CHAPTER 12 COAL AND OIL/GAS CONFLICTS: MARCELLUS SHALE DEVELOPMENT IN COAL COUNTRY
| Jurisdiction | United States |
(Dec 2010)
COAL AND OIL/GAS CONFLICTS: MARCELLUS SHALE DEVELOPMENT IN COAL COUNTRY
Reed Smith LLP
Pittsburgh, Pennsylvania
NICOLLE R. SNYDER BAGNELL is a Partner at Reed Smith LLP in Pittsburgh. Nicolle has an A.B. from Harvard University, an M.A. from the Nicholas School of the Environment at Duke University, and a J.D. from Duke University School of Law. She has been selected as a "Pennsylvania Rising Star" by Pennsylvania Super Lawyers from 2005 to 2010. Nicolle was also recognized as one of Law 360's 10 Energy Attorneys Under 40 to Watch. Nicolle is a member of Reed Smith's Environmental team within the Global Regulatory Enforcement Group. Her experience includes counseling clients on a variety of environmental matters, such as performing due diligence for large real estate transactions, advising clients on compliance with environmental regulations, and representing energy clients in various matters, particularly pipeline condemnations, encroachment cases, and various contract disputes. She is actively involved in litigation and regulatory issues regarding the Marcellus Shale in Appalachia, counseling clients on permitting and permit disputes, representing industry groups and producers in Minimum Royalty Act litigation and many other lease disputes, and performing due diligence and providing advice for Marcellus Shale transactions. Nicolle has been named the Oil and Gas Chair for the Energy and Mineral Law Foundation's 32nd Annual Institute.
In many parts of the United States, coal reserves and natural gas reservoirs are located in the same tracts of land, but at different depths. Because the rights to these different mineral estates are often severed, different owners of these different estates may have differing plans for extracting the resources from a given tract. As a result, coal mining and oil and gas operations have historically come into conflict when both resources are sought to be recovered from the same place at the same time. This is especially true in the Appalachian Basin, the home of the Marcellus shale, where coal owners and gas operators have been bringing their disputes to the courts for more than one hundred years.
In this paper, I will discuss the history of the conflicts between coal and gas operations,1 the nature of those conflicts, the regulatory framework that governs these operations in the Marcellus shale states, and the various options available to avoid conflict, where possible.
I. THE NATURE OF THE CONFLICTS
Coal is mined in the Marcellus region, and across the United States, in a number of different ways. One such method of coal removal is surface mining. Surface mining is accomplished by removing soil and other materials that are covering the mineral to be mined. A
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common form of surface mining used in this region is strip mining. Strip mining is used to mine a coal seam that is located relatively close to the surface. Open pit mining is another surface mining method that involves removal of overburden to reach minerals below the surface. Open pit mining is less common for coal removal in this region. Lastly, mountaintop mining is a common method of surface mining in Appalachia, particularly in West Virginia. Mountaintop mining is accomplished by blasting away overburden using explosives to gain access to the coal below. Mountaintop mining can completely change the landscape of the area where it is being conducted, leveling mountains and filling in valleys with blasted rock and soil.
In addition to the surface mining that is conducted in the region, underground mining is also common. There are at least two methods of underground coal mining in the region: room and pillar and longwall mining. Room and pillar mining, also sometimes referred to as continuous mining, is done by removing coal in a pattern of "rooms" while leaving pillars of support in place. Once the coal has been completely mined, then the pillars may be removed as miners retreat towards the entrance. After the pillars are removed, the roof of the mine may collapse and cause subsidence on the surface. Longwall mining, on the other hand, does not leave pillars, extracting long panels of coal with automatic mining equipment. The large equipment shaves and cuts off coal and then moves it out of the mine on conveyor belts. Longwall mining results in subsidence as soon as the longwall mining machine has moved through an area.
A. Impacts on Gas Operations from Coal Mining.
Surface operations can impact the oil and gas industry in a number of different ways. For example, mining can disrupt wells and well pads, pipelines, compression and regulator stations, access routes and other related facilities. This disruption can result from the large equipment
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needed for undertaking surface mining coming too close or moving over facilities or from a strip mine being located directly where a gas facility, like a well or pipeline, is located. In addition, uses of the surface by a coal company for purposes other than mining, like preparation facilities, shafts and hauling routes, may likewise impact these uses.
Subsurface mining operations likewise can impact all aspects of oil and gas operations. For example, the subsidence that results from long wall mining can damage or destroy pipelines, compressor stations or other surface facilities. Underground mining can also directly impact wells and storage by destroying the wells and casing for wells that go through the coal seam to deeper gas formations.
B. Potential Harm to Gas Operations from Coal Mining.
The results of conflicts to gas operators from coal mining can be far reaching and can range from the downtime needed to negotiate compromises between gas and coal owners to explosions and potential loss of life when mining impacts wells and pipelines. In between are the potential costs to mitigate pipelines and other facilities to prevent them from being damaged by mining operations; physical damages to facilities from being damaged either directly by mining or as a result of subsidence; disruption of service to gas customers; change of location for wells or other facilities; lost profits from delays and downtime due to conflicts; and potential explosions and third party damage that may result from mining through active gas facilities. Finally, there is the lost potential to fully extract natural gas from underground formations that may result from conflicts with coal owners.
II. A BRIEF HISTORY OF THE CONFLICTS BETWEEN THE COAL AND GAS INDUSTRIES IN APPALACHIA.
The first conflict between coal and gas came at the very advent of the oil and gas industry. As soon as gas was produced for industrial establishments, it was used as a substitute
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for coal.2 Andrew Carnegie claimed that natural gas supplanted 10,000 tons of coal a day in his operations.3 At that time there was no regulation of either industry and no legal precedent on how conflicts between the two industries should be handled. In fact, by the 1940s, the coal industry was lobbying for the passage of regulations to regulate the gas industry, in part to help increase the price of gas and prevent the displacement of coal.4
The conflicts between coal and gas increased in early 1950s, with the federal certification of many gas storage fields in Pennsylvania, Ohio and West Virginia. The nature of the conflicts between the two industries changed again with the advent of longwall mining, which resulted in subsidence issues for natural gas facilities. Though the regulation of the two industries had increased significantly, it still did not explicitly resolve their conflicts, and specifically did not address the increased problems caused by longwall mining.
Today, changes in the gas industry have lead to additional conflicts, in particular the increase in well drilling to tap into the tremendous resources of the Marcellus. Further, environmental regulation and sentiment has placed increasing economic pressure on the coal industry in Appalachia. Coal companies are willing to mine previously avoided areas, including areas with natural gas transmission lines, wells and storage fields, in order to maximize their recovery of coal from a single mine. The result is an increase in the potential conflicts between the two industries.
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III. STATUTORY AND REGULATORY FRAMEWORK
Both gas operations and mining are heavily regulated on the federal and state levels. This regulation helps to shed some light on how to deal with conflicts between the two industries.
A. Regulation of Coal Mining.
1. Federal.
The federal Mine Safety and Health Act ("MSHA") provides that a coal operator "shall establish and maintain barriers around such oil and gas wells in accordance with State laws and regulations, except that such barriers shall not be less than three hundred feet in diameter, unless the Secretary or his authorized representative permits a lesser barrier consistent with the applicable State laws and regulations where such lesser barrier will be adequate to protect against hazards from such wells to the miners in such mine. . . ."5 These barriers are significant in protecting a Marcellus or other well from the effects of mining, but also can prevent a coal company from longwall mining if the well bore is within a longwall panel. As a result, coal companies prefer for all wells in a mine to be plugged and abandoned.
In addition to the MSHA, the federal government regulates the subsidence that results from mining by the Surface Mining Control and Reclamation Act ("federal SMCRA").6 Federal SMCRA was enacted to regulate surface mining and the surface impacts incident to underground mining. Under federal SMCRA, states may assume jurisdiction over the regulation of surface coal mining (including, surface effects of underground mining) upon approval of a state program
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