PRESENT: Hassell, C.J., Lacy, Keenan, Koontz, Lemons, and Agee,
JJ., and Stephenson, S.J.
HARRISON-WYATT, LLC
OPINION BY
v. Record No. 030634 SENIOR JUSTICE ROSCOE B. STEPHENSON, JR.
March 5, 2004
DONALD RATLIFF, ET AL.
FROM THE CIRCUIT COURT OF BUCHANAN COUNTY
Keary R. Williams, Judge
This appeal presents a significant question of first
impression in Virginia, to-wit: Where a surface owner of a
tract of land, or his predecessor-in-title, has conveyed all the
coal in and under his land, has title to the coal bed methane
(CBM) passed to the coal owner along with the coal?
I
Harrison-Wyatt, LLC (the Coal Owner), is the successor
grantee under three coal severance deeds from the 19th century.
Donald Ratliff and others (the Plaintiffs) own the surface land
and all minerals upon and within it, except the coal. The
Plaintiffs filed a declaratory judgment action, pursuant to Code
§ 8.01-184, seeking, inter alia, a determination that they own
the CBM produced from the coal seams. The Coal Owner denied
that the Plaintiffs own the CBM and alleged, to the contrary,
that it, as the owner of the coal estate, owns the CBM.
Following a bench trial, the trial court ruled in favor of
the Plaintiffs, holding that the grant of the coal did not
include the CBM. The Coal Owner appeals.
II
A
The land involved in this case is located in Buchanan
County, Virginia, and is designated as Mineral Tracts 18, 19,
and 56. The severance deeds for Tracts 18 and 19 were recorded
on August 2, 1887, and convey "all the coal in, upon, and
underlying" the tracts. The severance deed for Tract 56,
executed on October 13, 1887, contains similar language.
B
Scientific evidence revealed how coal and CBM are formed.
Coal is formed over millions of years from decaying plant
material that settles on the bottom of swamps. By a
microbiological process, this plant material is first converted
into peat. Over time, the peat sinks deeper into the earth and,
ultimately, as a result of a chemical reaction that increases
its carbon content, is transformed into coal. This process of
transforming peat into coal is known as "coalification."
CBM, sometimes referred to as "marsh gas," is produced
during coalification. Coal is porous, and the CBM is held to
the porous surface of the coal by weak forces known as van der
Waals forces. When the pressure on the coal is reduced, the
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forces that hold the CBM to the coal are reduced, and the CBM is
released from the surface of the coal. Such a release may occur
through natural geological shifts or when coal is fractured
during the mining process.
There are three methods for fracturing coal in order to
capture CBM as an economic resource. One method is by drilling
wells from the surface into the coal seam. A second method is
by the use of horizontal degasification wells from inside the
coal mine. The third way is by employing what are called "gob"
wells relating to long-wall mining.
C
CBM, like any form of methane, is an extremely explosive
gas. At the time the severance deeds were executed in the
present case and for about a century thereafter, CBM was known
as the "miner's curse." Indeed, during these years, a great
many mine explosions occurred, killing or maiming thousands of
miners.
Also during this time, coal owners were required to
ventilate the CBM from mines as a safety measure. This
ventilation was accomplished by using very large fans and wells
to discharge the CBM into the atmosphere.
During the 1970's, however, it became apparent that CBM
could be a valuable energy source. Consequently, in 1990, the
General Assembly enacted The Virginia Gas and Oil Act, Code
3
§ 45.1-361.1 et seq. (the 1990 Gas Act), whereby CBM could be
captured for commercial use rather than merely discharged into
the atmosphere.1 The General Assembly, however, left for future
judicial determination the question of CBM's ownership, except
when there was "an agreement among all claimants," and mandated
that the royalties from the production of CBM be held in escrow.2
D
The Coal Owner sought to establish the meaning of the
severance deeds with the following 19th-century descriptions of
coal. The American Cyclopaedia described coal, in part, as
a term now commonly used to denote all kinds of
mineral fuel . . . . [A]t the present time, when wood
and charcoal are fast giving place to the mineral
varieties of fuel, the term coal is applied to that
class of this fuel in general use. . . . Under the
term coal we may therefore embrace all classes of
mineral fuel that will ignite and burn with flame or
incandescent heat. . . . The combinations of carbon,
hydrogen, oxygen, and nitrogen with earthy impurities,
to which the term mineral fuel may be properly
applied, are infinite, ranging through all the grades
of coal, from the hard, dense anthracite to the
asphaltic varieties, and from the solidified petroleum
to the gaseous naphtha.
1
The 1990 Gas Act defines CBM as "occluded natural gas
produced from coalbeds and rock strata associated therewith."
Code § 45.1-361.1.
2
In this declaratory judgment action, Plaintiffs sought
distribution to them of all escrowed amounts held by the
Virginia Gas and Oil Board pursuant to Code § 45.1-361.22.
4
IV THE AMERICAN CYCLOPAEDIA: A POPULAR DICTIONARY OF GENERAL
KNOWLEDGE 726 (Ripley and Dana eds., 1873). In addition, the
same reference stated the following:
All kinds of coal vary considerably both in mechanical
structure and chemical composition . . . . The
gradations of carbon, hydrogen, and oxygen compounds,
from the almost pure fixed carbon in anthracite,
through the more volatile bituminous varieties of
coal, to the free carbon and hydrogen of naphtha, are
infinite; and no formula can truly express the
relative proportions which limit these compounds to
the various classes of coals, or as mineral fuel.
Id. at 728. The Encyclopaedia Britannica described coal, in
part, as follows:
Coal is an amorphous substance of variable
composition, and therefore cannot be as strictly
defined as a crystallized or definite mineral can.
. . .
Coal is perfectly amorphous . . . .
. . . Gases, consisting principally of light
carburetted hydrogen or marsh gas, are often present
in considerable quantity in coal, in a dissolved or
occluded state, and the evolution of these upon
exposure to the air, especially when a sudden
diminution of atmospheric pressure takes place,
constitutes one of the most formidable dangers that
the coal miner has to encounter.
VI ENCYCLOPAEDIA BRITANNICA 45 (9th ed. 1877).
III
After examining the plain language of the severance deeds,
the trial court concluded that the term "coal" was not
ambiguous. The court noted that, "[w]hile encyclopedia
definitions of the time cited by the coal owners make it clear
5
that it was common knowledge that CBM was contained within the
coal, . . . CBM was not considered a chemical constituent of the
coal itself." The court found significant the lack of chemical
bond between coal and CBM and ruled that CBM "is simply a by-
product" of coal and a severable estate. The court stated,
therefore, that "[t]he grant of coal rights does not include
rights to CBM absent an express grant of coalbed methane,
natural gases, or minerals in general." Consequently, the court
held that "the surface owners retain the CBM."
IV
Although the issue before us is one of first impression in
Virginia, other state courts and the Supreme Court of the United
States have ruled on it. A review of these cases reveals a
split of authority.
A
In 1983, the Supreme Court of Pennsylvania decided United
States Steel Corp. v. Hoge, 468 A.2d 1380 (Pa. 1983). In that
case, the fee owners, in a 1920 deed, had conveyed to United
States Steel Corporation "[a]ll the coal" and specifically
reserved the right "to drill and operate through said coal for
oil and gas without being held liable for any damages." Id. at
1382. Relying upon the characteristics and origins of gas and
its history of development, the court held that "such gas as is
present in coal must necessarily belong to the owner of the
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coal, so long as it remains within his property and subject to
his exclusive dominion and control." Id. at 1383. The court
further held that the surface owner "has title to the property
surrounding the coal, and owns such of the coalbed gas as
migrates into the surrounding property." Id.
The Supreme Court of Alabama considered the issue in NCNB
Texas Nat. Bank, N.A. v. West, 631 So.2d 212 (Ala. 1993). In
that case, the original owner, in virtually identical 1953 and
1954 deeds, had conveyed "all the coal," but had reserved "all
of the oil, gas, petroleum and sulphur" and the exclusive right
to drill for and produce them. Id. at 219-20. All of the
parties agreed that coal and CBM were separate, severable
interests in real property. Id. at 221. The court found,
however, that the reservation of "all . . . gas" could not
impair the coal owner's incidental right to ventilate CBM for
mine safety. Recognizing the migratory nature of CBM, the court
held that the coal owner had the right to recover the CBM found
within the coal seam and that the owner of the gas estate had
the right to the possession of the CBM that escapes into the
surrounding strata. Id. at 228-29.
The Supreme Court of Montana also considered the issue in
Carbon County v. Union Reserve Coal Co., 898 P.2d 680 (Mont.
1995). In that case, the deed in question had conveyed "all
coal and coal rights," but had made no mention with respect to
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CBM, natural gas, or minerals. Id. at 682. The court concluded
that "coal seam methane gas is not a constituent part of coal
and, thus, it may be severed from the coal estate." Id. at 687.
The court then held that the deed had not conveyed the CBM to
the coal owner. Id. at 688. After noting that Montana is an
"ownership-in-place state," the court ruled that the owners of
the gas estate had the right to drill for and produce CBM within
the coal seam. Id. at 688-89. The court further held, however,
that the coal owner had a "mutual, simultaneous right to extract
and to capture such gas for safety purposes, incident to its
actual coal mining operations." Id. at 689. The court then
left "to the agreement of the parties or to some future case the
issue of whether, and if so, to what extent, the gas estate
owner . . . is entitled to be compensated by the coal owner for
gas extracted and captured incident to the coal owner's mining
operations." Id.
In Newman v. RAG Wyoming Land Co., 53 P.3d 540, 542 (Wyo.
2002), the Supreme Court of Wyoming considered a deed that had
conveyed "all coal and minerals commingled with coal," but had
reserved to the landowners "all oil, gas and other minerals."
From the unambiguous language of the deed and the facts and
circumstances surrounding its execution, the court held that the
CBM was not conveyed to the coal owner but, instead, was
reserved to the landowners. Id. at 549-50. The court explained
8
that "[c]oalbed methane, being a gas, remained the landowners'
property." Id. at 550.
Finally, we consider Energy Dev. Corp. v. Moss, ___ S.E.2d
___ (WV 2003), a case decided by the Supreme Court of Appeals of
West Virginia involving two virtually identical standard oil and
gas leases of "all of the oil and gas and all of the
constituents of either in and under the land." Id. at ___. The
leases made no mention of coal bed methane. The issue before
the court was whether the leases conveyed the right to develop
CBM, absent any specific language to that effect. Id. at ___.
The court held that the lessor did not intend to convey to the
lessee the right to drill into the lessor's coal seam for CBM.
Id. at ___.
B
In Amoco Prod. Co. v. Southern Ute Indian Tribe, 526 U.S.
865 (1999), the Supreme Court of the United States considered
land patents that had been issued to western settlers, pursuant
to the Coal Land Acts of 1909 and 1910, 30 U.S.C. §§ 81, 83-85
(the Federal Acts), conveying the land and everything in it,
except "all coal," which had been reserved to the Federal
Government. These patented lands included reservation lands
previously ceded by the Southern Ute Indian Tribe (the Tribe) to
the United States. In 1938, the United States restored to the
Tribe, in trust, title to the ceded reservation lands still
9
owned by the Federal Government, including the reserved coal
lands. These lands contain large quantities of CBM within the
coal formations. The Tribe brought an action, claiming the
right to the CBM. Id. at 870-71.
The Supreme Court rejected the Tribe's claim, holding that
the term "coal," as used in the Federal Acts, does not encompass
CBM. Id. at 880. The Court explained, inter alia, that it was
“persuaded that the common conception of coal at the time
Congress passed the 1909 and 1910 Acts was the solid rock
substance that was the country's primary energy resource.”
Id. at 874. The Court further stated that coal would not have
encompassed CBM "both because it is a gas rather than a solid
mineral and because it was understood as a distinct substance
that escaped from coal as the coal was mined, rather than as a
part of the coal itself." Id. at 874-75.
V
In the present case, the trial court relied, in part, upon
the Amoco opinion and the various definitions of "coal" set
forth therein. The Coal Owner contends that, in doing so, the
trial court erred because it considered evidence outside the
record on the meaning of the term "coal." The Coal Owner
further contends that the trial court should have limited its
consideration to the evidence it offered, as set forth in Part
II, D, of this opinion. We do not agree. Courts routinely
10
resort to various reference materials for the definitions of
terms contained in documents. In doing so, they are not limited
to definitions, if any, that may be offered into evidence by a
litigant. Although Amoco is not controlling in the present
case, the trial court did not err in relying upon the
definitions cited therein.
VI
Even though Amoco is not controlling in the present case,
we find it to be very persuasive, as did the trial court. We do
not believe the term "coal," as it was used in the late 19th
century, is ambiguous. As commonly understood at the time, the
term "coal" meant a solid rock substance used as fuel, and
nothing in the record indicates that CBM is a part of coal
itself. On the other hand, although CBM has a weak physical
attraction to coal and escapes from coal when coal is mined, it
is a gas that exists freely in the coal seam and is a distinct
mineral estate. Accord Newman and Carbon County, supra.
Moreover, the parties could not have contemplated at the time
the severance deeds were executed that CBM would become a very
valuable energy source. We hold, therefore, that title to the
CBM did not pass to the Coal Owner, and the trial court did not
err in holding that the CBM is owned by the Plaintiffs and that
the Plaintiffs are entitled to distribution of the royalties
held in escrow.
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VII
We have considered all of the Coal Owner's assignments of
error and find no error. Accordingly, the judgment of the trial
court will be affirmed.3
Affirmed.
3
The trial court also made the following finding: "The
surface owners' rights to the CBM only extend to that which has
separated from the coal. The surface owner does not have the
right to frac[ture] the coal in order to retrieve the CBM."
This finding was not in response to an issue brought by either
party at trial or on appeal, and, therefore, we express no
opinion regarding this finding.
12