Marcellus Shale, we are talking about natural gas, and viscosity isn’t the issue at hand, it is permeability.

The court likely sees production from the Upper Devonian Sandstones, the mainstay of southwestern and central Pennsylvania oil and gas industry, prior to the Marcellus Shale play, as a “conventional reservoir”. In most cases, it is not. It is a tight (low permeability) gas sandstone and requires hydraulic fracturing to increase the permeability and allow for economic production. The court likely sees the production from the Silurian Medina Sandstone, the mainstay of the northwestern Pennsylvania oil and gas scene, prior to the Utica shale and Marcellus Shale plays, as a “conventional reservoir”. It is not. It, too, is a tight (low permeability) gas sandstone and requires hydraulic fracturing to increase the permeability and allow for economic production.

The basic ruling in U.S. Steel Corp. v. Hoge was that whoever owned the coal owned the natural gas in it. I’m no lawyer, but given that the coal in question is an economically, mineable mineral (under the correct economic environment) maybe that ruling makes some sense. But, to compare a shale, a rock with little to no appreciable “mineable” value other than the hydrocarbon in the reservoir, especially at depths of thousands of feet below the surface, with a coal that has appreciable value, especially at the depths of an average coal mine, a few hundred feet below the surface, appears to be a ruling made not considering the entire definition of an unconventional reservoir.

So, back to the original question, “Is natural gas a mineral?” Or, “Is the Marcellus Shale a mineral?” Geologically, scientifically, the answer is still, “No!” But, legally, that answer is to come from the Pennsylvania Supreme court in the near future.

For more information on the case, Butler v. Charles Powers Estate, please review: http://www.lexology.com/library/detail.aspx?g=28d2c573-f28a-4af6-9fab-801855a1369a&buffer_share=4b762&utm_source=buffer&goback=%2Enmp_*1_*1_*1_*1_*1_*1_*1_*1_*1

You can review Harris Cander work at: http://www.searchanddiscovery.com/documents/2012/80217cander/ndx_cander.pdf