STATUTORY ACCOMMODATION OF CONCURRENT MINERAL DEVELOPMENT IN VIRGINIA

• Jurisdiction: United States

Coalbed Gas Development
(Apr 1992)
CHAPTER 4C
STATUTORY ACCOMMODATION OF CONCURRENT MINERAL DEVELOPMENT IN VIRGINIA
Timothy E. Scott, Esq.
McKinnis & Scott
Kingsport, Tennessee

I. A LOOK AT THE PAST: CONSOLIDATION COAL COMPANY v. CABOT OIL & GAS CORPORATION

Oil and gas and coal development have co-existed in Virginia since the early part of this century. Until recently, oil and gas development has lagged behind coal recovery operations. Several aggressive oil and gas companies with sizable drilling programs are now operating in southwest Virginia. In the late 1980's, the inevitable occurred. A controversy arose between an oil and gas lessee and a coal lessee over concurrent mineral development on the same leasehold.

On July 1, 1960, Pocahontas Mining Corporation, predecessor in interest to Pocahontas Mining Company Limited Partnership, executed a coal lease in favor of Consolidation Coal Company ("Consol"), recorded in Deed Book 172, Page 567, in the Clerk's Office of the Circuit Court of Buchanan County, Virginia, for the Pocahontas #3 seam of coal on certain tracts of land located in Buchanan County, Virginia. The lease was supplemented on May 12, 1977 to include additional Pocahontas Mining tracts. On October 31, 1984, Pocahontas Mining Company

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Limited Partnership executed an oil and gas lease in favor of Cabot Oil & Gas Corporation ("Cabot"), recorded in Deed Book 307, Page 364, in the Clerk's Office of the Circuit Court of Buchanan County, covering the same tracts covered by the Consol lease and other tracts not the subject of the controversy between Cabot and Consol.

The dispute arose between Cabot and Consol when Cabot filed drilling permit applications with the Virginia Oil and Gas Inspector in March, 1988, for three gas wells, designated PMC #1, PMC #7, and PMC #25, permit numbers 1169, 1170, and 1171, proposed to be located on the Pocahontas tracts. Consol filed objections to all three proposed permit applications pursuant to the provisions of Va. Code Ann. § 45.1-318 (1986) (now § 45.1-361.11), which provides, in relevant part, as follows:

B. In deciding on objections by a coal owner to the drilling of a new well, the Inspector shall first consider the following safety aspects, and no drilling permit shall be issued for any drilling location where the Inspector finds from the evidence that such drilling location will be unsafe:

1. Whether the drilling location is above or in close proximity to any mine opening or shaft, entry, travelway, airway, haulageway, drainageway or passageway, or to any proposed extension thereof, in any operated or abandoned or operating coal mine, or any coal mine already surveyed and platted but not yet being operated;

2. Whether the proposed drilling can reasonably be done through an existing or planned pillar of coal, or in close proximity to an

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existing well or such pillar of coal, taking into consideration the surface topography;

3. Whether the proposed well can be drilled safely, taking into consideration the dangers from creeps, squeezes or other disturbances due to the extraction of coal; and

4. The extent to which the proposed drilling location unreasonably interferes with the safe recovery of coal, oil and gas.

C. Subject to the distance limitations established in § 45.1-319 of this Code, the Inspector shall also consider the following questions with respect to the drilling location of a new gas well:

1. The extent to which the proposed drilling location will unreasonably interfere with present or future coal mining operations;

2. The feasibility of moving the proposed drilling location to a mined out area, below the coal outcrop, or to some other location;

3. The feasibility of a drilling moratorium for not more than two years in order to permit the completion of coal mining operations;

4. The methods proposed for the recovery of coal and gas;

5. The practicality of locating the well on a uniform pattern with other wells;

6. The surface topography and use; and

7. Whether the decision will substantially affect the right of the gas operator to explore for and produce the gas.

On May 6, 1988, pursuant to Va. Code Ann. § 45.1-318 (1986), an informal fact finding hearing was held before Byron Thomas Fulmer, the Virginia Oil and Gas Inspector (the "Inspector"), to hear Consol's general objections. At the

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hearing before the Inspector, Consol simply restated its general objections to the proposed well locations and did not offer alternative well locations on the same tract, as was then required by Va. Code Ann. § 45.1-315(C).

On May 10, 1988, the Inspector issued a written decision approving the permit applications as submitted by Cabot after having reviewed Consol's objections and the mandates of Va. Code Ann. § 45.1-318. In support of his decision the Inspector found, inter alia, that Consol had...