Title: McGEE v. CABALLO COAL COMPANY

State: wyoming

Issuer: Wyoming Supreme Court

Document:

McGEE v. CABALLO COAL COMPANY2003 WY 6869 P.3d 908Case Number: 02-109Decided: 05/29/2003
April Term, A.D. 2002

 

JOHN 
E. McGEE AND BETTY A. McGEE

TRUSTEES 
OF THE McGEE MINERAL

TRUST 
DATED JANUARY 15, 1992, AND

ALLEN 
CLARK, a/k/a MELVIN ALLEN CLARK,

 

Appellants(Plaintiffs) 
,

 

v.

 

CABALLO 
COAL COMPANY,

 

Appellee(Defendant) 
.

 

 

The 
Honorable Dan R. Price II, Judge

 

Representing 
Appellants:

Charles 
R. Hart of Hart & Beisher, Sheridan, WY.

 

Representing 
Appellee:

Dan 
B. Riggs of Lonabaugh and Riggs, Sheridan, WY.

 

Before 
HILL, C.J., and GOLDEN, LEHMAN, KITE, and VOIGT, JJ.

 

 

LEHMAN, 
Justice.

 

[¶1]      This 
is an appeal from summary judgment entered in favor of appellee Caballo Coal 
Company (CCC) and against appellants John E. McGee and Betty A. McGee, Trustees 
of the McGee Mineral Trust dated January 15, 1992, and Allen Clark (collectively 
appellants).  In granting summary 
judgment, the district court ruled that appellants' predecessors had 
con­veyed the rights to coalbed methane gas (CBM) when they transferred 
certain real property located in the Fort Union formation of the Powder River 
Basin of Wyoming to CCC's prede­cessors.  Upon review, we reverse. 

ISSUE

 

[¶2]      Appellants 
present the following issue:

 

            
Does a conveyance of "all coal and all other minerals . . . contained in 
or associated with coal and which may be mined and produced with coal which 
Grantor owns or holds in said lands" convey coalbed methane gas, or does a 
reservation of "oil, gas and other minerals" reserve coalbed methane 
gas?

 

CCC 
styles the issue before this court as:

 

            
Did the 1973 warranty deed between McGees and Carter Oil Company and the 
1973 warranty deed between Clarks and Carter Oil Company convey coalbed methane 
underlying the described lands?

 

 

 

[¶3]      On December 17, 
1973, John E. McGee and Betty A. McGee issued a warranty deed conveying to 
Carter Oil Company the surface estate and any interests in coal that they may 
have or hold in certain real property located in Campbell County for an amount 
of $340,000.00 and a two percent per ton royalty on certain mined coal.  The McGees did not own any coal rights 
with respect to this land because these rights had been reserved to the United 
States in the original patents.  On 
this same date, Melvin D. and Ethel L. Clark con­veyed to the Carter Oil 
Company, also via warranty deed, the surface estate in other real property for 
$1,510,000.00 but reserved the coal rights in this land.  These warranty deeds were issued 
pursuant to prior agreements. 

 

[¶4]      Pertinent parts 
of the agreements set forth:

 

            
Grantor agrees to grant and convey good and merchant­able title to 
said lands to Grantee . . . together with all coal and all other minerals 
metallic or non-metallic, contained in or asso­ciated with coal and which 
may be mined and produced with coal which Grantor owns or holds in said lands[.] 
. . . [E]xcepting and reserving to Grantor all oil, gas, and other 
min­erals in said lands which Grantor now holds, other than those specified 
above to be conveyed to Grantee and excepting all coal in the SE¼ of Sec. 5, Township 48 
North, Range 70 West [NE¼NE¼ of Section 24, Township 
48 North, Range 71 West]. 
 

The 
warranty deeds both state in applicable part:

 

. 
. . hereby releasing and waiving all rights [to the lands described above] 
together with all coal and all other minerals, metallic or nonmetallic, 
contained in or associated with coal and which may be produced with coal which 
Grantor owns or holds in said lands[.] . . . EXCEPTING AND RESERVING 
to Grantor all oil, gas and other minerals in said lands which Grantor now owns, 
other than those included above in the conveyance to Grantee, and excepting all 
coal in the SE¼ of Sec. 5, Township 48 North, Range 70 West [NE¼NE¼ of Section 
24, Township 48 North, Range 71 West]. 

 

Further, the warranty deeds contain a non-merger clause which 
states:  "This deed is exe­cuted 
pursuant to agreement between Grantor and Grantee dated December 17, 1973, the 
provisions of which are not merged herein."  
 

[¶5]      Appellants are 
the successors in interest to John E. and Betty A. McGee and Melvin D. and Ethel 
L. Clark, while CCC is the successor in interest of Carter Oil Company.  On June 21, 2001, appellants filed a 
declaratory judgment and quiet title action seeking a deter­mination that 
the McGees and Clarks reserved CBM with respect to the warranty deeds.  The parties then filed cross-motions for 
summary judgment.  Upon 
consideration and hearing, the district court entered summary judgment in favor 
of CCC and against appellants.  This 
appeal fol­lowed.

 

 

STANDARD 
OF REVIEW

 

[¶6]      Our standard of 
review in summary judgment cases is well established.  

 

            
Summary judgment motions are determined under the fol­lowing language 
from W.R.C.P. 56(c):

 

The 
judgment sought shall be rendered forthwith if the pleadings, depositions, 
answers to interrogatories, and admissions on file, together with the 
affidavits, if any, show that there is no genuine issue as to any material fact 
and that the moving party is entitled to a judgment as a matter of 
law.
 

            
The purpose of summary judgment is to dispose of suits before trial that 
present no genuine issue of material fact.  
Moore v. Kiljander, 604 P.2d 204, 207 (Wyo. 1979).  Summary judgment is a drastic remedy 
designed to pierce the formal alle­gations and reach the merits of the 
controversy, but only where no genuine issue of material fact is present.  Weaver v. Blue Cross Blue Shield of 
Wyoming, 609 P.2d 984, 986 (Wyo. 1980).  A fact is material if proof of that fact 
would have the effect of establishing or refuting one of the essential elements 
of a cause of action or defense asserted by the parties.  Schuler v. Commu­nity First Nat. 
Bank, 999 P.2d 1303, 1304 (Wyo. 2000).  
The summary judgment movant has the initial burden of establishing by 
admissible evidence a prima facie case; once this is accom­plished, the 
burden shifts and the opposing party must present specific facts showing that 
there is a genuine issue of material fact.  
Boehm v. Cody Country Chamber of Commerce, 748 P.2d 704, 710 (Wyo. 
1987); Gennings v. First Nat. Bank of Thermopolis, 654 P.2d 154, 156 
(Wyo. 1982).

 

            
This Court reviews a summary judgment in the same light as the district 
court, using the same materials and following the same standards.  Unicorn Drilling, Inc. v. Heart 
Mountain Irr. Dist., 3 P.3d 857, 860 (Wyo. 2000) (quoting Gray v. Norwest 
Bank Wyoming, N.A., 984 P.2d 1088, 1091 (Wyo. 1999)).  The record is reviewed, however, from 
the vantage point most favorable to the party who opposed the motion, and this 
Court will give that party the benefit of all favorable infer­ences that may 
fairly be drawn from the record.  
Garcia v. Lawson, 928 P.2d 1164, 1166 (Wyo. 1996). 

 

Garnett 
v. Coyle, 
2001 WY 94, ¶¶3-5, 33 P.3d 114, ¶¶3-5 (Wyo. 2001).  

 

 

DISCUSSION

 

[¶7]      Initially, we 
recognize that the facts and issue presented in this case are akin to those 
which existed in the case of Newman v. RAG Wyoming Land Co., 2002 WY 132, 
53 P.3d 540 (Wyo. 2002), recently before this court.  In Newman, we considered whether 
or not CBM had been conveyed or reserved by landowners in a 1974 land 
conveyance.  In Newman, the 
grantors owned both the surface and mineral estate in certain Campbell County 
property and deeded the surface of such property and "coal and minerals 
commingled with [the] coal" to a neighboring coal mine operator reserving all 
"oil, gas, and other minerals" not otherwise conveyed.  Newman, at ¶1. 

 

[¶8]      In Newman, 
we began our analysis by setting forth the historical background of CBM.  In particular, this court recognized 
that CBM had been well known for over a century and had long been considered a 
dangerous waste product of coal mining until the 1970s.  At that time, the value of CBM was 
realized resulting in concerted research and development in the area through the 
issuance of government grants.  
Nevertheless, it was not until the early 1990s that techniques were 
perfected for the efficient development of CBM.  Prior to this time, CBM was simply 
allowed to escape from the coal in the course of open pit surface mining, and no 
attempt was made to capture it as a valuable resource.  Newman, at 
¶¶6-8.

 

[¶9]      Newman 
further explored the chemistry and composition of CBM.  In doing so, we recognized that CBM is 
chemically identical (CH4) to gas produced through conventional 
methods.  Both CBM and gas produced 
from conventional methods are known as "natural gas" and emanate from the decay 
of organic material over time under great pressure and temperature.  CBM gas exists in coal in three basic 
states:  as free gas; as gas 
dissolved in the water in coal; and as gas "absorbed" on the solid surface of 
the coal.  Newman, at 
¶9.  Many of these facts are also 
established in this case through the affidavit of Jimmy Goolsby, a 
con­sulting geologist, submitted by appellants in support of their summary 
judgment motion and the affidavit of Anthony W. Gorody, an earth science 
professional, proffered by CCC in sup­port of its motion for summary 
judgment.  

 

[¶10]   Finally, this court explained that 
the ultimate issue to be resolved in Newman was whether the parties to the deed in 
question intended CBM to be conveyed along with the coal estate or reserved to 
the grantor as part of the oil and gas estate.  Newman, at ¶¶11 and 
14.  We are faced with exactly the 
same conclusive issue in this case.

 

[¶11]   In making such a determination, we 
apply the following standards:

 

"According 
to our established standards for interpreta­tion of contracts, the words 
used in the contract are afforded the plain meaning that a reasonable person 
would give to them.  When the 
provisions in the contract are clear and unambiguous, the court looks only to 
the four corners' of the document in arriving at the intent of the 
parties.  In the absence of any 
ambiguity, the contract will be enforced according to its terms because no 
con­struction is appropriate."  
Amoco Production Company v. EM Nominee Partnership Company, 2 P.3d 534, 539-40 (Wyo. 2000) (citations omitted).

 

            
Assignments are contracts and are construed according to the rules of 
contract interpretation.  The 
determination of the parties' intent is our prime focus in interpreting or 
construing a contract.  If an 
agreement is in writing and its language is clear and unambiguous, the parties' 
intention is to be secured from the words of the agreement.  When the agreement's language is clear 
and unambiguous, we consider the writing as a whole, taking into account 
relationships between various parts. In interpreting unambiguous contracts 
involving mineral interests, we have consistently looked to surrounding 
circumstances, facts showing the relations of the parties, the subject matter of 
the contract, and the apparent purpose of making the 
contract.

 

Boley 
v. Greenough, 
2001 WY 47, ¶¶10-11, 22 P.3d 854, ¶¶10-11 (2001) (some citations omitted).  Although substantial dis­agreement 
exists over the meaning of the deed, neither party suggests the language of the 
deed is ambiguous.  Differing 
interpretations of contracts alone do not constitute ambiguity requiring 
extrinsic evidence.  Moncrief v. 
Louisiana Land and Exploration Company, 861 P.2d 516, 524 (Wyo. 
1993).

 

            
We must first examine the terms of the deed and give them their plain and 
ordinary meaning.  Wolter v. 
Equitable Resources Energy Company, Western Region, 979 P.2d 948, 951 (Wyo. 
1999); Pete Lien & Sons, Inc. v. Ellsworth Peck Construction Co., 896 P.2d 761, 763 (Wyo. 1995).  Plain 
meaning is that "meaning which [the] language would convey to reasonable persons 
at the time and place of its use."  
Moncrief, 861 P.2d  at 524.

 

 

Newman, 
at 
¶¶11-12 (emphasis added).  See 
also WADI Petroleum, Inc. v. Ultra Resources, Inc., 2003 WY 41, ¶11, 
65 P.3d 703, ¶11 (Wyo. 2003).  We 
also recognized in Newman, at ¶¶19 and 27, when faced with circumstances 
like those present here, we must focus on the general intent of the parties, 
concentrating on the purpose of the grant in terms of respective manner of 
enjoyment of surface and mineral estates and the exploitation of the mineral 
resources involved.

 

[¶12]   The language of the warranty deeds 
in this case convey good and merchantable title to the lands involved "together 
with all coal and all other minerals, metallic or non-metallic, contained in or 
associated with coal and which may be produced with coal" owned or held by the 
grantors in those lands.  These 
warranty deeds also reserved to the grantors "all oil, gas and other minerals in 
said lands" which the grantors then owned, "other than those included above in 
the conveyance to Grantee."  One of 
the two warranty deeds also reserved "all coal" in the involved piece of real 
property, preserving such rights in the grantors.  The language utilized in the agreements 
entered into between the parties varies slightly from that utilized in the 
warranty deeds by specifying that the grantors would grant and convey good and 
mer­chantable title to the lands "together with all coal and all other 
minerals metallic or non-metallic, contained in or associated with coal and 
which may be mined and produced with coal" which grantors owned or 
held in such lands.1 

 

[¶13]   As in Newman, we start by 
concluding that CBM is a mineral under Wyoming law.  Newman, at ¶13 and those cases 
cited therein.  However, like 
Newman, this conclusion does little to resolve the dispute before us 
because "minerals" are both granted and reserved.  Likewise, it is clear that CBM is 
contained in or associated with coal.  
As noted above, CBM exists in coal in three basic states.  Newman, at ¶9.  Expert testimony in this case, submitted 
by both parties via affidavits, establishes this.  These affidavits were consistent and not 
in dispute.  Dr. Gorody specified 
that CBM can be "physically absorbed onto the surface area of the coal matrix, 
and is an integral part of the organic coal structure," that CBM "is contained 
in each coal seam of the Fort Union formation," and that CBM "is physically 
trapped in the coal seams of the Fort Union formation . . ."  The affidavit of Dr. Goolsby further 
confirms this fact.  In accord 
see Amoco Prod. Co. v. Southern Ute Indian Tribe, 526 U.S. 865, 873, 
119 S. Ct. 1719, 1724, 144 L. Ed. 2d 22 (1999); Carbon County v. Union Reserve 
Coal Co., 898 P.2d 680, 683 (Mont. 1995); United States Steel Corp. v. 
Hoge, 468 A.2d 1380, 1382 (Pa. 1983).  

 

[¶14]   However, we are faced with a 
somewhat more difficult proposition when determining whether CBM "may be 
mined and produced with coal" as specified within the warranty 
deeds and agreements at issue.  
Obviously, these terms must be given their plain and ordi­nary 
meaning to reasonable persons at the same time and place of their usenamely, 
1973 in the Fort Union formation of the Powder River Basin of Wyoming. 

 

[¶15]   In Newman, this court was 
faced with a similar determination in rendering a conclu­sion as to whether 
or not CBM "may be mined or extracted in association" with coal or "in 
conjunction with coal mining operations."  
Newman, at ¶¶15-18.  
In that case, we stated:  

 

The 
coal operator argues that production of gas has been con­sidered "mining" 
relying on Coronado Oil Company v. Grieves, 603 P.2d 406 (Wyo. 1979), 
Amoco Production Company v. Guild Trust, 636 F.2d 261, 263-65 (10th Cir. 
1980), and the lan­guage of oil and gas leases, including those issued by 
the landowners in this case.  While 
those references certainly estab­lish that oil and gas production through 
the drilling of wells has been considered "mining," they do not answer the 
question posed in this case because all agree that, in 1974 when the 
war­ranty deed in question was drawn, any gas found in the coal seam was not 
mined through a well bore but was ventilated or wasted while the coal was 
produced by excavation in the course of surface mining.  In addition, the minerals conveyed by 
the language of the deed were only those mined "in association therewith or in 
conjunction with such coal operations." Webster's New World Dictionary confirms 
the ordinary mean­ing of "in association" and "in conjunction" to be 
"together."  No party contends 
coalbed methane is somehow captured together with the coal as it is mined.  Rather, it is released and escapes 
during the mining process.  
Southern Ute Indian Tribe, 526 U.S.  at 873, 119 S. Ct. 1719.   In the case of underground mines, 
it must be ventilated.  United 
States Steel Corporation v. Hoge, 503 Pa. 140, 468 A.2d 1380, 1382 
(1983).

 

            
Is the plain meaning of "extracted" the same as "released," "escaped," or 
"ventilated"?  It is obvious these 
words connote different actions, and the distinctions between them are crucial 
to determining the intent of the parties to this deed.  Webster's New World Dictionary confirms 
that differ­ence by defining (1) "extract" as "to draw out by effort; pull 
out" and "to remove or separate (metal) from ore"; (2) "release" as "to set 
free"; and (3) "ventilate" as "to provide with an opening for the escape of air, 
gas, etc."  Under the plain 
mean­ing of the terms chosen by the parties to the deed, we cannot conclude 
they intended to include coalbed methane gas as a mineral "mined or extracted in 
association therewith or in con­junction with such coal operations" when it 
can only be produced through wells as any other gas.

 

            
We could end the inquiry at this point.  However, because of the importance of 
the issue of the ownership of coal­bed methane in general and the extensive 
consideration of this issue by other courts and commentators which we find 
helpful and consistent with our initial conclusion, further discussion is 
warranted.

 

            
The coal operator poses a creative argument suggesting that, because 
coalbed methane can most efficiently be produced in advance of the mining 
operations thereby reducing the water the mine must contend with and making the 
mine more eco­nomically successful, it is mined or extracted "in association 
therewith" or "in conjunction with" coal mining operations.  Two problems exist with that 
argument.  First, the gas 
produc­tion does not occur automatically in the process of overburden and 
coal excavation and removal.  
Instead, it only occurs when and if the coal operator decides to 
undertake gas well drilling in advance of the mine face.  Second, such "mining" techniquesthe 
coordination of well drilling and mine excavationdid not exist until twenty 
years after the deed in question was drawn which poses the broader question in 
this case.  How is the par­ties' 
intent to be determined when minerals become valuable long after a conveyance by 
(1) discovery of new methods of production; (2) changes in economics making 
production of a previously known, but unwanted, mineral profitable; (3) or 
dis­covery of the presence of minerals not previously known to exist?  Obviously, the language of the 
particular documents involved affects the answer to this question on a 
case-by-case basis.

 

Id. 
(footnote 
omitted.)  

 

[¶16]   CCC, like the coal operator in 
Newman, contends that CBM is "mined" as a matter of law and industry 
usage because CBM can be extracted through a well bore.  In support of this contention, CCC cites 
the cases of Coronado Oil Co. v. Grieves, 603 P.2d 406, 411 (Wyo. 1979), 
Amoco Prod. Co. v. Guild Trust, 636 F.2d 261, 265 (10th Cir. 1980) and 
City of Evanston v. Robinson, 702 P.2d 1283, 1286 (Wyo. 1985), along with 
Wyo. Const. art. 15, § 3; Wyo. Stat. Ann. § 39-13-102; and Williams and Meyers, 
Manual of Oil and Gas Terms 477 (11th 
ed. Lexis 2000).  While oil and gas 
production through a well bore has been con­sidered "mining," utilizing the 
same reasoning expressed in Newman quoted above, we must disagree such 
mining occurs "in conjunction with" or "in association" with the mining of 
coal.

 

[¶17]   Moreover, our conclusion is 
supported by the expert affidavits of both Dr. Goolsby and Dr. Gorody submitted 
by the parties.  In explaining the 
methods used to obtain CBM for sale commercially, Dr. Goolsby 
states:

 

            
All gas wells, whether drilled into sandstone, limestone, or other types 
of reservoir rock at any depth rely on a pressure differential to bring the gas 
into the well bore.  The bore hole 
of any type of gas well serves as an escape route for gas under pressure to flow 
towards the surface.  The pressure 
differential can be natural, caused by gravity, or it can be created by 
inject­ing water or carbon dioxide into gas holding formations.  Likewise, the pressure differential can 
be achieved by removing or producing water from the gas well.  Regardless of the method of exploiting 
or creating the pressure differential, all gas wells rely on this pressure 
differential.  An accurate 
description of the production method for coalbed methane gas in the Powder River 
Basin is contained in the State of Wyoming Geological Survey's Information 
Pamphlet 7 (revised) entitled Coalbed Methane in Wyoming by Rodney 
DeBruin, Robert Lyman, Richard Jones and Lance Cook." 

 

Dr. Goolsby 
continues,

 

            
Coal is mined by breaking it up and removing it from the earth with 
machinery.  In the Powder River 
Basin in Wyoming and Montana, coal is removed by a process of open pit 
mining.  This process does not allow 
the economic capture of coalbed methane gas.  Rather, as the coal seam is exposed, and 
removed, essentially all of the coalbed methane gas is dissipated into the 
atmosphere.  Only an infinitesimal 
amount of coalbed methane gas remains in the coal after production.  With current technolo­gies, there is 
no way to economically recover coalbed methane gas from coal during or after it 
has been removed from the earth.

 

Dr. Goolsby 
then concludes that he knows of no method whereby coalbed methane may be mined 
and produced when excavating coal so that CBM may be sold or have any commercial 
value. 

 

[¶18]   Dr. Gorody similarly 
indicates in his affidavit that CBM is inevitably present during the normal 
process of coal extraction because the decrease in pressure within the coal seam 
naturally causes CBM to be released from the coal.  Dr. Gorody further clarifies that CBM is 
extracted from the coal seams in the Fort Union formation by lowering the 
hydrostatic pres­sure immediately surrounding the coal matrix and that the 
removal of water to recover CBM is a mining process.  In addition, Dr. Gorody 
details:

 

            
Unconventional coalbed methane gas is physically trapped in the coal 
seams of the Fort Union formation and can­not be released until mined or 
extracted. The mining and extraction method generally employed by producers 
proceeds as follows.  First, a well 
is drilled to the top of the Wyodak-Anderson coal seam.  Drilling is discontinued as soon as this 
thick coal seam (usually 75 to 200 feet thick) is reached.  A steel casing string is then set and 
cemented in each well.  Once the 
cement has set, drilling is resumed, and the coal seam interval is drilled until 
the base of the coal is reached.  
The interval between the base of the casing and the base of the coal is 
usually left incased, or "open hole."  
Accordingly, there are no other geological strata exposed in the well 
bore that could provide access to either water or gas.  This confirms that coalbed meth­ane 
is produced only from the coal seam and not from a different geological horizon. 

 

[¶19]   These statements confirm our 
recognition in Newman that the capture of CBM for com­mercial 
purposes does not occur automatically in the process of overburden and coal 
excavation and removal.  It only 
occurs when and if the coal operator decides to undertake gas well drilling in 
advance of mining the actual coal.  
Newman, at ¶18.   
Therefore, we con­clude, as we did in Newman, that given the 
plain meaning of the terms used in the subject agreements, the parties here did 
not intend to include CBM as a mineral "mined" with coal, as CBM can only be 
captured through the use of wells, as any other gas.

 

[¶20]   Citing the expert affidavits 
submitted as noted above, CCC further argues that CBM is produced with 
coal.  Indeed, CCC tenders that not 
only may CBM be produced with coal, it is impossible to prevent such production 
because it is a scientific fact that CBM is inevita­bly produced during the 
normal process of coal extraction as the decrease in pressure within the coal 
seam naturally causes CBM to be released from the coal.  Further, in support of this argument, 
CCC points out that Webster's Ninth New Collegiate Dictionary defines the term 
"produced" as "to offer to view or notice [or] to give birth or rise to," which 
it asserts is con­sistent with its expressed position.  

 

[¶21]   We note that in rendering summary 
judgment in favor of CCC, the district court placed significance on the fact 
that given future technological advancements and develop­ments, CBM "may" be 
mined and produced with coal when wells are drilled in advance of the mine 
face.  However, this reasoning is 
effectively thwarted and must be considered inap­propriate when it is 
recognized that the parties in 1973 clearly could not have had this manner of 
production in mind because it only became known long after the conveyance. 

 

[¶22]   We also question whether CBM can be 
mined and produced with coal as expressed in both the warranty 
deeds and the agreements.  Webster's 
Third New International Dictionary, Unabridged, defines the word "with" as 
"2a) alongside of; near to  c) in the same direction  4c) in respect 
to: so far as concerns  7d) as a result of;  because of  9d) at the same time 
as "  Thus, as utilized in context 
with the circumstances faced by the parties, we hold that the word "with," as 
was the case in Newman, connotes the ordinary meaning of "in 
association," "in conjunction" or "together."  Again, CBM is not captured together with 
the coal as it is mined.  Rather, it 
can only be captured prior to the mining process or it is released and escapes 
during the mining process.  The most 
likely meaning of the word "with" as used by the parties, was meant to convey 
those minerals that could be actually mined together with coal.  As CCClike the coal operator in 
Newmanargues, common sense dictates that its predecessor, Carter Oil 
Com­pany, intended to acquire and paid for all minerals that could be 
produced with the coal to avoid interference with its coal mining 
operations.  We agree that was the 
grantee's likely intent, and certain minerals did exist which could have been 
produced with the coal and caused problems for the coal 
producer.

 

[¶23]   As expressed by Dr. 
Goolsby:

 

            
I have considered the possible meaning of minerals con­tained in or 
associated with coal.  Minerals 
contained in or associated with coal include pyrite, marcasite, and calcium 
car­bonate.  In 1975 I was 
employed mapping coal deposits in Wyoming for the U.S. Geological Survey.  At that time there was a rumor that 
small traces of gold were or might be present in coal 
deposits.

 

However, 
CBM was not produced "with" the coal either in 1974 or today.  In fact, in 1974, it was considered a 
waste product and a safety hazard.  
For  similar reasons, it does 
not make sense that Carter Oil Company intended to purchase CBM in order to 
negate any liability for its release.  
Indeed, we provided in Newman at ¶30:

 

            
The coal operator strenuously argues the broad language of the warranty 
deed, "coal and minerals commingled with [the] coal," was intended to allow it 
to release the coalbed methane during the mining operation without 
liability.  However, as noted by the 
Supreme Court:

 

The 
right to dissipate the CBM gas where reasonable and necessary to mine the coal 
does not, however, imply the ownership of the gas in the first instance.  Rather, it simply reflects the 
established common-law right of the owner of one mineral estate to use, and even 
damage, a neighboring estate as necessary and reasonable to the extraction of 
his own minerals.

 

Southern 
Ute Indian Tribe, 
526 U.S.  at 879, 119 S. Ct. 1719 (citing Williams v. Gibson, 84 Ala. 228, 
4 So. 350 (1888); Rocky Mountain Mineral Law Foundation, 6 American Law of 
Mining § 200.04 (2d ed. 1997)).  
Other courts which have con­sidered this issue agree the right to 
ventilate gas, which is an essential element of the right to mine, is not 
equivalent to own­ership.  
NCNB Texas National Bank, N.A., 631 So. 2d  at 226.  No one questions the coal owner's right 
to ventilate coalbed methane in the course of mining.  "The grant of coal mining rights would 
be useless if it did not include the right to ventilate methane gas from the 
coal mining area."  Id. at 
228.

 

Furthermore, 
in this case with respect to one of the deeds, CCC cannot argue the grantee 
intended to protect its right to mine the coal because the coal owned by the 
grantor was specifically reserved and not conveyed.  Thus, no potential for interference with 
the coal mining existed in any case.  

 

[¶24]   Finally, the McGees and Clarks 
expressly reserved "all oil, gas and other minerals in said lands which Grantor 
now owns, other than those included above in the conveyance to Grantee."  Thus the only specific mention of the 
mineral "gas" is contained in the reservation.  As we expressed in Newman at 
¶32:

 

            
On the basis of the unambiguous language of the deed and the surrounding 
facts and circumstances, we conclude the parties generally intended the coal to 
be conveyed and the gas, wherever it may be located within the property, to be 
reserved to the landowners.  Coalbed 
methane, being a gas, remained the landowners' property.  By this ruling, we do not intend to 
imply that, in all circumstances, the conveyance of coal excludes the conveyance 
of the coalbed methane.  Parties can 
certainly sever the coalbed methane from the remainder of the oil and gas estate 
and convey it separately.  Such an 
explicit severance occurred in this case when the oil and gas lessee vertically 
segregated its oil and gas leasehold interest and assigned from the surface to 
1,000 feet beneath the surface, which contained the coal seam, to Hi-Pro.  However, the warranty deed from the 
landowners to the coal operator in this case, which conveyed "all coal and 
minerals commingled with coal that may be mined or extracted in association 
therewith or in conjunction with such coal opera­tions" but reserved all oil 
and gas, did not accomplish such a segregation.

 

 

CONCLUSION

 

[¶25]   We hold that the district court 
improperly determined that summary judgment should be granted to CCC.  The record before us does not present 
issues of material fact, and the warranty deeds are not ambiguous.  Moreover, the undisputed facts in this 
case establish that appellants' predecessors could not have intended to convey 
CBM to CCC's predecessors, as the identity, value, or feasibility of production 
of CBM was unknown at the time of the con­veyance and, therefore, 
appellants' predecessors likely had no intent at all with regard to the CBM in 
question.  Thus, appellants are 
entitled to summary judgment as a matter of law, rather than 
CCC.

 

[¶26]   Reversed.

 

FOOTNOTES

1We 
again recognize that the warranty deeds contain a non-merger clause which 
states, "[t]his deed is executed pursuant to agreement between Grantor and 
Grantee dated December 17, 1973, the provisions of which are not merged 
herein."  Nevertheless, we consider 
this language contained within the agreements in making our review of the 
surrounding circumstances, facts showing the relations of the parties, the 
subject matter of the contract, and the apparent purpose of making the contract 
as required under our applicable standard of review.