CHAPTER 17 SPECIAL PROBLEMS OF COAL TITLE EXAMINATION

• Jurisdiction: United States

Mineral Title Examination
(Nov 1977)
CHAPTER 17
SPECIAL PROBLEMS OF COAL TITLE EXAMINATION
John L. Cravens
Attorney, Exxon Company, U.S.A.
Houston, Texas

This paper is not intended to be a detailed guide to coal title examiners, nor even an effort to prescribe the final answer to some of the major problems encountered in that work. Rather, the intent is to call attention to legal and practical problems which will, or may, be encountered by that attorney having responsibility for title examinations on coal properties of a multistate operator, and proper use of the information which should be obtained therefrom. For convenience, such an attorney will be called "company attorney" to distinguish him from the title examiner.

Legal problems are dealt with only broadly. A lengthy paper, based on detailed research, might be written on any single one of those problems. As to work methods, practices, and such means of coping with problems as will be suggested—the value and usefulness of these are matters for each reader to appraise according to his own needs, interests and facilities available. The really important message is that title examinations are not only an important part of a coal acquisition program but are closely interrelated with planning for and developing the mine to produce that coal. Dealing with the problems which those examinations reveal requires a joint effort of the land department, company attorney, miners and management.

To put this whole matter into the proper perspective, it is necessary to look at some of the essential characteristics of coal and coal operations. The United States has tremendous coal deposits, the general location of which is known and largely mapped. They are widely distributed throughout the Appalachian states, the central and southern states and the Rocky Mountain area. The coal operator's acquisition efforts are directed at finding blocks of coal that can be economically mined. Coal includes many different grades and types from lignite up through bituminous and anthracite coal. The two broad divisions of mining operations are underground, or deep mining, and surface mining. The latter includes open pit and strip pit mining; contour mining, which is the mining of coal along its outcrop on a hill or a mountainside; and auger mining—use of large augers to go into the side of a hill or a mountain beyond the distance that the coal can be recovered by removal of overburden. The cost of a large underground mine can easily exceed One Hundred Million Dollars. A large surface mine in the western states will cost from $40-50 million dollars. All costs of mining have increased dramatically in the last seven or eight years both from inflation and from the enactment of the Mine Health & Safety Act on the federal level, and surface mining acts on both the federal and state levels. These increased costs are an economic pressure toward large-scale mining operations. Certainly the Mine Health & Safety Act of Congress put many small Appalachian mines out of business. To cope with the increasing mass of federal and state regulations, the operator must have a large staff of advisers or the services of outside consultants to keep informed of their requirements, and large capital resources to meet those requirements.

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The greatest use of steam coal is by utilities for boiler fuel. With the coming of the energy crisis, we may see other large demands for coal arising in industry as a whole. The large users of coal generally need assurance of a large and continuing supply. This is still more economic pressure, favoring the large-scale operator.

For surface mining of coal, tremendous draglines and other earth-moving equipment have been developed that has made coal accessible today which could not be economically mined 40 or 50 years ago. Such equipment is expensive. Equipment for underground mining is also expensive. Any shutdown of a mine or disruption and change of operations costs the operator. Avoidance of any shutdown or disruption of operations that might result from unexpected title problems certainly is a very important objective of title examinations.

For reasons which I will not attempt to explain here, the creation of a satisfactory joint operating agreement between two or more operators holding separate portions of an underground mining block is difficult to accomplish. The most logical thing is for the coal operator owning or controlling most of the acreage in any given mining block to exchange coal lands with other operators so that it holds all of the coal. A joint operating agreement for surface mining does not present as difficult problems, but operations by co-tenants are still less desirable in several respects than operations by one party. The company attorney will, most likely, have the responsibility for a large area of coal properties for each mine.

To a limited extent, and at some extra expense, underground coal operations can be conducted around a tract on which the title is bad or on which mining rights cannot be secured. However, the operator needs to know of any gap or open tract in his mining block well in advance, so that mining operations may be planned accordingly. For surface mining, a gap in the mining block can be even more serious. Surface mining can simply not be conducted to the very edge of a tract on which coal mining rights are not held by the operator. The deeper the surface mining, the larger the tract of unmined coal which must be left to provide lateral support for an open tract. Also, the owners of surface tracts have been given by federal and state law a very strong voice in the issuance and denial of mining permits, and the identity of these owners must be known prior to the operator's application for a mining permit.

It follows from the characteristics of coal and coal operations that title examinations must be conducted over a relatively large area before actual mining operations commence. This has some practical advantages, but it also presents a title examination and title curative project of considerable magnitude requiring two or three years of work.

In this we find one large distinction between coal mining operations and oil and gas operations. A well can draw oil or gas from surrounding lands for a considerable distance; and pooling and spacing laws in the various oil and gas producing states, together with special laws to facilitate operations by one of several co-tenants, have largely removed the problems of open tracts in an oil field. Title examinations can be conducted on successive drill sites for oil and gas wells after a discovery is made.

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With these conditions in mind, I will discuss two general kinds of problems for the company coal lawyer. The first is special legal problems in coal titles. The second is title examination methods and the form and content of title opinions, with a few comments on the finding and guiding of title examiners. Comments on the use of title information in operations will be made at appropriate places.

First, as to special problems, I do not believe that there are any basic title problems peculiar only to coal titles as distinguished from titles to oil, gas and other minerals. However, there are problems that do appear in somewhat different form that merit a close reexamination by the company attorney in light of the operations planned for the lands. Also, if the company attorney is an experienced oil and gas lawyer, he must constantly remember that there is much statutory law, special lease provisions and a large body of case law on oil and gas which have furnished solutions for oil and gas problems which trace to title and property rights. Forced pooling laws and statutory provisions for leasing the interests held by imcompetents and unknown owners are two examples of such statutory law. Such company attorney should check against coal law nearly everything he knows about mineral law from his oil and gas experience.

Three of the four problems to be mentioned arise from the creation of interests in minerals out of the whole and entire fee—that is, severed interests.

First and foremost is one with which most of you are probably already acquainted—the question of whether or not coal is included in a severed mineral estate, identified only as "other minerals," especially coal which is minable only by surface mining methods. Indeed, there can be a question of whether or not a coal severance deed includes surface minable coal. This is not a new and novel question, but it has been given great prominence by the Texas case of Acker v. Guinn¹ which held that a grant or reservation of oil, gas and other minerals did not include any mineral which must be mined in a manner which would destroy the surface estate, unless the contrary intent is affirmatively and fairly expressed. That case was decided in 1971. It aroused a great deal of discussion and criticism. The matter was reconsidered in 1977 in Texas in the case of Reed v. Wylie² and the doctrine was reaffirmed with some attempted clarification. In Reed, the court explained that Acker did not mean that only such coal as could be mined by surface mining methods was excluded from the grant or reservation. The presence on the lands, at the time the grant or reservation was made, of coal or other mineral minable only by surface mining methods means that that substance, at all depths, was not included in the grant or reservation of the separate mineral estate. The Texas doctrine, of course, leaves the title examiner completely "in the dark." It is impossible to forecast a jury decision as to whether, as of a certain date, on a particular tract of land, there was coal which was minable only by surface methods. Indeed the examining attorney is ignorant of the depth at which the coal is located, and can only assume that there is coal in the land from the fact that some coal operator has asked him for a title examination on...