CASE NOTE ENERGY LAW—Finding the Appropriate Authority for ... law review/v10 n2/haderlie.pdf · CASE NOTE ENERGY LAW—Finding the Appropriate Authority for Federal Coal Mine Methane

CASE NOTE

ENERGY LAW—Finding the Appropriate Authority for Federal Coal Mine Methane Leasing; Vessels Coal Gas, Inc., 175 I.B.L.A. 8 (2008)

Nicholas T. Haderlie*

IntroductIon

AUtahcoalminingoperationventedmethanegas into theatmosphereasit developed its federal coal lease in compliancewithMineSafety andHealthAdministration(MSHA)regulations.1ConsistentwithEnvironmentalProtectionAgency (EPA) guidelines, the coal mine operator contracted with anothercompany tocapture theventedmethanebecause it is consideredagreenhousegas.2Thecompanyprofitedfromcapturingthegasbecausethehighconcentrationofmethaneintheventedgasmadeitmarketable.3Consistentwithestablishedprecedent, the Utah State Office of the Bureau of Land Management (BLM)decidedthemethanegascapturedfromfederallandsmustbedoneincompliancewithafederalleaseissuedundertheMineralLeasingAct(MLA).4TheBLMheldacompetitiveleasesale,butathirdpartychallengedthesaleasanticompetitive.5After extensive litigation, the Interior Board of Land Appeals (IBLA) heldmethanegasreleasedincidenttocoalminingisnotagasdeposit,andisthereforenotsubjecttoregulationundertheMLA.6

Vessels Coal Gas, Inc. is an administrative decision offering a pragmaticsolution to a unique problem, thereby preventing waste of valuable naturalresources.Despitethispositiveoutcome,theIBLAdecisioninVesselsunnecessarilysteppedoutsidetheboundariesofestablishedlawbyredefiningthetermdepositwhentherewerelegitimatealternativetheoriestohandleeachconcerntheIBLAespousedinreachingitsresult.7Giventheseconsiderations,Vesselshighlightstheneedforlegislativeclarificationinthisareaofenergylaw.8

* Candidate for J.D. and M.A. in Environment and Natural Resources, UniversityofWyoming,2011.Thankyou to allmy editors, includingmybeautifulwife, for your superbguidance.ThanksalsotoProfessorDennisStickleyandProfessorSamKalenforyourinsightsandadviceonthisnote.

1 VesselsCoalGas,Inc.,175I.B.L.A.8,9–10(2008).

2 Id.at12–13.

3 Id.

4 Id.at14.

5 Id.at15–17.

6 Id.at24–25.

7 See infranotes115–18,134–40,156–60andaccompanyingtext.

8 See infranotes151,166andaccompanyingtext.

As a preliminary matter, the background section of this note outlinesrelevant terminology, statutes, and precedent at issue in Vessels.9 The analysissectionillustratesthattheIBLAsteppedoutsidetheboundariesofexistinglaw.10AlternativelegalapproachestotheprobleminVesselsandpolicyconsiderationsare also evaluated.11 Finally, this note concludes there is a need for legislativeclarificationregardingcoalminemethaneleasingtoensurestabilityinthisareaofnaturalresourcedevelopment.12

Background

Terminology

A few basic terms are essential to understanding the issues raised inVessels. Methane is a hydrocarbon associated with petroleum formed by thedecompositionoforganicmatter.13Methaneisthemostcommonandabundantofallthehydrocarbonsthatconstitutenaturalgas,anditisoftenassociatedwithcoalmining.14Methanehasnotaste,color,orodor,anditcanformanexplosivemixturewhencombinedwithair.15

Coalbedmethane (CBM) ismethanegas found in and released fromcoaldeposits.16CBM is foundboth in the fracturesof a coal seamandwithin thecoal itself.17 CBM is extracted in two ways: (1) traditional drilling of verticalwells, independent of coal mining; and (2) in conjunction with the coalminingprocess.18

9 See infranotes13–56andaccompanyingtext.

10 See infranotes112–25,141–51andaccompanyingtext.

11 See infranotes115–18,136–40,156–60,161–72andaccompanyingtext.


13 Bureau of MInes, a dIctIonary of MInIng, MIneral, and related terMs 700 (1968);a. nelson, dIctIonary of MInIng 281(1965);8 Howard r.wIllIaMs & cHarles J. Meyers, oIl and gas law 600–01(LexisNexis2008).

14 See sourcescitedsupra note13.

15 See sourcescitedsupranote13.

16 dennIs c. stIckley, PetroleuM Industry words & PHrases 68 (2007). CBM isalternativelyreferredtoas“coalbedmethanegas,coalbedmethane,coalseamgas,occludedcoalbedmethane gas . . . firedamp, and . . . a variety of similar terms.” NCNBTex. Nat’l Bank, N.A.v.West,631So.2d212,213n.2 (Ala.1993) (citing JeffL.Lewinet al.,Unlocking the Fire: A Proposal for Judicial Determination of the Ownership of Coalbed Methane,94 w. Va. l. reV.563,566–67(1992)).

17 fred BosselMan, Joel B. eIsen, JIM rossI, daVId B. sPence & JacquelIne weaVer, energy, econoMIcs and tHe enVIronMent 551 (2ded.2006).

18 Id.at551–52.

516 wyoMIng law reVIew Vol.10

Coalminemethane(CMM)isaformofcoalbedmethane,sometimescalled“gobgas.”19Inthelongwallcoalminingmethod,CMMcomesfromtheextractionof CBM from “gob hole vents” or “gob wells” in quantities often containingas much as ninety-five percent marketable methane.20 CMM is derived froma combinationof sources, includingCBMreleased fromaprimary coal seam,smallerunmineablecoalseamsandothernearbymineworkings,stratagasesfromcoal seams that are trapped in noncoal strata, and from natural gas otherwiseoriginatinginnoncoalstrata.21

Ventilationairmethane(VAM)isanairandmethanemixturethatiscreatedwhenventspushexternal air intoamine tomixwithanddilutemethanegasreleasedinadvertentlyduringlongwallcoalmining.22Themixtureisthenexpelledviaventsinthemine,creatingVAM.23VAMisnotamarketableformofmethanebecauseitusuallycontainslessthanonepercentmethane,andthereforedoesnotexhibitthesamehighconcentrationsofmethanegasasCMM.24

Statutes, Regulations, and Policies

Thecanary inthecoalmine,asasentinelofhazardtohumanhealth,hasbeen replaced with statutes, rules, and regulations promulgated by the MineSafetyandHealthAdministration.25AdivisionoftheLaborDepartment,MSHA

19 Id.at552.

20 Id.;VesselsCoalGas, Inc.,175I.B.L.A.8,11–12 (2008).Longwall coalmining is anundergroundmethodwherea“seriesof longwalls,or rooms, separatedbypillars”areexcavated.Vessels,175I.B.L.A.at11.Coalisextractedfromtheroomswhilethepillarsareusedforsupporttopreventthesurfacefromcollapsing.Id.

21 BosselMan et al., supra note 17, at 552. CMM is emitted from at least six sourcesincluding“degasificationsystemsatundergroundcoalmines,”“ventilationairfromundergroundmines,”“abandonedorclosedmines,”“surfacemines,”and“fugitiveemissionsfrompost-miningoperations,inwhichcoalcontinuestoemitmethaneasitisstoredinpilesandtransported.”enVtl. Prot. agency, coalBed MetHane outreacH PrograM (2009),available athttp://www.epa.gov/cmop/basic.html[hereinafterEPACMOP].

22 Vessels,175I.B.L.A.at11.

23 Id.

24 Id.at11–12 (emphasizingthelowconcentrationsofmethaneinVAManditssimilarlylowcontributiontogreenhousegasemissionswhenvented);see alsoEPACMOP,supranote21 (offeringinformationabouttheEPA’sCoalbedMethaneOutreachProgram,includingadescriptionofVAMandhowitiscreated).

25 FederalMineSafetyandHealthActof1977,Pub.L.No.95-164,91Stat.1290(1977).Foranexplanationof theconceptof thecanary in thecoalmine, seeYaleUniversitySchoolofMedicine,CanaryDatabase:WhatAreAnimalSentinels?,http://canarydatabase.org/about/what_are_animal_sentinels/ (lastvisitedFeb.24,2010) (“Well into the20thcentury,coalminers . . .brought canaries into coal mines as an ‘early warning signal’ for carbon monoxide and otherpoisonousgases.Thebirdswouldbecomesickbeforetheminers,whowouldthenhaveachancetoescapeorputonprotectiverespirators.”).

2010 case note 517

hasbeenregulatingminesafetysince1978.26Methanegasisadeadlybyproductofcoalminingthatcancauseundergroundexplosions;therefore,detectionandremovalofcoalminemethaneisimportanttoprotectthehealthandsafetyofcoalminers.27Asaresult,MSHArequirescoalminestoventilateorotherwiseremovemethaneincidenttotheminingprocessinordertopreventexplosions.28

Methane is dangerous to miners, but it is also considered a greenhousegas by the Environmental Protection Agency.29 Although there are no currentEPA regulations requiring capture of ventilated methane, such regulationmay be imminent with growing public concern and increased litigation overgreenhouse gas emissions.30 If CMM is vented into the atmosphere and notcaptured—aswaslargelydonewithVAMinthepast—itmayhavethepotentialtoadverselycontribute toclimatechange.31Thus, theEPAadvocates thatcoalminesvoluntarilyadoptprogramstocaptureventedmethane,therebyreducing

26 FederalMineSafetyandHealthActof1977,Pub.L.No.95-164,91Stat.1290;see alsoMineSafetyandHealthAct,30U.S.C.§§801–965(2006)(codifyingthecurrentversionoftheAct,whichincludesahostofhealthandsafetyregulationsaffectingvariousminingoperations).

27 Vessels, 175 I.B.L.A. at 10–11 (2008) (“The old adage of the canary in the coal mineestablisheswellenough. . .thatcoalminingreleasesmethane.”); see alsoAmocoProd.Co.v.S.UteIndianTribe,526U.S.865,871(1999); FreemanCoalMiningCo.v.InteriorBd.ofMineOperationsAppeals,504F.2d741,746–47(7thCir.1974)(discussingthedeadlynatureofmethanegasincoalmining);supranotes13–15andaccompanyingtext(definingmethanegas).

28 30 U.S.C. § 863 (requiring ventilation of coal mines); Vessels, 175 I.B.L.A. at 10–11;Newmanv.RAGWyo.LandCo.,53P.3d540,545(Wyo.2002)(citingU.S.SteelCorp.v.Hoge,468A.2d1380,1382(Pa.1983)(discussingthesafetyrequirementsofcoalmineventilation)).

29 See generallyEPACMOP,supranote21(discussingcoalminemethanegenerally);enVtl. Prot. agency, gloBal MItIgatIon of non-co2 greenHouse gases(2006),available at http://www.epa.gov/climatechange/economics/international.html[hereinafterEPAgloBal MItIgatIon].

30 James A. Holtkamp & Rebecca A. Ryon, Capture of Ventilated Methane from Mining Operations: Ownership, Regulation, and Liability Issues,55 rocky Mt. MIn. l. Inst. 26-1, 26-5 to -12 (2009) (discussing the possibility of regulation under the Clean Air Act, the NationalEnvironmental Policy Act, proposed mandatory emission reporting rules, and possible climatechangelegislation).See generallyWendyB.Davis, Coalbed Methane: Degasification, Not Ventilation, Should Be Required,2aPPalacHIan l.J.25(2003);KathyJ.Flaherty, Quandry or Quest: Problems of Developing Coalbed Methane as an Energy Resource,15J. nat. resources & enVtl. l.71(2000);EPACMOP,supranote21.

31 Vessels, 175 I.B.L.A. at 12; enVtl. Prot. agency, coalBed MetHane outreacH PrograM BrocHure,http://www.epa.gov/cmop/docs/brochure_2005.pdf(lastvisitedMay18,2010)(“[M]ethaneismorethan20timesmorepowerful(byweight)atwarmingtheatmospherethancarbondioxide.Coalminingisasignificantsourceofmethane:itcontributesabout10percentofallhuman-relatedmethaneemissionsintheUnitedStates.”)[hereinafterePa cMoP BrocHure];see alsoDavis,supranote30,at32–33;ePa gloBal MItIgatIon, supra note29;enVtl. Prot. agency, MetHane to Markets, underground coal MIne MetHane recoVery and use oPPortunItIes (Mar. 2008),http://methanetomarkets.org/documents/coal_fs_eng.pdf(“Globally,CMMaccountsfor6percentoftotalmethaneemissionsresultingfromhumanactivities.”).


greenhousegas emissions fromthecoalminingprocess.32TheEPA’sgoal is tosimultaneously facilitate the captureofCMMforprofit,promotemine safety,andpreventdischargeofCMMintotheatmosphere.33

Inadditiontohealth,safety,andenvironmentalconcerns,publicpolicyalsodiscourageswasteofnaturalresourcesgenerally.34Eventhoughsomewastemaybepermissibleintheeventofmineralestateconflict,itisotherwiseforbidden.35Assuch,mostoilandgasproducingstateshavemadeittheirexpresspolicytoavoidwasteofnaturalresources,alwaysrecoveringasmuchaspossible.36

The Mineral Leasing Act is another body of law important in analyzingVessels.TheMLAfacilitatesleasingfederaloilandgaslands.37TherighttoproducemethanegasonpubliclandsisacquiredbyobtainingafederaloilandgasleasethroughthecompetitivebiddingprocesscompelledbytheMLA.38TheBLMhasbroaddiscretionindeterminingwhichfederallandswillbeavailableforleasing,andisundernolegalobligationtomakeanyparticulartractavailable.39TheMLA

32 EPACMOP,supranote21.

33 Id.; see also Vessels,175I.B.L.A.at12(“Thegoalofthisprogramis‘topromotetheprofitablerecoveryanduseofcoalminemethane(CMM),agreenhousegasmorethan20timesaspotentascarbondioxide.’”)(quotingEPACMOP, supranote21).

34 E.g., n.d. cent. code § 38-08-01 (2008). North Dakota’s statute is exemplary ofmoststates:

Itisherebydeclaredtobeinthepublicinteresttofoster,toencourage,andtopromotethedevelopment,production,andutilizationofnaturalresourcesofoilandgasinthestateinsuchamanneraswillpreventwaste...[and]insuchamannerthatagreaterultimaterecoveryofoilandgasbehad....

Id.;see also, e.g.,Mont. code ann.§82-11-121(2007);utaH code ann.§40-6-1(2008);wyo. stat. ann.§30-5-102(2009).

35 AmocoProd.Co.v.S.UteIndianTribe,526U.S.865,878–79(1999)(“[Acoallesseehas]theestablishedcommon-lawrightoftheownerofonemineralestatetouse,andevendamage,aneighboringestateasnecessaryandreasonabletotheextractionofhisownminerals.”);see also MichaelF.Geiger,L.L.C.v.UnitedStates,456F.Supp.2d885,889(W.D.Ky.2006)(notingthecoal lesseehasarighttouseordamageaneighboringgasestateasmuchasreasonablyrequiredtoextractcoal);HuntOilCo.v.Kerbaugh,283N.W.2d131,135(N.D.1979)(discussingtheimpliedrightsofthemineralestatetodominatethesurfaceestateasmuchasisreasonablynecessarytoexploreforandextractminerals);infranote147andaccompanyingtext(citingsourcesdiscussingmineralestatedominanceandconflictsbetweenestates).

36 E.g., wyo. stat. ann. § 30-5-102; see also supra note 34 (citing statutes expresslydiscouragingwasteofnaturalresources).

37 See generally30U.S.C.§§181–263(2006).

38 30 U.S.C. § 226; 2 george c. coggIns & roBert l. glIcksMan, PuBlIc natural resource law §23.03(1994);JohnF.Shepherd&JeanineFeriancek, A Guide to the Federal Onshore Oil and Gas Leasing Reform Act of 1987,nat. res., energy, and enVtl. l. sec. MonograPH serIes no.9,at11–15(1989).

39 30U.S.C.§226(a)(“Alllands...believedtocontainoilorgasdepositsmaybeleasedbytheSecretary.”)(emphasisadded);see also2coggIns & glIcksMan,supranote38,§23.03[2][a];5eugene o. kuntz, a treatIse on tHe law of oIl and gas§67.2(MatthewBender,rev.ed.,2010).

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only allows noncompetitive leasing of lands if the same lands were previouslyofferedforcompetitiveleasing,butdidnotreceiveaminimumacceptablebid.40TheMLAdoesnotspecificallyaddresscoalminemethane,butallotherformsoffederallyownedmethaneareusuallyleasedunderMLAprocedures.41

Finally,theFederalLandPolicyandManagementAct(FLPMA)isanotherstatutethatcouldbeusedtolegallycapturefederalcoalminemethane.42UnderFLPMA,theSecretaryoftheInteriorisdirectedto“regulate,througheasements,permits, leases, licenses, published rules, or other instruments as the secretarydeemsappropriate,theuse,occupancy,anddevelopmentofthepubliclands.”43TheSecretaryhasbroaddiscretion inauthorizing landuseunderFLPMAandsuch landuse authorizationmaybeoffered competitivelyornoncompetitivelythroughprivatenegotiation.44

The Owner of Federal Coal Does Not Own Federal Methane

The United States Supreme Court case Amoco Production Co. v. Southern Ute Indian Tribeisthefoundationcaseregardingownershipoffederalmethaneincident to coal seams.45 The issue in Amoco was whether the United States

40 30U.S.C.§226(b)(allowingnoncompetitiveleasingunder§226(c)ifthesubjectlandswerepreviouslyofferedforcompetitivesaleanddidnotreceiveaminimumacceptablebid,andthecompetitivesaleoccurredwithintwoyearsofthenoncompetitiveleasesale);see alsoShephard&Feriancek,supranote38,at15.

41 30U.S.C.§181 (“Depositsof . . . gas . . . shallbe subject todisposition in the formandmannerprovidedbythischapter[oftheMLA]....”).Whilethispropositionistrueundercurrentlaw,whethertheMLAshouldapplytoCMMisultimatelythecruxofthedebateinVessels:theIBLAavoidedtheMLAinitsdecisionbecauseitfelttheMLAwasnotwellsuitedtohandleCMM,butVesselsarguedtheMLAshouldapplybecauseitwastheonlyavailablesourceofleasingauthority.VesselsCoalGas,Inc.,175I.B.L.A.8,19,25–26(2008).Also,OsoinitiallyrequestedalicensefromtheBLMunderthebroadsecretarialpowersithasundertheFLPMA,whichwasultimatelydeniedbytheBLMwhenitrecognizedtheMLAastheappropriatesourceofauthority.Id.at14.ThesefactshighlighttheconfusionsurroundingCMMleasing,andthustheneedforlegislativeclarification.See infranotes69,89–90,151,166andaccompanyingtext(discussingboththeconfusionbehindtheappropriateleasingauthorityandtheneedforlegislativeclarificationofthesame).

42 Holtkamp&Ryon,supranote30,at26-17.

43 43U.S.C.§1732(2006).

44 Holtkamp&Ryon,supranote30,at26-16to-17(citing43C.F.R.§2920.5-4(b)(2009)).

45 526 U.S. 865, 873–78, 880 (1999). Amoco is the subject of much publication andcommentary. E.g., Anita S. Bryant, Amoco Production Co. v. Southern Ute Indian Tribe, 27ecology l.q. 799 (2000); Elizabeth A. McClanahan & Jill M. Harrison, Southern Ute: Trial Court to Supreme Court,15J. nat. resources & enVtl. l.247(2001);LauraD.Windsor,AmocoProductionCompanyv.SouthernUteIndianTribe: A Final Resolution to the Battle over Ownership of Coalbed Methane Gas?,17ga. st. u. l. reV.893(2001).


intendedtoreservemethanegaswhenitreservedcoal in landspatentedundertheCoalLandsActs of 1909 and1910; specifically,whetherCBM shouldbeconsideredincidenttothecoal.46

TheissuearosewhencommercialinterestgrewindevelopingCBM,butitwasunclearwhether the reservationof coal to theUnitedStates also includedrightstoincidentalmethane.47Inresponsetothisuncertainty,theSolicitoroftheDepartmentoftheInteriorpublishedanopinioninwhichheconcludedthe1909and1910ActsreservingcoaltotheUnitedStatesdidnotreserveCBM.48Relyingonthisconclusion,developmentcompaniesenteredintooilandgasleaseswithsurfaceownerscoveringanestimated200,000surfaceacrespatentedunderthe1909 and 1910 Acts, under which the Southern Ute IndianTribe owned thecoal.49ClaiminganexecutiveinterestintheCBM,theTribebroughtsuitagainstproductioncompanies,royaltyowners,federalagencies,andofficialsinvolvedintheproductionandmarketingoftheCBMfromthelandsatissue.50TheTribearguedthereservationofcoal totheUnitedStates inthe1909and1910ActsincludedCBM,sotheTribe—notthesuccessorsininteresttothelandpatents—wouldownthegas.51

ThecaserosetotheUnitedStatesSupremeCourt.52ThemajorityfocusedontheissueofwhetherCongressregardedCBMasapartofcoalatthetimeitmade

46 Amoco,526U.S.at867,873(“Thequestionisnotwhether,givenwhatscientistsknowtoday,itmakessensetoregardCBMasaconstituentofcoalbutwhetherCongresssoregardeditin1909and1910.”).TheUnitedStatespatentedmillionsofacresoflandunderthe1909and1910Acts, someofwhichwere former Indian reservation lands oncebelonging to the SouthernUteIndianTribe.Id.at870.In1938,theUnitedStatesrestoredtitletoalloftheformerreservationlandsnotyetpatentedbacktotheTribe,alongwithallofthecoal,includingcoalreservedfromlandsalreadypatentedunderthe1909and1910Acts.Id.;Windsor,supranote45,at896–97.

47 Amoco,526U.S.at871.CBMdevelopmenthassinceboomedandisamajorsourceofnaturalgas in theUnitedStates.Windsor, supranote45,at899(“TodayCBMaccounts foranestimatedfifteenpercentofpotentialUnitedStatesnaturalgasreserves.”);see alsoAnneMacKinnon&KateFox,Demanding Beneficial Use: Opportunities and Obligations for Wyoming Regulators in Coalbed Methane,6wyo. l. reV.369,370(2006)(discussingissuessurroundingincreasedCBMdevelopmentinWyoming).

48 Amoco,526U.S.at871(citingOwnershipofandRighttoExtractCoalbedGasinFederalCoalDeposits,88InteriorDec.538,538–39(1981)).

49 Id.

50 Id.

51 Id.

52 S.UteIndianTribev.AmocoProd.Co.,874F.Supp.1142,1154(D.Colo.1995)(holdingtheplainmeaningofcoalincludesonlythesolidrocksubstancecommonlyusedforfuelanddoesnotincludeCBM), rev’d,119F.3d816,828(10thCir.1997)(findingCBMwasincludedwhentheUnitedStatesreservedcoalinlandspatentedunderthe1909and1910Acts),aff ’d on reh’g,151F.3d1251,1267(10thCir.1998)(findingthetermcoalambiguous,construingthereservationinfavorofthesovereignandfindingthereservationofcoalinthe1909and1910ActstotheUnitedStatesnecessarilyincludedareservationofCBM),rev’d,526U.S.865,880(1999);see also McClanahan&

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the reservations in 1909 and 1910.53 Based on historical context surroundingthepassageofthelegislation,theCourtfound“themostnaturalinterpretationof ‘coal’ asused in the1909and1910Actsdoesnot encompassCBMgas.”54Therefore,theimportantpointfromAmocoisthebright-linesubstantivepropertyrule ultimately established: CBM is not a part of the federal coal estate, andtherefore any rights in the methane belong to the successor in interest to thepatentgrantingtitletosurfaceownership.55Federalcoalleasesdonotconveyanyrightsinmethane.56

PrIncIPal case

IncompliancewithMSHAsafetyrequirements,UtahAmericanEnergy,Inc.(UAE) ventedVAM from its Aberdeen Coal Mine with a fan and ventilationsystem.57MethaneconcentrationsincreasedatAberdeenasUAEminedtowarddepthsreaching3,000feet,andtheexistingventilationsystemwasnotsufficienttoremovethedeadlygas.58Asaresult,MSHAorderedUAEtoinstallanenhancedmethaneremovalsystem.59Atacostupwardsoftwomilliondollars,UAEinstalleda state-of-the-art system.60 The new system removed large concentrations ofmarketableCMMthroughdeeplydrilledverticalventholes.61 UAEenteredinto

Harrison,supranote45,at247–60;Windsor,supranote45,at895–913(detailingtheproceduralhistoryanddispositionofcasesleadinguptoAmoco).

53 Amoco,526U.S.at873.

54 Id.at880.

55 Id.

56 Id.WhileAmoco determinedwhoownsCBMunder federal landpatents, thequestionisnotwellsettledamongthestates:somecourtsagreewiththeholdinginAmocothattheownerofthecoaldoesnotowntheCBM.E.g.,In reHillsboroughHoldingsCorp.,207B.R.299,305(Bankr.M.D.Fla.1997);NCNBTex.Nat’lBank,N.A.v.West,631So.2d212,229(Ala.1993);CarbonCountyv.UnionReserveOilCo.,898P.2d680,687–88(Mont.1995).SomecourtshavefoundtheownerofthecoalownstheCBM.E.g.,Vinesv.McKenzieMethaneCorp.,619So.2d1305,1309 (Ala.1993);Cont’lRes. of Ill., Inc. v. Ill.Methane,L.L.C.,847N.E.2d897,902(Ill.2006);U.S.SteelCorp.v.Hoge,468A.2d1380,1384–85(Pa.1983).Othercourts—mostnotablytheWyomingSupremeCourt—haveadoptedcase-by-caseanalysisoftheparties’intentandsurroundingcircumstances.E.g.,CaballoCoalCo.v.Fid.Expl.&Prod.Co.,84P.3d311,314–15(Wyo.2004);Hickmanv.Groves,71P.3d256,258(Wyo.2004);McGeev.CaballoCoalCo.,69P.3d908,912(Wyo.2003);Newmanv.RAGWyo.LandCo.,53P.3d540,544–45(Wyo.2002); EnergyDev.Corp.v.Moss,591S.E.2d135,146,150(W.Va.2003).See generallyBosselMan et al., supranote17,at 552–53(discussingallthecommonlawpossibilitiesfordeterminingCBMownership, including theories based on priority at severance, successive ownership, and mutualsimultaneousrights);8wIllIaMs & Meyers, supranote13,at151–52.

57 Vessels Coal Gas, Inc., 175 I.B.L.A. 8, 10–11 (2008); see also supra notes 25–28 andaccompanyingtext(discussingMSHAcoalmineventilationrequirements).


59 Id.

60 Id.

61 Id.at11–12.


anagreementwithOsoOilandGasProperties,L.L.C.tofacilitateEPAdirectivestocapturetheventedgas.62Undertheagreement,OsowouldcapturetheCMMattheventsonthesurface,thentransportit,processit,andmarketit.63

The Aberdeen mine operated under both public and private coal leaseagreements.64Ososuccessfullyacquiredoilandgasleasesfromtheprivatemineralownersinordertoconductitsmethanecapturingoperationattheventslocatedonprivateparcels.65Theparcelsofthemineonpubliclandsaresubjecttofederalcoal leases.66 Federal coal leases “give the lessee the right to explore for,mine,and produce coal deposits.”67 Federal coal leases, however, do not give any oftheserightswithrespecttooilorgas.68Tolegallycapturethemethanegasoverthefederalparcels,OsorequestedalicensebeissuedunderthebroadsecretarialpowersoftheBLM.69ConsistentwiththeUnitedStatesSupremeCourtholdinginAmoco,theBLMdeterminedtheonlywayforOsotolegallycapturetheventedmethanefromthecoalmineoverthefederalparcelswastoacquireafederaloilandgasleaseundertheMLA.70

Meanwhile,VesselsCoalGas,Inc.discoveredtheagreementbetweenUAEandOsoandtriedtojointheoperation.71UAEinformedVesselsthattheonlyway it couldbedirectly involvedwasbyancillary agreementwithOso,whichapparently never came to fruition.72 Determined to participate, Vessels beganacquiringprivateoilandgasleasesinlandssurroundingtheareaofthecoalmine.73WhentheBLMissuedaNoticeofCompetitiveLeaseSalethatincludedleasesfor

62 Id.at12;see also supranotes29–33andaccompanyingtext(discussingtheEPA’sCoalbedMethaneOutreachProgram,encouragingthevoluntarycaptureofventedCMM).


64 Id.at9–10.

65 Id.at13.

66 Id.at9–10;see also30U.S.C.§201(2006)(authorizingtheSecretaryofInteriortodividefederalcoallandsintotractsandawardleasesbycompetitivebidding).

67 Vessels,175I.B.L.A.at9;see also30U.S.C.§§201–209(providingforfederalcoalleasing).

68 Vessels,175I.B.L.A.at9 (citingAmocoProd.Co.v.S.UteIndianTribe,526U.S.865,879–80(1999)).

69 Id. at 13 (arguing the BLM had authority to issue such a license under the FederalLandPolicyandManagementAct,insteadofaleaseundertheMLA);see supra notes41–44andaccompanying text (discussing the underlying issue in Vessels of what the appropriate source ofauthorityforCMMleasingisandthepossibilityofaFLPMAlease).

70 Vessels,175I.B.L.A.at14(citing30U.S.C.§226(2000));see also 2coggIns & glIckMan, supranote38,§23.03(discussingMLAleasingproceduresandrequirements).See generallysupranotes37–41andaccompanyingtext(describingbasicMLAleasingrequirements).


72 Id.

73 Id.

2010 case note 523

thefederalparcelsatissue,Vesselsprotested.74Vesselscontendedstipulationsintheleasesmadethem“anticompetitiveandinconsistent”withtherequirementsoftheMLAbecausethestipulationsgaveUAEoperationalcontroloftheCMMvents,andthereforeofanyfederaloilandgasleaseoveranyparcelscontainingthe vents.75 As such, Vessels maintained that the stipulations inappropriatelydelegatedBLM’sregulatoryauthorityforoilandgasleasestoUAE.76

The lease sale went on and Oso acquired the federal oil and gas leases.77Vesselsfiled aprotest to the lease sale thatwasultimatelydeniedby theUtahStateDirectoroftheBLM.78TheDirectorsaidtheMLAdidnotapplytothesalebecausethegasatissuedidnotmeetthedefinitionofgasnormallysubjecttoregulationundertheMLAsincetheDirectorthoughtitdidnotcontainhighenoughmethaneconcentrations(hemistakenlybelievedtheleaseswereforVAMratherthanCMM).79TheDirectorconcludedtheleasesatissuedidnotpermitrecoveryofgasnormallysubjecttotheMLA,andthuswerenotMLAleases.80

VesselsappealedtheBLM’sdecisiontotheInteriorBoardofLandAppeals.81The IBLA found that the BLM inappropriately premised its decision on thenotionthatmethaneemittedfromtheminewasnotgasbecauseitwasartificiallycreatedandnot“producedinanaturalstatefromtheearth,”asrequiredbythefederal definition of gas subject to the MLA.82The IBLA disagreed with the

74 Id.at17;see also30U.S.C.§226(f )(2006)(“Suchnoticeshallbepostedintheappropriatelocal office of the leasing and land management agencies . . . [and] shall include the terms ormodifiedleasetermsandmapsornarrativedescriptionsoftheaffectedlands.”).TheBLMdecidedtoissueleasesovertheAberdeenminenotwithstandinganexistingpolicyagainstgasleasingoverlongwallcoalmines.Vessels,175I.B.L.A.at10,16.


76 Id.

77 Id.

78 Id.at18.

79 Id.;see supra note24andaccompanyingtext(explainingthedifferencebetweenVAMandCMM).AnotherrationalefortheDirector’sdecisionwasthatthegas“isartificiallycreatedinthemineanddischargedthroughamechanicalventilationsystemattheearth’ssurface.”Vessels,175I.B.L.A.at18.

80 Vessels,175I.B.L.A.at18,21.

81 Id. at 18–21. The IBLA hears appeals from decisions of the Bureau of LandManagement,theMineralsManagementService,andtheOfficeofSurfaceMiningReclamationand Enforcement, or any administrative law judge decision made under subparts E and Lof 43 C.F.R. part 4. See generally Department Hearings and Appeals Procedures, 43 C.F.R.pt. 4 (2008); offIce of HearIngs and aPPeals, u.s. deP’t of tHe InterIor, InterIor Board of land aPPeals Manual (2009), available at http://www.oha.doi.gov/manuals/IBLA%20Manual%202009%200612.pdf(settingforthproceduresandpracticestheIBLAfollowsinadjudicatingappeals);JamesM.Day,Federal Oil and Gas Lease Appeals in the Department of the Interior,innat. res., energy, and enVtl. l. sec. MonograPH serIes no.18(1992)(describingIBLAjurisdiction,standingtoappeal,appealsprocedures,andotherjurisdictionalandevidentiaryissuesthatariseinappealingfederaloilandgasleasingdecisionstotheDepartmentoftheInterior).

82 Vessels,175I.B.L.A.at18,19.


Director’sdecisionthatthemethaneatissuewasnotsubjecttotheMLAbecausesuchaclassificationofCMMwouldthrowmethaneleasinginothercontextsintodisarray.83AccordingtotheIBLA,thisprojectandcasearosepreciselybecausethegasatissuewassomethingmorethanVAM.84TheIBLArefusedtodefineCMMcontaininghighconcentrationsofmethaneassomethingotherthangassimplybecause“itisproducedasaninadvertentbyproductofcoalmining,”notingthat“itisbeingcapturedbecause itismethanegas.”85TheIBLAalsoreasoneditwasinconsistentfortheDirectortocontendthemethaneatissuewasnotgasundertheMLA,whilesimultaneouslyupholdingtheMLAleasesale.86

CitingtheDirector’smistakeoffactandtheinconsistentpositionsheldbytheBLM,theIBLAreversedtheDirector’sdecisiondenyingVessels’sprotesttotheleasesale.87However,VesselsrequestedbothareversaloftheDirector’sdecision,aswellasanorderfromtheIBLAforcingasecondcompetitiveleasesaleundertheMLAforthesameleases,butwithouttheoffendingstipulations.88

IndeterminingwhetherVesselswasentitledtorelief in the formofanewcompetitive lease sale, the IBLA addressed the threshold issue of whether theMLAwastheappropriatesourceofauthorityforleasinginthistypeofsituation.89The IBLAfound theMLAdoesnotcontemplate thenovel issuepresentedbyanoilandgascompanycapturingandmarketinggasventedbyanundergroundcoalmine.90TheIBLApointedtolanguageintheMLA,whichstatesinrelevantpartthat“[d]epositsof...oil...gas,andlandscontainingsuchdeposits...shallbe subject todisposition in the formandmannerprovidedby this chapter.”91

83 Id.at21(agreeingwithVesselsthatholdingCMMtobesomethingotherthangaswouldconflictwithcoalbedmethaneleasingundertheMLA).

84 Id. (“[The Director’s] logic misses the entire nature of the project and undercuts therationaleofhisdecisionaffirmingcompetitivebiddingforMLAleases.”).

85 Id.at22.

86 Id. at 21–22.The IBLA used this reasoning against the Director, yet ignored that itsdecisioninthiscasehastheexactsameresult;namely,theIBLAdeniedthattheMLAapplies,yetupheldtheMLAleasesatissue.Id.at25–27;see also infranotes154–55andaccompanyingtext(discussingtheinconsistencyinupholdingtheMLAleaseatissuewhilesimultaneouslycontendingtheMLAdoesnotapply).


88 Id.at22.

89 Id.at23.TheIBLAfirstdeterminedtheBLMwasundernoobligationtoissueMLAleasesforoilandgasdepositsbecausethereisno“foundationinanylaworrule”supportingtheideathatacompetitiveleasesalemustbeheldsimplybecausecoalminingistakingplace.Id.at24.Therefore,the IBLA concluded it was not necessary to hold a second competitive lease sale, even thoughtheStateDirector’sdecisiondenyingVessels’sprotestwasreversed.Id.;see also supranote39andaccompanyingtext(discussingtheBLM’sdiscretionindeterminingwhethertoofferaparticulartractforoilandgasleasing).


91 Id.(citing30U.S.C.§181(2000)).

2010 case note 525

TheIBLAalsopointedto§226oftheMLAwhichstates“[a]lllandssubjecttodispositionunderthischapterwhichareknownorbelievedtocontainoilorgasdepositsmaybeleasedbytheSecretary.”92

Using these two sections of the MLA, the IBLA reasoned “[g]as alreadylegallyreleasedintotheatmosphereisnotremotelya‘deposit.’”93TheIBLAalsoofferedadefinitionfromanindustrydictionarydefining“‘deposit’tobe‘anythinglaiddown,’and‘mineraldeposit’as‘anatural occurrenceofausefulmineral...in sufficient extent and degree of concentration to invite exploitation.’”94TheIBLAconcludedadeposit“isthemineralinplaceintheground.”95TheIBLAalsocontendedthepurposeoftheMLAwastofacilitateoilandgasleasingforpurposesofexploration,drilling,mining,extracting,andproductionof“oilandgasdepositsinplace.”96TheIBLAsaidthiswasnotthepurposeoftheprojectinthiscasebecausetherewasnodepositandacoallesseewasmerelyliberatinggasasaresultofitscoalmining.97Onthesebases,theIBLAdecidedthegasventedfromacoalmineisnotadepositofgas.98

The IBLA also gave three further rationales justifying its decision.99 First,the IBLAconcluded that anyfindingotherwisewould essentiallyput the coallessee in thepositionofpaying for thedrillingandexplorationcostsnormallyassociatedwithfederaloilandgasleasesbygivingtheoilandgaslesseetheabilityto capture the methane at the coal miner’s expense of installing the methanevents.100 Second, the IBLA reasoned if it found the vented gas was a deposit,thecoallesseemightbeaccusedof“actingwithrespecttoadepositinamannerappropriateonlyforanoilandgaslessee,contrarytothelimitedrightsitisgivenunderitscoallease,”becausefederalmethaneisapartoftheoilandgasestateandnotpartofthecoalestate.101Finally,theIBLAcitedpracticalreasonsfordenyingVessels’srequest:“UAEandOsohavecollaboratedincreatinganewcoalminedegasificationoperationthathasthebenefitofprotectingminersasrequiredby

92 30U.S.C.§226;Vessels,175I.B.L.A.at25.


94 Id.(citingBureau of MInes, supranote13).

95 Id.

96 Id.

97 Id.

98 Id.

99 Id.at25–26.TheIBLAwasnotaddressinganyparticularparty’sarguments,butofferingdictatosupportitsdeparturefromexistingprecedent.See id.(justifyingthedecisiondecliningtoextendtheMLAtocoverventedcoalminemethane).

100 Id.

101 Id. (citingAmocoProd.Co.v.S.UteIndianTribe,526U.S.865,879–80(1999)); see also supra notes55–56andaccompanyingtext(recitingthebright-linepropertyruleestablishedbyAmoco:CBMisnotpartofthefederalcoalestate).


MSHA,minimizingpollution to the environment as sought by theEPA, andpermittinguseofadditionalenergyresourcesaspromotedbynationalpolicy.”102The IBLA concluded there was nothing in the MLA compelling the BLM toimposeanuninvitedthirdpartyontheproject.103Decliningtoorderasecondcompetitiveleasesale,theIBLAheldgasventedfromacoalmineisnotadepositofgas,andthereforeisnotsubjecttotheMLA,whichonlyrequiresfederalleasingfordepositsofoilandgas.104

analysIs

TheIBLAofferedapracticalsolutiontoauniqueproblemwiththeVesselsdecision. The MSHA requires venting methane for mine safety.105 The EPApromotes capturing vented methane to reduce greenhouse gas emissions.106Public policy discourages waste of natural resources.107The decision in Vesselssimultaneously advances all of these policies.108 Unfortunately, the decisionaccomplishesthisinalogicallyinconsistentmannerthatdoesnotcomportwithexistingprecedent.First, theIBLAeitherdisingenuouslyor incorrectlydefineddeposit.109 Second, while the rationales offered by the IBLA raise legitimateconcerns, they do not justify a decision contravening precedent when thereare legitimate legal alternatives available to address such concerns.110 Finally,this section highlights important environmental and political considerationsnotentirelyaccountedforintheVesselsdecisionthatneedtobemorecarefullyevaluatedandconsideredinfutureCMMleasing.111

The Definition of Deposit

TheVesselsdecisionrestsuponadictionarydefinitionofthetermdeposit.112TheIBLA’schoiceofdefinition for the termdeposit is susceptible tocriticism


103 Id.

104 Id.

105 30U.S.C.§863(2006);supranotes25–28andaccompanyingtext(discussingminesafetyrequirements).

106 Vessels,175I.B.L.A. at11–12;supranotes29–33(discussingEPAgreenhousegasreductionguidelines).

107 E.g.,wyo. stat. ann.§30-5-102(2009);see also supranote34(citingstatutescodifyingpoliciesagainstwasteofnaturalresources).






2010 case note 527

inthatitmayhavebeendisingenuouslyselectedmerelytorenderresults.113TheIBLAinferredfromvariouspiecesofadefinitionthatadepositisamineralinplaceintheground.114However,anotherindustry-accepteddefinitionhasno“inplaceintheground”requirement:adepositis“[a]naccumulationofoil,gasorothermineralscapableofproduction.”115ThegasatissueinVesselswasanaccumulationcapableofproduction,andwasthereforeadepositaccordingtothisalternativedefinition.116Furthermore,beforeVesselswasdecided,theAmericanGeologicalInstituteupdatedtheDictionary of Mining, Mineral, and Related Terms,extendingits definition of deposit to include “[m]aterial of any type, either consolidatedorunconsolidated,thathasaccumulatedbysomenaturalprocessoragent”and“[a]naccumulationoforeorothervaluableearthmaterialofany origin.”117TheIBLA’sdefinitionrequiringadeposittobeinplaceinthegroundignoresthesealternativeindustry-accepteddefinitionsoftheterm.118

EveniftheIBLA’sdefinitionofthetermdepositisappropriate,applicationofthedefinitionproducesanabsurdlogicalcontradiction.119TheIBLA’sdefinitionofadepositthatwouldbesubjecttotheMLAisamineralinplaceintheground.120Itfollowsthatamineralnotinplaceinthegroundisnotadeposit,andisnotsubjecttotheMLA.121Thereductio ad absurdumargumentagainstthesepremises

113 Cf.Gonzalesv.Raich,545U.S.1,69n.7(2004)(Thomas,J.,dissenting)(implyingthemajorityselectedoneofmanyavailabledefinitionswithoutexplanationmerelytosupportitsbroaddefinitionoftheterm“economic”);Keeganv.UnitedStates,325U.S.478,502(1945)(“[A]word,readinitscontextinthestatute,isfarmorerevealingofthelegislativepurposethanthearbitraryselectionofoneofitsdictionarymeaningstotheexclusionofotherswhichareequallyapplicable.”);UnitedStatesv.Cabaccang,332F.3d662,640(9thCir.2003)(Kozinski,J.,dissenting)(“Astatutedoesnothave aplainmeaning just becauseone cherry-pickeddictionarydefinitionhappens tosupportit.”).

114 Vessels,175I.B.L.A.at25 (citingBureau of MInes, supranote13).

115 8wIllIaMs & Meyers, supranote13,at 255.

116 Vessels,175I.B.L.A.at12;8wIllIaMs & Meyers,supranote13,at255.

117 aM. geologIcal Inst., a dIctIonary of MInIng, MIneral, and related terMs(1997)(emphasisadded).

118 Itisalegitimateexerciseinstatutoryinterpretationtorelyondictionarydefinitions.See, e.g.,UnitedStatesv.Kozminski,487U.S.931,961–62(1988)(relyingonmultipledictionariestointerprettheterm“servitude”).But seeVinesv.McKenzieMethaneCorp.,619So.2d1305,1307(Ala.1993)(“Themeaningoftheterm‘minerals’asthatwordisusedinanyparticulargrantorreservationisnottobedeterminedbyrigidandarbitrarydefinitions,butfromthelanguageofthegrantorreservation,thesurroundingcircumstances,andtheintentionofthegrantor,ifitcanbeascertained.”).Choosingonedictionarydefinitionofatermtotheexclusionofalternativeswithoutexplanationisquestionable.See casescited supranote113.

119 Seee.J. leMMon, BegInnIng logIc26(HackettPubl’g.Co.1978)(describingthebasicrulesof thepropositionalcalculus thatmodernsymbolic logic is foundedon);cf.SierraClubv.Andrus,581F.2d895,902(D.C.Cir.1978),rev’d on other grounds,442U.S.347(1979)(“TheprincipleofReductioadabsurdumispartofthelandscapeoflogic.”).


121 Id. at26(“Themethanemixturereleasedbycoalmining...isnottheoilandgasdepositaddressedbyleasingundertheMLA.”).


isasfollows:CMMisinplaceinthegroundbeforecoalmininghappens,andisthereforesubjecttotheMLA.122ThesameCMMisnotinplaceinthegroundafter coalmininghappens, and is thereforenot subject to theMLA.123This isanabsurdresultbecausetheCMMcannotbebothsubjecttotheMLAandnotsubjecttotheMLA.124TheIBLA’sdefinitionofdepositignoresthiscontradiction:theMLAmayapplyatonegiventimeandnotatalatertimeovertheexactsamemoleculesofgas.125Thedefinitionwouldnolongerproducethisabsurdresultifthe“inplaceintheground”requirementwereabandonedinfavorofmorerecentindustrydefinitions.

Three Rationales Offered by the IBLA

The IBLA offered three rationales as justification for declining to extendMLA leasing to CMM by redefining deposit.126 However, an alternative legaltheorywasavailabletohandleeachconcernraisedbytheIBLAwithoutdepartingfromprecedent.127ThefirstconcernthatMLAleasingofCMMwouldputthecoal lessee in the untenable economic position of shouldering the burden ofgas exploration costs couldbehandledby a theoryof contract implied in lawbetweenthecoalandgasestates.128Thesecondconcernthatthecoallesseemaybefacedwithviolatingthegasowner’srightsisalleviatedbythedoctrinethatacoallesseemayinfringeon,andevendestroy,somuchofneighboringestatesasisreasonablynecessarytominethecoal.129Finally,theconcernthatnothingintheMLAcompelstheIBLAtoallowthird-partyinterventioninacaselikeVesselscanbeaddressedwiththebroaddiscretiontheBLMisotherwiseaffordedeitherundertheMLAoralternativelyundertheFLPMA.130

122 See id.at25(assumingdepositmeansamineralinplaceintheground,andthereforeanymethaneinplaceinthegroundisadepositsubjecttoMLAleasing).

123 See id.at26(holdingmethanereleasedbycoalminingisnotsubjecttoMLAleasing).

124 Cf. Corley v. United States, 129 S. Ct. 1558, 1567–68 (2009) (employing reductio ad absurdumreasoningindeterminingwhetherCongressintendedtodiscardornarrowtheMcNabb-Maloryrulewhenitpassed18U.S.C.§3501);Andrusv.SierraClub,442U.S.347,358–59(1979)(citingthelowercourt’sreductio ad absurdumargumentwithapproval);Sierra Club,581F.2dat902,rev’d on other grounds,442U.S.347(relyingonreductio ad absurdumandnotingtheabsurdityofrequiringanEISoneveryfederallandmanagementdecision);leMMon, supranote119,at26–27(“[I]facontradictioncanbededucedfromapropositionA,Acannotbetrue,sothatweareentitledtoaffirmitsnegation.”).

125 See Vessels, 175I.B.L.A.at26(applyingthetermdeposit,asusedin§226oftheMLA,onlytomethaneinplaceintheground,butnottothesamemethaneotherwisereleasedfromtheground); see also supra notes119–24 and accompanying text (showing the logical contradictionproducedbythedefinitionofdepositrequiringamineraltobeinplaceintheground).






2010 case note 529

Coal Lessee in Untenable Economic Position

The IBLA reasoned that extending the MLA to issue leases to an oil andgas producer that develops gas vented by a coal lessee incident to its miningoperationswouldeffectively force thecostofexplorationandproductionontothecoallessee.131Indeed,federaloilandgaslesseesusuallyconfrontriskandincursubstantialexplorationcostsindevelopingaprospect.132ItistruetheserisksandexpensesareavoidedbytheoilandgaslesseeinaprojectliketheoneinVesselsbecausethereisnoexplorationrequired.133

Theselegitimateconcernsamounttoadesiretoavoidunjustlyenrichingthegasestateattheexpenseofthecoalestate.134Thereisnoreasontoexpectacoalminetoshoulderthecostsofexplorationforagascompany,whilegettingnoneofthebenefit.135Thelegalfictionofacontractimpliedinlawexiststohandleunjust

131 VesselsCoalGas,Inc.,175I.B.L.A.8,25–26(2008).

132 energy Info. adMIn., costs and IndIces for doMestIc oIl and gas fIeld equIPMent and ProductIon oPeratIons 1988 tHrougH 2006(2007),available at http://www.eia.doe.gov/pub/oil_gas/natural_gas/data_publications/cost_indices_equipment_production/current/coststudy.html;RobJessen,Top 10 Risks for the Oil and Gas Industry,J. PetroleuM tecH.,July2008,at18,available at http://www.spe.org/spe-site/spe/spe/jpt/2008/07/07GuestEdit.pdf.

133 Vessels,175I.B.L.A.at26.InjurisdictionswherethecoalestateownstheCBM,subjecttotheruleofcapture,thesurfaceownerwhocapturesmigratingCBMsimilarlyavoidsexplorationcosts.SeeU.S.SteelCorp.v.Hoge,468A.2d1380,1383(Pa.1983)(indicatingthesurfaceownerhastitletoCBMthatmaymigratetothesurfaceorsurroundinglandsasaresultofcoalorCBMoperationsbelowthesurface).

134 Vessels,175I.B.L.A.at25–26(“[I]twouldputthecoallesseeintheuntenablepositionofeffectivelyperformingandpayingfor[oilandgasexploration]...withtheoilandgaslesseereapingthebenefitofthecoallessee’swork.”).

135 See Wattsv.Watts,405N.W.2d303,313(Wis.1987)(citingPuttkammerv.Minth,266N.W.2d361,363(Wis.1978))(“[A]nactionforrecoverybaseduponunjustenrichmentisgroundedonthemoralprinciplethatonewhohasreceivedabenefithasadutytomakerestitutionwhereretainingsuchbenefitwouldbeunjust.”);see also BluebonnetWarehouseCoop.v.BankersTrustCo.,89F.3d292,300(6thCir.1996);CommerceP’ship8098Ltd.P’shipv.EquityContractingCo.,695So.2d383,386(Fla.Dist.Ct.App.1997);restateMent (fIrst) of restItutIon§117(1937).TentativeDraftNumber2oftheRestatement(Third)ofRestitution&UnjustEnrichmentdefinesthecommonlawactionofrestitutionasfollows:

Apersonwhotakeseffectiveactiontoprotectanother’spropertyoreconomicinterestshasaclaiminrestitutionagainsttheotherif

(a) the circumstances justify the claimant’s decision to intervene without aprioragreementforpaymentorreimbursement,and

(b) itisreasonablefortheclaimanttoassumethatthedefendantwouldwishtheactionperformed.

RestitutionunderthisSectionismeasuredby(i)thelossavoidedbythedefendantor(ii)areasonablechargefortheservicesprovided,whicheverisless.

restateMent (tHIrd) of restItutIon & unJust enrIcHMent §21(TentativeDraftNo.2,2002).


enrichmentclaimsliketheoneatworkinVessels.136Therelationshipbetweenacoalmineventinggasandagascompanycapturingit,likeinVessels,satisfiesallthe common law elements of unjust enrichment: the coal mine conferred thebenefitonthegascompanyofshoulderingthecostsofexploration.137Awareofthisbenefit,thegascompanyretainedoraccepteditbycapturingthegaswithouthavingexploredforit.138Finally,thesecircumstancesareunjustsuchthatitwouldbeinequitableifthegascompanydidnotpayfairvalueforthisservice.139

Since there may be a contract implied in lawbetween the coal lessee andthegas lessee, there isnoreasonto ignorewell settledprecedentbyredefiningdeposit toprotect the interestsof thecoal lessee fromunjust enrichment.TheIBLAraisedlegitimateconcernsregardingunjustenrichment,butdidnotappealtothealternativedoctrineandofferednootherfoundationinthelawtojustifyitsdecision.140

Coal Lessee Faced with Violating Gas Owner’s Rights

Initsdecision,theIBLApointedtotheUnitedStatesSupremeCourtprecedentitultimatelydeclinedtoextend.141Asdiscussedabove,Amoco Production Co. v. Southern Ute Indian Tribestandsforthepropositionthatafederalcoallesseehasnorightsinthemethanegasassociatedwiththecoal;rather,thoserightsareinthesuccessorsininteresttothelandsurfacepatentees.142TheIBLAcitedAmocoasareasonnottoextendtheMLAtocovergasthatisincidenttocoalmining.143TheIBLAexpressedconcernthatifCMMwasadepositundertheMLA,thenthefederalcoallesseemaybe“heldaccountableforactingwithrespecttoadeposit

136 Commerce P’ship,695So.2dat386(notingthatacontractimpliedinlawisreferredtoalternativelyasa“quasi-contract,”“unjustenrichment,”“restitution,”“constructivecontract,”and“quantummeruit”).Theequitableremedyofcontractimpliedinlawhasfourelements:

(1) the plaintiff has conferred a benefit on the defendant; (2) the defendant hasknowledge of the benefit; (3) the defendant has accepted or retained the benefitconferred and (4) the circumstances are such that it would be inequitable for thedefendanttoretainthebenefitwithoutpayingfairvalueforit.

Id.;see alsosourcescitedsupranote135.

137 Vessels,175I.B.L.A.at25–26.

138 Id.

139 Id.; see alsosupranotes135–36(discussingprinciplesofequityunderlyingcontractsimpliedinlaw).

140 See Vessels,175I.B.L.A.at25–26.

141 Id.at26.

142 AmocoProd.Co.v.S.UteIndianTribe,526U.S.865,871(1999);see also supra notes55–56andaccompanyingtext(recitingtheholdingfromAmoco).


2010 case note 531

inamannerappropriateonlyforanoilandgaslessee.”144ButtheVesselsdecisioneffectivelyawardedUAE,thefederalcoallessee,therighttoprivatelynegotiateandprofitfromthecaptureofthemethanefromitsminevents.145

UAE’sgasventingoperationsatAberdeendidnotinfringeonthemethaneat issue in a manner only appropriate for an oil and gas lessee until it beganextractingthegasforsaletoOso.146Inordertoexerciseitsownrights,thefederalcoallesseenecessarilyhassomerighttoinfringeonthegasincidenttothecoal.147Otherwise,underAmocoafederalcoallesseehasnorighttogasassociatedwithitscoal.148EventheEPAacknowledgesthecaselawholdingthatafederalleaseis required for any form of federal methane production.149The IBLA raised a

144 Id.EveniftheMLAisnotextendedtocoverCMM,afederalcoallesseeprofitingfromthesaleofgasincidenttoitscoalisstillactinginamanneronlyappropriateforanoilandgaslessee.43C.F.R.§9239.0-7(2009)(“Theextraction,severance,injury,orremovalof...mineralmaterialsfrompubliclandsunderthejurisdictionoftheDepartmentofInterior,exceptasauthorizedbylawandtheregulationsoftheDepartment,isanactoftrespass.”);see alsoW.Nuclear,Inc.v.Andrus,475F.Supp.654,663(D.Wyo.1979),rev’d on other grounds,664F.2d234(10thCir.1981),rev’d,462U.S.36(1983)(upholdinganIBLAdecisionfindingatrespassonthemineralestatewhenthesurfaceownerremovedsandandgravelwithoutauthorization).

145 Vessels,175 I.B.L.A. at25–26 (declining toordera secondcompetitive lease saleundertheMLA,therebyallowingUAEtoprofitfromtheprivatecontractithadwithOsotocapturetheventedmethane).

146 See id. at 26 (“UAE arguably risks being held accountable for acting with respect to adepositinamannerappropriateonlyforanoilandgaslessee,contrary to the limited rights it is given under its coal lease.”)(emphasisadded).

147 See supranote35andaccompanyingtext(discussingthecommonlawrightofanownerofonemineralestatetouse,andevendamage,neighboringestatestotheextent it isreasonablynecessaryfortheextractionofhisownminerals).Thecommonlawruleineveryjurisdictionthathasconsideredtheissueisthatthemineralestateisthedominantestateandcanenterandusesomuchoftheservientorneighboringestateasisreasonablynecessarytoextractminerals. See, e.g.,HuntOilCo.v.Kerbaugh,283N.W.2d131,135(N.D.1979)(“[T]hewell-settledrule[is]thatwherethemineralestateisseveredfromthesurfaceestate,themineralestateisdominant.”);GettyOilCo. v. Jones,470S.W.2d618,621 (Tex.1971);HumbleOil&Ref.Co. v.Williams,420S.W.2d133,134(Tex.1967);FlyingDiamondCorp.v.Rust,551P.2d509,511(Utah1976);MingoOilProducersv.KampCattleCo.,776P.2d736,742(Wyo.1989)(“Itiselementarythatthemineral lessee . . .possessesthedominantestate.”);BelleFourchePipelineCo.v.State,766P.2d537, 544 (Wyo. 1988) (“[T]hemineral estate [is] thedominant estatewith respect to theownershipofthesurfaceandtheincidentsofownershipofamineralestateincludecertaininherentsurfacerights.”).

148 See AmocoProd.Co.v.S.UteIndianTribe,526U.S.865,879–80(1999)(holdingthatareservationofcoaldoesnotencompassmethane).

149 enVtl. Prot. agency, IdentIfyIng oPPortunItIes for MetHane recoVery at u.s. coal MInes: ProfIles of selected gassy underground coal MInes 2002–2006, 2-19 (rev.Jan.2009),available at http://www.epa.gov/cmop/docs/profiles_2008_final.pdf. EPA guidelines explicitlyrequireafederalleaseforventedmethane:

A developer on federal lands must hold a gas lease in order to put a CBM or CMM resource to beneficial use.IfacompanyholdingacoalleasewantstoutilizeitsCMMemissions,forexample,itmustfollowthefederalleasingproceduresinplaceforconventionalnaturalgasasprescribedbytheBLM.Generally,utilizationand/or


legitimateconcernwith this rationale,butofferedno legal justification for theconclusionatwhichitarrived.150TheIBLA’sconcerndoes,however,highlighttheneedforlegislativeclarificationregardingCMMleasing.151

A Pragmatic Solution for a Complicated Problem

The final rationale the IBLA offered for declining to extend the MLA tocover gas incident to coal mining was that two companies created anew coalminedegasificationprocesscomplyingwithbothMSHArequirementsandEPAguidelines,andnothingintheMLAcompelstheIBLAtoallowthirdpartiestointervene.152Nonetheless,theMLAdoescompelcompetitiveleasingforfederalgasintheeventfederalgasisleased.153FailuretorecognizethisMLArequirementresultedinthesameinconsistentoutcomeinVesselsthattheIBLAcriticizedtheStateDirectorforinhisoriginalopiniondenyingVessels’sprotest.154Namely,theIBLAdeniedtheMLAcoversmethanegascapturedincidenttocoalmining,yetupheldtheMLAleasestocapturemethanegasincidenttocoalmining.155

Additionally,astheguardianofpubliclands,theSecretaryoftheInteriorhasbroaddiscretionindeterminingwhethertoleasefederaloilandgasdeposits.156

salesofCMMrequiresavalidgaslease,regardlessofenduse.Iftheleasedgasisusedbythemineorminecompany,usedforpowerproduction,orsoldtoanotherparty,gasroyaltiesmustbepaidtotheBLM.Ifnoleaseisheldforthegas,itmayonlybeventedtotheatmosphereforsafetypurposesassetoutbytheMineSafetyandHealthAdministration(MSHA).

Id. (emphasis added); accord enVtl. Prot. agency, coalBed MetHane extra 2007 (2007),available at http://www.epa.gov/cmop/docs/fall_2007.pdf.

150 See Vessels,175I.B.L.A.at26;cf.Amoco,526U.S.at871(holdingfederalcoalestatehasno right to infringeon theCBMincident to its coal except asmaybe reasonablynecessary forextractionofthecoal).

151 Windsor,supranote45,at918–19(callingforlegislativeclarificationofCBMownership).

152 Vessels,175I.B.L.A.at26;see also 30U.S.C.§§181–263(2006); 2coggIns & glIcksMan,supranote38,§23.01 (discussing theMLAgenerally);GaryL.Trotter&Q.ZaneRhodes II,Catalytic Oxygen Removal for the Aberdeen Coal Mine Methane Project in Carbon County, Utah,LauranceReidGasConditioningConference (2008),available athttp://newpointgas.com/blog/wp-content/uploads/2009/11/zanes-2008-gpa-paper-website.pdf (giving a technical descriptionof themethanecapturingprocess, indicating it is aprofitable step toward lowergreenhousegasemissionsforundergroundcoalmines).

153 See generally30U.S.C.§§181–263; see also supra notes37–41andaccompanying text(discussingtheMLAgenerally).

154 Vessels,175I.B.L.A.at21–22;see also supranote86andaccompanyingtext(discussingtheIBLA’scriticismoftheDirector’sreasoningupholdingtheMLAleasewhilemaintainingtheMLAdidnotapply).

155 See supranote86andaccompanying text (discussing the IBLA’s criticismof theDirec-tor’sopinion).

156 30U.S.C.§§189,201,226;UnitedStatesex rel.McLennanv.Wilbur,283U.S.414,416–19(1931)(citingUnitedStatesv.Grimaud,220U.S.506(1911);Williamsv.UnitedStates,138U.S.514(1891);Knightv.Ass’n,142U.S.161(1891))(“[U]nderthe[MLA],thegranting

2010 case note 533

Inthiscase,theBLMcouldhaveinvokeditssecretarialdiscretiontoissuealeaseunderFLPMA,or it couldhavedeclined to issue any lease for the captureoftheventedgasatissue.157InpastdisputesregardingCBMownership,theBLMinvoked its discretionbyhalting all leasing activities and awaiting appropriatejudicial or legislative clarification.158 Furthermore, the BLM has previouslyimplemented policies and guidelines for conflict resolution between coal andCBM owners and developers.159 The BLM offered no explanation why thisalternativedisputeresolutionwasnotemployedintheinstantcase,nordidtheIBLAincontraveningexistingprecedent.160

Environmental and Political Considerations

TheVesselsdecisionisimportanttounderstandbecauseithighlightssignificantenvironmental and political policy considerations. It is uncontroversial thatmethaneisagreenhousegasthatshouldnotsimplybeventedintotheatmosphereif doing so can be avoided.161 According to the EPA, methane is a potentgreenhousegasthatis“extremelyeffectiveattrappingheatintheatmosphere”andatleast“20timesmorepowerful(byweight)atwarmingthancarbondioxide.”162Other sources indicate“methanehas25–30 timesmore ‘radiativeeffect’ (thancarbon dioxide), and scientists believe that increased methane concentrationsareresponsible forroughly15–20%of theglobalwarming.”163Coalmining is

ofaprospectingpermitforoilandgasisdiscretionarywiththeSecretaryoftheInterior,andanyapplicationmaybegrantedordenied...asthefactsmaybedeemedtowarrant.”);see also 38aM. Jur. 2dGas and Oil§260(1999)(discussingtheSecretary’sauthority).

157 See supra notes 39, 156 and accompanying text (discussing the broad discretion theSecretaryoftheInteriorhasindeterminingwhethertoissueMLAleases);supranotes42–44andaccompanyingtext(discussingthebroaddiscretiontheSecretaryoftheInteriorhastoauthorizelandusesundertheFLPMA);see also Vessels,175I.B.L.A.at10(“Wehavedeterminedthatoilandgasdevelopmentisincompatiblewithundergroundlongwallmines,sooilandgasleaseswillnotbeofferedovercoallandscontainedwithintheminepermitareasfortheexistingcoalminesorwithintractsexpected tobedeveloped in thenext tenyears.”); supranote74 (discussing IBLA’spolicyagainstleasingovercoalmines).

158 Windsor,supranote45,at915–16(citingJeanineFeriancek,Coal and Coalbed Methane Development Conflicts: No Easy Solution,14nat. resources & enV’t260(2000)).

159 Id.; see also Instruction Memorandum No. 2003-253 from the BLM Directoron Policy and Guidance on Conflicts between Coalbed Natural Gas (CBNG) andSurface Coal Mine Development in the Powder River Basin to State Directors, Wyomingand Montana (Aug. 21, 2003), available at http://www.blm.gov/wy/st/en/programs/energy/CAZ/im2003-253.html.See generallyU.S.Dep’tofInterior,BureauofLandManagement,Conflict Administration Zone, http://www.blm.gov/wy/st/en/programs/energy/CAZ.html (lastvisitedMay26,2010).

160 See Vessels,175I.B.L.A.at25–28(failingtodiscussthepossibilityofconflictadministrationzoningforCMMandcoalleasing).

161 See generallyDavis,supranote30;Flaherty, supranote30;EPACMOP,supranote21; ePa gloBal MItIgatIon,supra note29.

162 ePa cMoP BrocHure, supranote31.

163 Flaherty,supranote30,at87(quotingLewinetal.,supranote16,at585).


164 ePa cMoP BrocHure, supranote31.

165 E.g.,wyo. stat. ann.§30-5-102(2009);Flaherty,supranote30,at71,87;see also supranote34(citingotherstatutesexpresslydiscouragingwasteofnaturalresources).

166 See Jeanine Feriancek, supra note 158, at 262–63 (discussing proposed legislation thatwouldestablishjudicialprocedurefordisposingofconflictsbetweenCBMandcoalownersanddevelopers);see alsoWindsor,supranote45,at918–19.

167 VesselsCoalGas,Inc.,175I.B.L.A.8,28n.13(2008);seeMacKinnon&Fox,supranote47,at370(“TheproductionofmethanegasfromcoalbedshasgrowndramaticallyinWyomingsincethelate1990s,with2003gasproductionvaluedatabout$1.5billion,translatingintosome$257millionintaxandroyaltyincometothestateandcounties.”).

168 See generally30U.S.C.§191(2006);30U.S.C.§§1701–1759(2006).

169 30U.S.C.§191(a);see alsoNewMexicov.Regan,745F.2d1318,1319(10thCir.1984)(“TheMineralLeasingAct(MineralAct)directstheSecretaryoftheTreasurytopayfiftypercent(50%)ofallmineralroyaltiesreceivedfromfederallandstothestatesinwhichtheleasedfederallandsarelocated.”).

170 See supranotes168–69andaccompanying text; see also Vessels,175I.B.L.A.at28n.13(“Our holding . . . that the leases were not properly issued under the MLA necessarily meansthattheapportionmentoffundstotheStateofUtah,under30U.S.C.§191(a)(2000)doesnotapplyhere.”).

171 SeeNewMexicov.UnitedStates,831F.2d265,269(Fed.Cir.1987)(litigatingwhetherapportionment to the states shouldhappenbeforeor after the federalwindfall tax is collected);Regan,745F.2dat1319(involvingadisputeovercalculationofseverancetaxes);Alaskav.Andrus,436F.Supp.288,291–92(D.Alaska1977)(disputingwhetherrevenuescollectedfrommineralleasingofwildliferefugelandsshouldbesubjecttoapportionmenttothestateunder30U.S.C.§191);AmocoProd.Co.v.Wyoming,751P.2d379,382–83(Wyo.1988)(determiningtheterms“gas” and “natural gas” include all types of gas, not just those with hydrocarbons, for purposesallowingthestatetocollectmoremoneyfromAmocounderanexcisetaxstatute); see alsoVessels,175I.B.L.A.at28n.13;C.C.Co.,116I.B.L.A.384,387(1990)(indicatingBLMhasauthoritytocollectroyaltyonventednaturalgas).

responsibleforapproximatelytenpercentofallmanmademethaneemissionsintheUnitedStates.164Inadditiontotheharmfuleffectsventingmethanehasontheenvironment,thegasisalsoavaluableeconomicresourcethatshouldnotbewasted.165Giventheseenvironmentalconsequencesandpolicygoals,thereneedstobeadeterminationregardingwhoownsfederalmethaneinallitsvariousformsand how it is to be leased, so methane producers and coal miners can legallyachievethesegoals.166

Vessels alsoraisesapracticalissueregardingentitlementtobonuses,rentals,androyalties.167MineralleasesissuedundertheMLAaresubjecttopaymentsofbonuses,rentals,androyaltiestotheUnitedStates.168TheUnitedStatessharesthe profits of these payments equally with the state from which minerals areextracted.169IfgasventedfromcoalminesandproducedformarketisnotsubjecttotheMLA,thenthebonuses,rentals,androyaltiescollectedbytheUnitedStatesonthatgasarenotsubjecttothefiftypercentapportionmenttothestatesrequiredbytheMLA.170Manystatesare likely toopposeCMMleasingthatallowstheUnitedStatestoprofitfromroyaltiesonmineralsextractedinsideastate’sborderswithoutapportioninganyof the royalty to the state.171Thepractical resultof

2010 case note 535

172 Vessels,175I.B.L.A.at28n.13.

173 Id. at 27. The IBLA raises this issue indirectly by its decision that the MLA is theinappropriateauthorityfortheseleases,andquestionswhetherornottheBLMhas“authorityatalltoissueleases,permits,orcontractsforthecaptureoftheventgas,similartotheonesissuedtoOso.”Id.

174 See supranotes105–08andaccompanyingtext.

175 See supranotes37–41,112–25,141–51andaccompanyingtext.

176 See supranotes37–41,115–18,136–40,156–60andaccompanyingtext.




180 See supranotes151,166andaccompanyingtext.

VesselsmeanstheUnitedStatesprofitsfromtheroyaltycollectedfromOso,whilethestateofUtahgainsnothing.172

conclusIon

The IBLA’sdecision inVessels Coal Gas, Inc. raisesquestions regarding theappropriate authority for issuing leases to capture vented CMM.173The IBLAeffectivelybalancedcompetingpolicygoalsinVessels.174 However,thepragmaticresulttheIBLAreachedisincommensurablewithexistinglaw.175TheconcernsraisedbytheIBLAinVesselscanbeaddressedbyexistinglegitimatealternativeswithout contravening precedent.176 Admittedly, the existing alternatives maynot be the most precise tools for CMM leasing, but this fact only highlightstheneedforlegislativeclarification.177Furthermore,anyfutureapplicationoftheruleVesselsultimately establisheswillproduceuntenable results.178Given theseconsiderations,itisapparentthereisanexceptionalopportunitytosimultaneouslypreventwasteofnaturalresourcesandharmtotheenvironment,whilereapingtheeconomicbenefitsofmineralproduction.179Forthesereasons,amoredefinitelegalframeworkformethaneleasinginallitsvariousformsshouldbeestablishedtoensurestabilityoftheproductionofmethaneasavaluablenaturalresource.180


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CASE NOTE ENERGY LAW—Finding the Appropriate Authority for ... law review/v10 n2/haderlie.pdf · CASE NOTE ENERGY LAW—Finding the Appropriate Authority for Federal Coal Mine Methane