Amoco Production Company v. Southern Ute Indian Tribe: a Final Resolution to the Battle Over Ownership of Coalbed Methane Gas?

• Citation: Vol. 17 No. 3
• Publication year: 2010

Amoco Production Company V. Southern Ute Indian Tribe: A Final Resolution to the Battle over Ownership of Coalbed Methane Gas?

Laura D. Windsor

Introduction

The United States' demand for natural gas, an energy source that is critical for power generation and heating, is expected to increase sixty-two percent by the year 2020.[1] Energy analysts question whether current supplies of traditional natural gas will be able to meet this demand.[2] Given this high demand and the potential for limited supply, alternative gas sources, such as methane gas, are becoming increasingly more valuable, spurring ownership disputes over those previously untapped gas reserves.[3]

On June 7, 1999, the United States Supreme Court in Amoco Production Co. v. Southern Ute Indian Tribe,[4] reversed the en banc opinion of the Tenth Circuit[5] and held that a Colorado Indian Tribe does not own the rights to valuable underground coalbed methane gas (CBM), despite the fact that it owns the surrounding coalbed.[6] At issue in the Amoco case was ownership of CBM in over 200,000 acres of Native American-owned coal land in southern Colorado and resolution of the Tribe's demand for back CBM production royalties of approximately $1 billion.[7] The Supreme Court granted certiorari to review the Tenth Circuit's decision and to determine if a grant of "all coal" in the Coal Lands Acts of 1909 and 1910 necessarily included a grant

of the CBM found both in and around the coal.[8]

The outcome of this case had serious implications for the many parties involved in the litigation (including nearly three thousand landowners with whom Amoco held natural gas leases).[9] Also immediately affected was an estimated twenty million additional acres of privately held coal land in the West, patented to landowners under the Coal Lands Acts.[10] Finally, though beyond the scope of Amoco, the decision inevitably affected other private coal and land owners who received their coal land from other grant or lease instruments.[11] As the value and importance of alternative energy sources increase, so will coal owners' desire to fight for CBM development rights.[12]

Part I of this Comment examines the history of the coal land conveyances to the Southern Ute Indian Tribe and the 1909 and 1910 Coal Lands Acts. Part II explains what CBM is, its relationship to coal, and why it is such an important resource for America's future energy needs. Part III examines the Department of the Interior agency opinions and state and federal court cases that eventually led to the Supreme Court decision in Amoco. Part IV considers why the Supreme Court in Amoco might have decided as it did. Finally, although this narrowly-written decision applied only to federal coal lands reserved under the 1909 and 1910 Coal Lands Acts, Part V examines the potential effect that the decision will have on other federal and private coal lands in the United States, as well as administrative and legislative attempts to prevent future coal and CBM development conflicts.

I. The Coal Lands Acts of 1909 and 1910

A. Historical Background of the Acts

In an effort to promote development across the country and to encourage homesteaders to settle the American West, Congress passed the 1862 Homestead Act, the Coal Lands Acts of 1864 and 1873, and the 1877 Desert Land Act.[13] Collectively, these statutes enabled homesteaders to purchase up to 160 acres of coal lands in fee simple absolute for approximately $10 per acre with no mineral reservation to the United States government.[14] The government also encouraged natural resource and energy development through a sale of coal lands for only $2.50 per acre to oil and gas explorers.[15] Because of these laws, homesteaders and explorers came from all over the country to settle the western United States and to profit from the land.[16]

Near the turn of the twentieth century, famine and fraud in the American West prompted President Theodore Roosevelt to order the Department of the Interior to withdraw from public sale sixty-four million acres of public land that contained "workable" coal.[17] Facing the daunting demands of the Industrial Revolution, President Roosevelt took this action to protect and preserve the country's coal resources for the benefit of the public.[18] Homesteaders could only maintain ownership of the land that they had settled if they could show the Land Office that the land contained no coal.[19] This decision outraged the homesteaders, and they demanded that the President reconsider his order.[20] Over the next few years, Congress and the President worked toward a compromise that would both preserve the ownership rights of the settlers and promote mineral and energy development of the land.[21] That compromise was the Coal Lands Acts of 1909 and 1910.[22]

B. The Acts

The Coal Lands Act of 1909 created limited land patents for homesteaders who had settled lands that were later found to contain coal.[23] The issuance of the land patent was contingent upon the United States keeping a reservation to "all coal" in the land and the right to mine the land for that coal.[24] This statute only addressed lands that had already been settled through the earlier homestead laws, and made no provision for the other western surplus lands that were still unoccupied.[25]

To fill this gap in the statute, Congress enacted the Coal Lands Act of 1910.[26] This statute was very similar to the 1909 Act, but the 1910 law also included lands that had not yet been settled.[27] It offered limited land patents that were subject to the United States government's coal reservation.[28] In sum, well over twenty million acres of land were patented under

these two statutes.[29]

C. Ownership Rights of the Southern Ute Tribe

In 1864, the Southern Ute Indian Tribe, along with other Ute tribes, formed the Confederated Band of Utes.[30] They then negotiated with the United States government and exchanged their scattered, reserved lands in Utah, New Mexico, and Colorado for 15.7 million contiguous acres of land in southern Colorado.[31] By the middle of the 1870s, the Confederated Utes ceded 3.7 million acres of that southern Colorado land back to the United States government.[32] In reaction to, and as punishment for, the bloody 1879 Ute uprising in which many non-Indians were killed, Congress divided the Confederated Utes' commonly-held land into smaller land parcels that would be made available for sale to homesteaders.[33] The Ute Confederation dissolved, and by 1882, only the Southern Ute Tribe remained on 200,000 acres of the southern Colorado land.[34] Much of that 200,000 acres of land was later patented to homesteaders in the 1909 and 1910 Coal Lands Acts, with the Tribe only holding a small land reservation in southern Colorado.[35]

In an act of goodwill toward the Indian nation, in 1934 the United States gave any surplus of the previously ceded land back to the Ute Tribe under the Indian Reorganization Act.[36] Finally, in 1938 the United States conveyed, in trust, title to the previously ceded, unsettled lands still held by the government.[37] In addition to the land, the United States gave the Ute Tribe all of the coal that was reserved to the government under the 1909 and 1910 Coal Lands Acts.[38] As such, the Tribe had equitable title to the coal within the boundaries of its 200,000-acre reservation (including the coal under the reservation land that was settled by homesteaders under the Coal Lands Acts).[39]

II. Coalbed Methane Gas—What Is It? And Why Is It Important?

Coalbed methane is a gas that is formed naturally when plants and other organic material decay and form peat.[40] Years of intense geological pressure compress and change the peat into coal and methane gas through a process called "coalification."[41] Coalbed methane gas (CBM) is found either within the microscopic pores and fissures of the solid coal or is "adsorbed" to the surface of the coal through van der Waals forces.[42] Although most of the methane eventually migrates out of the solid coal during periods of man-made depressurization or natural shifting within the earth, nearly all of the CBM stays within the coal seam or the coal strata.[43]

When a mining company extracts the coal, it drills into the fragile coal seam, thus unavoidably depressurizing it such that CBM seeps (or even explodes) to the surface through the natural or man-made fissures in the coal bed.[44] Until technology was developed to contain the CBM gas expulsion, coal miners considered CBM a nuisance and a potential mining hazard.[45] That view changed when scientists realized that CBM was a potential energy source.[46]

By the 1970s, an energy crisis rendered the United States desperate to find new energy sources within its own borders, to reduce reliance upon foreign oil.[47] As such, Congress established the Federal Energy Regulatory Commission (FERC) under the Natural Gas Policy Act of 1978 to research and develop potential energy resources in the United States.[48] The energy industry soon realized that CBM was a valuable and untapped energy source.[49] Once a nuisance, CBM became an exploitable national asset seemingly overnight.[50]

Today CBM accounts for an estimated fifteen percent of potential United States natural gas reserves.[51] The United States Geological Survey estimates that there may be 700 trillion cubic feet of CBM in the United States.[52] Thus, CBM is extremely valuable because natural gas is now being developed as an alternative fuel source for home heating and other energy uses.[53] As an incentive to increase CBM production, the United States government instituted a generous package of grants and federal tax credits for companies engaged in CBM development and mining.[54]

By the late 1970s and early 1980s, with coal and natural gas companies clambering for CBM mining rights, the fundamental question arose—who owns CBM: the landowners, the coal owners, or the natural gas owners?[55] This question...