Legal Aspects of Coalbed Gas
Authors: Mutchler Norman E. , Sachse Harry R. 
Published: December 2007

The major institutional problem in production of gas from coalbeds is the legal question of who owns the gas. In this study, related judicial decisions in West Virginia are examined along with U.S. federal and state regulations, and a limited overview of Pennsylvania law is given. The problem could be resolved by litigation, legislation, or cooperation. An outline for a model legislative solution is given. However, it is recognized that cooperation may be a viable solution for near-term development of this unconventional gas source.

Introduction

Berger Associates Inc. completed a comprehensive technical, economic, and institutional study for the Appalachian Regional Commission on Appalachian unconventional gas sources that included a special legal study of coalbed gas ownership. A single judicial decision exists on the subject: a Greene County, PA, judge recently held that rights to coalbed gas are not conveyed through a coal mining lease. That decision currently is pending appeal before the Pennsylvania Superior Court. Another dormant case was found in Virginia. Hence, research and analysis must rest primarily on related cases.The legal ownership problem must be solved if this gas source is to make the contribution many have predicted. The risk of expensive lawsuits is a major deterrent to utilization of the gas.

Methane Gas - Liability to Asset

Methane gas released in connection with mining of coal traditionally has been considered a costly and hazardous liability rather than an asset. Methane gas is a hydrocarbon gas formed in the process of peat turning into coal. It has roughly the same Btu (J) content and is in the same chemical family as "natural gases" found in connection with petroleum. In this sense it is a natural gas, but it is not necessarily natural gas in the conventional sense of this term. Methane gas released during coat mining may accumulate in mined-out areas (gob gas) and may migrate into coal mines from adjacent areas. If the coal seam does not have a relatively impermeable caprock, methane gas may be present in the overburden as well, and it is believed by many that this gas migrated upward from the coal seam.It is now technically and, many believe, economically feasible in certain coalbeds to produce and market methane gas. Methane drainage (the earlier term) has been practiced in the U.S. since 1920; however, with certain exceptions, recovery is generally a more recent occurrence. The OPEC oil embargo of 1973 and subsequent shifts in national policies emphasized utilization in 1974. However, one private recovery effort is known to date from 1931 and a USBM cost-shared project recovered methane gas in 1972.Recovery of methane gas before, during, and after mining (gob gas) may contribute to the safety of mining, increase coal mining productivity, reduce ventilation costs, and conserve a valuable energy resource. Many coal operators vent methane gas to the atmosphere, but an insignificant amount is recovered for use.

Landowner's Ownership of Minerals

It is well established in common law and under West Virginia law that the landowner begins owning every resource of value, and even of no current value, on and underneath his land. In West Virginia, the breadth of this ownership is indicated in the definition of minerals mentioned in Horse Creek Land and Mining Co. v. Midkiff: "every inorganic substance which can be extracted from the earth for profit, whether it be solid as stone ... and coal, or liquid, as, for example, salt and other mineral waters and petroleum oil, or gaseous..."The theory in some states is that oil and gas, unlike solid minerals, are fugacious like wild animals and are not susceptible to private ownership until they are reduced to possession by extraction. In contrast, oil and gas in West Virginia are considered susceptible to absolute ownership in place (see Robinson v. Milam and Williamson v. Jones). There is little practical difference in the two theories. West Virginia considers, as a corollary to ownership in place, that any person may drill on his land and extract such oil and gas as he can, regardless of its origin, unless he already has disposed of that right.

JPT

P. 1861^