Continental Resources of Illinois, Inc. v. Illinois Methane, LLC

847 N.E.2d 897, 364 Ill. App. 3d 691, 301 Ill. Dec. 887, 171 Oil & Gas Rep. 523, 2006 Ill. App. LEXIS 285
CourtAppellate Court of Illinois
DecidedApril 10, 2006
Docket5-03-0784
StatusPublished
Cited by9 cases

This text of 847 N.E.2d 897 (Continental Resources of Illinois, Inc. v. Illinois Methane, LLC) is published on Counsel Stack Legal Research, covering Appellate Court of Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Continental Resources of Illinois, Inc. v. Illinois Methane, LLC, 847 N.E.2d 897, 364 Ill. App. 3d 691, 301 Ill. Dec. 887, 171 Oil & Gas Rep. 523, 2006 Ill. App. LEXIS 285 (Ill. Ct. App. 2006).

Opinion

JUSTICE DONOVAN

delivered the opinion of the court:

Plaintiff, Continental Resources of Illinois, Inc. (Continental), brought an action against defendants, Illinois Methane, LLC (Illinois Methane), and DeMier Oil Company (DeMier), alleging that, pursuant to certain oil and gas leases, it has the exclusive right to explore, drill, and produce the coalbed methane gas that is being produced by defendants. Continental further alleged that it also has a legal right to share in the proceeds of Illinois Methane’s coalbed methane production from certain coal mine voids because Continental owns the coal rights in nearby lands which were a part of the same coal mine. Royal Talon Company (Royal Talon) intervened, alleging that its rights might be affected by Continental’s complaint. The circuit court of Franklin County dismissed Continental’s complaint for a failure to state a cause of action because Continental did not have any right to produce - coal-bed methane under the conventional oil and gas leases it controlled. The court further found that, under the mineral-production principle known as the rule of capture, the complaint did not state a cause of action for the drainage of gas. Continental appeals the dismissal of its complaint. The United Mine Workers of America, its District 12 (Illinois), and the Illinois Coal Association were given leave to file amicus curiae briefs with this court. We affirm.

Old Ben Coal Company (Old Ben) originally controlled the coal, oil, and gas underlying various lands in Franklin County, Illinois. In the early 1980s, Old Ben executed oil and gas leases granting the right to produce from those lands oil, all gases, liquid hydrocarbons, and their constituent products. Continental obtained three of these oil and gas leases by assignment in 2001. Continental also acquired in 2001 all oil, gas, and mineral rights to some 300 acres known as the “Williams Acreage.” According to Continental, Illinois Methane and De-Mier allegedly were producing coalbed methane gas from mine voids underlying the lands leased or controlled by Continental. Continental sought a declaratory judgment that it had the exclusive right to explore, drill, and produce gas, including coalbed methane gas, on these properties. Continental also sought relief under the theories of trespass, conversion, quiet title, slander of title, and accounting. It further sought injunctive relief to prevent additional production of coalbed methane gas. Royal Talon intervened with permission of the court and alleged that it owned coal rights under these lands and had leased those rights to Illinois Methane and DeMier, which were producing coalbed methane from Royal Talon coal seams. All defendants filed motions to dismiss Continental’s complaint. The court granted defendants’ motions after concluding that methane gas existing in abandoned mine voids left by prior coal mining operations belonged to the coal estates, that no rights to the coalbed methane gas were granted by the oil and gas leases held by Continental, and that the rule of capture applies to coalbed methane gas.

Continental argues on appeal that the court erred in dismissing its complaint. Continental asserts that it was error to find that the language “all gases” in its leases did not include coalbed methane gas. Continental further contends the court erred in holding that gas existing in mine voids is subject to the rule of capture.

While the ownership of and the right to develop coalbed methane gas are questions of first impression in Illinois, courts in other jurisdictions have struggled with these issues for more than a decade. A review of these cases reveals a split of authority. Many of the cases have resolved the issues by resorting to interpreting or looking to the intent of the original leases and/or grants. See Carbon County v. Union Reserve Coal Co., 271 Mont. 459, 898 P.2d 680 (1995); Newman v. RAG Wyoming Land Co., 53 P.3d 540 (Wyo. 2002); see also Amoco Production Co. v. Southern Ute Indian Tribe, 526 U.S. 865, 144 L. Ed. 2d 22, 119 S. Ct. 1719 (1999). Others have relied upon the general property laws of their respective states with respect to the production of all “minerals” and the manner in which coal is mined in that particular jurisdiction. See NCNB Texas National Bank, N.A. v. West, 631 So. 2d 212 (Ala. 1993); United States Steel Corp. v. Hoge, 503 Pa. 140, 468 A.2d 1380 (1983). No one answer is right for every state and/or every lease or grant. While cases from other states are helpful, we must make our own determinations based on Illinois law. And, in order to make those determinations, we also must consider fully the natural characteristics of coalbed methane gas and the methods, rights, and obligations of mining and extraction in general. We begin with a basic description of coalbed methane gas and the methods for its extraction.

The process by which organic material becomes coal is known as coalification. The coalification process generates gases, one of which is coalbed methane. There are three states of coalbed methane gas: (1) free gas within the cleats and matrixes of the coal, (2) gas dissolved in water in the coal pores, and (3) gas adsorbed onto the solid surface of the coal. When the pressure on the coal is reduced, the forces that hold the coalbed methane to the coal are reduced and coalbed methane is released from the coal. Harrison-Wyatt, LLC v. Ratliff, 267 Va. 549, 551, 593 S.E.2d 234, 235 (2004).

Historically, coalbed methane gas was considered a “dangerous waste product of coal mining.” Amoco Production Co., 526 U.S. at 871, 144 L. Ed. 2d at 28, 119 S. Ct. at 1723. Technological developments in the 1980s and changes in federal law made the commercial development of coalbed methane gas possible. Carbon County, 271 Mont. at 464, 898 P.2d at 683. The extraction of coalbed methane gas is generally accomplished by one of three methods: vertical degasification wells, horizontal boreholes, or gob wells. Vertical degasification wells are drilled from the surface into an unmined coal seam. Horizontal boreholes are bored into the coal seam from a point within the coal mine itself. Gob wells, relating to longwall mining, are drilled from the surface to an area near the coal seam. Harrison-Wyatt, LLC, 267 Va. at 551, 593 S.E.2d at 235; Carbon County, 271 Mont. at 464, 898 P.2d at 683. During the longwall mining method, a machine grinds progressively into the wall of coal to tear away the coal. As the machine grinds further and further into the wall, it leaves behind it a void into which the ceiling of the mine collapses, creating a gob of rubble in which the coalbed gas collects. The collapse of the ceiling of the mine also leaves the overlying strata unsupported, and gravity causes it to subside and to fracture, thereby releasing more gas. Gas from the gob can then travel upward into noncoal strata as well. See Carbon County, 271 Mont. at 464-65, 898 P.2d at 683; NCNB Texas National Bank, N.A., 631 So. 2d at 215.

In Illinois, mineral rights may be severed from surface rights and conveyed separately. Miller v. Ridgley, 2 Ill.

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847 N.E.2d 897, 364 Ill. App. 3d 691, 301 Ill. Dec. 887, 171 Oil & Gas Rep. 523, 2006 Ill. App. LEXIS 285, Counsel Stack Legal Research, https://law.counselstack.com/opinion/continental-resources-of-illinois-inc-v-illinois-methane-llc-illappct-2006.