<PAGE>

                                                                     EXHIBIT 8.1

                         [CROWE & DUNLEVY LETTERHEAD]



REEDER E. RATLIFF                               E-MAIL ratliffr@crowedunlevy.com
DIRECT LINE (405) 235-7714
DIRECT FAX (405) 272-5246

                                 May 26, 2000



Canaan Energy Corporation
119 North Robinson, Suite 600
Oklahoma City, Oklahoma 73102

Gentlemen:

          We have acted as counsel to Canaan Energy Corporation, an Oklahoma
corporation ("Canaan"), in connection with that certain Registration Statement,
File No. 333-30322, with respect to 5,000,000 shares of common stock of Canaan,
filed with the Securities and Exchange Commission under the Securities Act of
1933, as amended, on or about February 14, 2000 (the "Registration Statement").
Except as otherwise indicated, all terms used herein shall have the respective
meanings assigned to them in the Registration Statement.  Canaan filed the
Registration Statement in connection with the proposed Plan of Combination.

          You have requested our opinion regarding the material Federal income
tax consequences of certain aspects of the proposed Plan of Combination.  Our
opinion assumes the accuracy and completeness of the facts set forth in the
Registration Statement and certain additional facts and assumptions set forth in
the certificates, attached hereto collectively as Exhibit A (the "Certificate").

          Based upon the foregoing, in reliance thereon and subject thereto, and
subject to the other limitations set forth below, the statements made in the
preliminary Prospectus/Proxy Statement being filed with the Registration
Statement under the captions "Summary-Summary of Material Federal Income Tax
Consequences" and "Material Federal Income Tax Consequences" with respect to our
tax opinions represent our opinions of the tax consequences described therein.

          (A) No opinion is expressed as to any matter not specifically
     addressed above, including the reasonableness of the above-referenced
     assumptions relied upon by us in rendering the opinion set forth above.

          (B) Our opinions are based upon the Internal Revenue Code of 1986, as
     amended ("Code"), the Treasury Regulations promulgated thereunder, judicial
     decisions, published rulings of the Internal Revenue Service ("IRS"), and
     other administrative pronouncements, all as in effect on the date hereof.
<PAGE>

Canaan Energy Corporation
May 26, 2000
Page 2

          (C) The statutory, judicial, regulatory and administrative authorities
     relied upon by us in rendering the above-referenced opinions may be amended
     or revoked at any time. Any such changes may or may not be retroactive with
     respect to transactions entered into or contemplated prior to the effective
     date thereof and could significantly alter this opinion. There can be no
     assurance that legislative, judicial or administrative changes affecting
     the tax consequences described in the Prospectus/Proxy Statement will not
     occur in the future. We assume no obligation to update or modify this
     opinion to reflect any developments that occur after the date hereof.

          (D) We hereby consent to the use of this opinion as an exhibit to the
     Registration Statement and to the use of our name in the Registration
     Statement and Prospectus/Proxy Statement under the heading "Legal Matters".

          (E) This opinion is not binding on the IRS or the courts and is
     dependant upon the accuracy and completeness of the facts set forth in the
     Registration Statement and the facts and assumptions set forth in the
     Certificates.  We have relied upon these facts and assumptions, and any
     inaccuracy or incompleteness in our understanding of those facts or
     assumptions could adversely affect the Federal income tax consequences of
     the Plan of Combination transactions and, accordingly, could alter our
     opinion.

                              Respectfully submitted,

                              CROWE & DUNLEVY
                              A Professional Corporation



                              By: /s/ Reeder E. Ratliff
                                  ---------------------------------------------
                                  Reeder E. Ratliff


RER:CLA:clm
<PAGE>

                                  CERTIFICATE


          The undersigned (i) officers and shareholders of Canaan Energy
Corporation, an Oklahoma corporation ("Canaan"), Coral Reserves, Inc., an
Oklahoma corporation, Coral Reserves Energy Corp., an Oklahoma corporation, and
Canaan Securities, Inc., a Delaware corporation; and (ii) General Partners of
the Partnerships, in connection with the opinions to be delivered by Crowe &
Dunlevy, A Professional Corporation, with respect to the Combination
Transactions occurring pursuant to the Plan of Combination ("Plan of
Combination") dated February 14, 2000, as amended, and recognizing that said law
firm will rely on this Certificate in delivering its opinions, hereby certify,
to the best of their knowledge and belief, as follows (capitalized terms not
otherwise defined herein have the meaning assigned to them in the Plan of
Combination):

          1.   No Canaan common stock will be issued for services rendered to or
for the benefit of Canaan in connection with the Combination Transactions, and
no Canaan common stock will be issued for indebtedness of Canaan or for interest
on indebtedness of Canaan.

          2.   The limited partners and additional general partners of the
Partnerships, and the shareholders of the Corporate Combining Entities, other
than limited partners who elect to receive cash, (collectively referred to
herein as the "Transferors") will not retain any rights in the property
transferred by them to Canaan in connection with the Combination Transactions.

          3.   Canaan will not assume any liabilities of the Transferors in
connection with the Combination Transactions, or receive the partnership
interests of such limited partners or the common stock of such shareholders
subject to any liabilities.

          4.   There will be no indebtedness between Canaan and any of the
Transferors created in favor of any such Transferor as a result of the
Combination Transactions.

          5.   The transfers and exchanges will occur under a plan agreed upon
before the closing of the Combination Transactions in which the rights of the
parties are defined.

          6.   All exchanges contemplated by the Plan of Combination will occur
on approximately the same date.

          7.   There is no plan or intention on the part of Canaan to redeem or
otherwise reacquire any Canaan common stock to be issued in the Combination
Transactions.
<PAGE>

          8.   Taking into account the issuance of the Canaan common stock
pursuant to the Plan of Combination, the Transferors will be in "control" of
Canaan within the meaning of Section 368(c) of the Code on the Closing Date.
For this purpose, "control" means the ownership of stock in Canaan representing
at least 80% of the total combined voting power of all classes of stock entitled
to vote and at least 80% of the total number of shares of all other classes of
stock of Canaan.

          9.   Each Transferor will receive Canaan common stock at the Closing
approximately equal to the fair market value of the partnership interest or
common stock transferred by him, her or it to Canaan.

          10.  Canaan will remain in existence and will retain and use the
property transferred to it in a trade or business.

          11.  There is no plan or intention by Canaan to dispose of the
transferred property, or to cause any of the Partnerships or Corporate Combining
Entities to dispose of any of their assets, other than in the normal course of
business operations.

          12.  Canaan and the Transferors will pay their own expenses, if any,
incurred in connection with the transactions contemplated pursuant to the Plan
of Combination.

          13.  None of the Transferors are under the jurisdiction of a court in
a title 11 or a receivership, foreclosure or similar proceeding, and the Canaan
common stock to be received in the transaction will not be used to satisfy any
indebtedness of any such Transferor.

          14.  At the Closing, more than twenty percent (20%) of the assets of
the Partnerships and the Corporate Combining Entities are used in a trade or
business activity, and there is no plan or intention to redeploy these trade or
business assets to assets held for investment purposes such that eighty percent
(80%) or more of the gross assets of Canaan, the Partnerships and the Corporate
Combining Entities, in the aggregate, would be held for investment purposes.

          15.  The Transferors have no plan or intention to sell, exchange or
otherwise dispose of any Canaan common stock to be received by such party
pursuant to the Plan of Combination.

                                       2
<PAGE>

          IN WITNESS WHEREOF, this Certificate has been signed this 26/th/ day
of May, 2000.

CANAAN ENERGY CORPORATION,                 CORAL RESERVES, INC., an
an Oklahoma corporation                    Oklahoma corporation
By:/s/ Leo E. Woodard                      By:/s/ Leo E. Woodard
   -----------------------------------        ---------------------------------
   Leo E. Woodard, Chairman and CEO           Leo E. Woodard, President


CORAL RESERVES ENERGY                      CANAAN SECURITIES, INC.,
CORPORATION, an Oklahoma                   a Delaware corporation
corporation
By:/s/ Leo E. Woodard                      By:/s/ Thomas H. Henson
   -----------------------------------        ---------------------------------
   Leo E. Woodard, President                  Thomas H. Henson, President



/s/ Leo E. Woodard                            /s/ John Penton
--------------------------------------        ---------------------------------
Leo E. Woodard                                John Penton


/s/ Michael W. Mewbourn
--------------------------------------
Michael S. Mewbourn

                                       3
<PAGE>

                                  CERTIFICATE

          The undersigned officer of Indian Oil Company, an Oklahoma corporation
("Indian") in connection with the opinions to be delivered by Crowe & Dunlevy, A
Professional Corporation, with respect to the Combination Transactions occurring
pursuant to the Plan of Combination ("Plan of Combination") dated February 14,
2000, by and among Canaan Energy Corporation, an Oklahoma corporation, f/k/a
Coral Reserves Group, Ltd. ("Canaan"), Indian and the other parties named
therein, and recognizing that said law firm will rely on this Certificate in
delivering its opinions, hereby certifies, to the best of his knowledge and
belief, as follows (capitalized terms not otherwise defined herein have the
meaning assigned to them in the Plan of Combination):

          1.   No Canaan common stock will be issued to shareholders of Indian
for services rendered to or for the benefit of Canaan in connection with the
Combination Transactions, and no Canaan common stock will be issued for
indebtedness of Canaan to Indian or its shareholders or for interest on
indebtedness of Canaan to Indian or its shareholders.

          2.   The shareholders of Indian will not retain any rights in the
property transferred by them to Canaan in connection with the Combination
Transactions.

          3.   Canaan will not assume any liabilities of the shareholders of
Indian  in connection with the Combination  Transactions, or receive the Indian
common stock of such shareholders subject to any liabilities.

          4.   There is no indebtedness between Canaan and any of the
shareholders of Indian, and there will be no indebtedness created in favor of
any such shareholder as a result of the Combination Transactions.

          5.   The transfers and exchanges contemplated by the Plan of
Combination will occur under a plan agreed upon before the closing of the
Combination Transactions in which the rights of the parties are defined.

          6.   All exchanges contemplated by the Plan of Combination will occur
on approximately the same date.

          7.   Each shareholder of Indian will receive Canaan common stock at
the Closing approximately equal to the fair market value of the Indian common
stock transferred by such shareholder to Canaan.

          8.   The shareholders of Indian will pay their own expenses, if any,
incurred in connection with the transactions contemplated pursuant to the Plan
of Combination.
<PAGE>

          9.   None of the shareholders of Indian are under the jurisdiction of
a court in a title 11 or a receivership, foreclosure or similar proceeding, and
the Canaan common stock to be received in the transaction will not be used to
satisfy any indebtedness of any such shareholder.

          10.  No shareholder of Indian has any plan or intention to sell,
exchange or otherwise dispose of any Canaan common stock to be received by such
party pursuant to the Plan of Combination.

          IN WITNESS WHEREOF, this Certificate has been signed this 22 day of
May, 2000.


                              INDIAN OIL COMPANY, an Oklahoma corporation



                              By:/s/ Richard R. Dunning
                                 ----------------------------------------------
                                 Richard R. Dunning
                                 Title: Chief Executive Officer

                                       2