Acquisition and Financing of Coal Reserves

Chapter 10 - Acquisition and Financing of Coal Reserves SYNOPSIS 10.01. Introduction: Coal Reserves Are Real Estate 10.02. Coal Reserves as Distinct from Other Real Estate 10.03. Extraction Value <ul> <li>[1] — Creating Divergent Interests in Purchaser and Lender</li> <li>[2] — Rendering Title Insurance Inadequate Protection For Coal Mine Operator </li> </ul> 10.04. Impact of Large Numbers of Tracts in a Coal Reserve Transaction 10.05. Acceptable Title Standards for Coal Reserves 10.06. Title Standard Variations <ul> <li>[4] — Reduction Standards</li> <li>[5] — Rejection Standards</li> <li>[5] — Multiple Title Standards</li> </ul> 10.07. Real Property Interests in Coal Reserves <ul> <li>[1] — Fee Coal</li> <li>[2] — Leasehold Coal</li> <li>[3] — Appurtenant Rights</li> <li>[4] — Caution: Dominant Estates</li> <li>[5] — Block Holdings; Windows</li> </ul> 10.08. Title Assurance <ul> <li>[1] — Title Insurance</li> <li>[2] — Tract Opinions</li> <li>[3] — Capstone Title Opinions</li> </ul> 10.09. Creation and Perfection of Security Interests in Coal <ul> <li>[1] — As-Extracted Collateral, Article 9 of the Uniform Commercial Code</li> </ul> 10.10. Special Problems for Lenders <ul> <li>[1] — Mandates</li> <li>[2] — Assignment Restrictions</li> <li>[1] — Holding Costs</li> <li>[2] — Evaporating Collateral</li> </ul> 10.11. Practical Problems in Coal Reserve Transactions 10.12. Conflicts of Interest <a href="http://emlf.org/papers/85/2008Rhine/product.aspx" target="_blank">Link to Article</a> John E. Rhine

2009-08-17T15:30:06Z

2009-08-17 11 Acquisition and Financing of Coal Reserves

2009-08-17T21:01:38Z

<h4>Does the Coal Owner/Lessee have the legal right to dispose of slurry and coal refuse in the mine voids? What are the risks?</h4> <a href="http://www.rhine-ernest.com/EMLF.pdf" target="_blank">Link to PDF</a>

2009-08-11T08:11:47Z

2008-01-01 8 Slurry and Coal Refuse Disposal

2009-08-11T08:11:47Z

A home is the largest single asset most people will acquire during their lifetime, and a mortgage on a home is often the single largest debt obligation many will ever incur in their lifetime. Does a person really need an attorney when buying or selling a home or obtaining financing for an existing home? Selling or buying of real estate can become a complex transaction. Abstracts of title, purchase agreements, deeds, title opinions, title insurance, and closing are all terms you will become familiar with regarding a real estate transaction. Often in the excitement of the purchase of a new home people are unaware of, or overlook the pitfalls involved in such a transaction. With such a huge investment at stake, it makes sense to have your law firm represent and advise you in such a transaction. When buying or selling real estate, an executory contract, often referred to as a purchase agreement, should be drafted and executed by the buyer and seller. This document establishes the parties intent to buy or sell the real estate and governs their rights until closing. The sale price, date of closing, responsibility for payment of taxes, responsibility for damages prior to closing, financing contingencies, and many other issues are covered by such a document. The seller of real estate is responsible for providing evidence of merchantable title to the real estate in question. This is done by providing the buyer an updated abstract of title or title insurance. An abstract of title is a condensed history of the real estate as shown in the records of the recorder's office of the county in which the real estate is located. On behalf of the seller, an abstractor or an attorney will check the records of the county recorder from the date of the last abstract certification to the present date and compile any additional records into the abstract which would affect title to the real estate in question. Title insurance is an insurance policy which is prepared by an attorney insuring good title to the real estate in question. Once an abstract of title or title insurance commitment has been furnished to the buyer by the seller, it is the buyer's responsibility to determine if he is receiving good title to the property. This is done by having an attorney review the abstract render a title opinion as to the status of title. In the case of title insurance, the attorney reviews the exceptions listed in the commitment, making sure that there are no liens or unacceptable clouds on title. The term caveat emptor (let the buyer beware) applies to real estate. The term closing refers to the event at which time legal title to the real estate is changed from buyer to seller. Typically a warranty or quitclaim deed is employed to convey the real estate. A warranty deed provides that the seller is the legal owner of the property and that the real estate is free from encumbrances. A quitclaim deed merely provides that the seller is conveying his or her interest in the property, whatever interest that may be. If the seller only owns a partial interest in the real estate, a quitclaim deed only conveys that partial interest to the seller. Again caveat emptor applies. Of importance to the buyer is the question of how they will hold title to the property. If there is more than one buyer, typically a husband and wife, title may be held in joint tenancy, tenancy by the entirety, or tenancy in common. The main difference in these types of ownership is that joint tenancy and tenancy by the entirety include a right of survivorship. Once a right of survivorship is in place, if one of the owners of the property dies, title will automatically vest in the other owner. With ownership by tenancy in common, each party owns an undivided interest in the whole. If that party were to die, his or her interest would be distributed according to his or her will or by intestate succession and not by survivorship. Buyers of real estate should consult with the law firm that handles their estate planning, as the way real estate is titled can carry tax consequences and present estate concerns upon your death. Most people when purchasing real estate must obtain financing from a lending institution and this is done by a promissory note and a mortgage. A mortgage is an interest in real estate created by a written instrument which provides security for the payment of a debt. In other words the bank lends you money and you give the bank a lien on the real estate. Often people with real estate will refinance their mortgage several times during their lifetime. When obtaining financing the lending institution will require a title opinion or title insurance both of which are prepared by attorneys, the cost of which is charged to you as closing costs. Most local financial institutions in this area will use attorneys of their choice unless you insist otherwise. In such a scenario you may have an attorney you do not know or worse, one you are not comfortable with doing your legal work. You are the one paying for this service, and you should insist that the law firm that you trust and are familiar with handle your title work. Buying, selling, and financing a home raises many issues and possible pitfalls of which the buyer and seller may be unaware. With such large investments at stake, it is wise to consult the law firm you trust to protect your interest. At Rhine Ernest LLP our attorneys have more than 50 years of collective experience in real estate transactions. We routinely update abstracts, write title insurance, provide title opinions, draft purchase agreements and deeds and consult and advise both buyers and sellers from the moment of the initiation of a real estate transaction through closing. <a href="http://www.rhine-ernest.com/attorneys/3">Joseph F. Vargo</a>, Rhine Ernest LLP

2009-08-11T08:09:13Z

2000-04-01 7 Buying or Selling a Home

2009-08-11T08:09:13Z

The U.S. District Court for the Southern District of Illinois has upheld a provision in a coal deed granting the coal owner the right to purchase the surface for mining purposes. In reaching the decision in Arclar Company v. Gates, U.S. Dist. Court, So. Dist., 97-4335-JLF (1998), Judge James L. Foreman cited fundamental Illinois mineral law as well as precedent from other mineral producing states. In Arclar, the coal owner purchased the coal in 1905. The deed also granted a right of way for conveying coal and a right to purchase "such portion of the surface of the premises hereinabove described as may be necessary for the erection of tipple, buildings, powerhouses, railroad tracks, switches and other improvements necessary for the mining and removing said coal at the price of One Hundred Dollars per acre." The Arclar Company operates a coal mine in Saline County, Illinois, and sought to place an overland conveyor belt on about three acres of Gates' property and construct a high voltage power line and water line on it as well. Arclar brought an action against Gates, requesting specific performance of the option to buy the surface, an injunction preventing Gates from interfering with Arclar's use of the conveyer easement and damages for such interference. Gates moved to dismiss on numerous grounds, including the Rule Against Perpetuities, the Rule Against Restraints on Alienation and Illinois' 75-year statute of limitation (735-ILCS 5/13-114), which bars offering documents against someone's title if those documents are over 75 years old. The U.S. District Court noted that the Illinois Supreme Court had upheld a virtually identical deed provision against a challenge based on the Rule Against Perpetuities in Threlkeld v. Inglett, 124 N.E. 368 (1919), which had been subsequently approved in decisions by the Illinois Supreme Court itself, Jilek v. Chicago, Wilmington & Franklin Coal Co., 47 N.E.2d 96 (1943); the Illinois Appellate Court in In re Payment of Taxes, 537 N.E.2d 358 (5th Dist. 1989); the United States Court of Appeals for the Seventh Circuit, Chicago, Wilmington & Franklin Coal Co. v. Minier, 127 F.2d 1006 (1942) and Chicago, Wilmington & Franklin Coal Co. v. Herr, 127 F.2d 1010 (1942); and by courts from other states, such as Quarto Mining Co. v. Litman, 327 N.E.2d 676 (Ohio 1975). The district court, citing the Threlkeld and Quarto cases, also found that while a bare option to purchase exercisable outside the period of the Rule Against Perpetuities is void as an unreasonable restraint on alienation, this rule does not apply to options to purchase part of an overlying surface estate granted for the purpose of facilitating mining. The court also held that the 75-year statute did not apply under fundamental mineral law. The surface estate, subject to the easement and option, is a separate estate from the mineral estate, which includes certain implied and, in this case, express, surface rights. Arclar was not claiming against Gates' title but rather enforcing its own. Furthermore, the 75-year statute is a statute of limitations — it could not apply until Arclar had a chance to enforce its rights and that did not happen until Arclar needed the surface for mining purposes. The court's decision in Arclar v. Gates comes as no surprise to mineral lawyers as it applies the most fundamental of all mineral law — the law of separate estates. In virtually every mineral producing state in the United Sates and in other common law jurisdictions, minerals may be held separately from the surface. Ownership may be divided vertically, as well as horizontally, so that the owner of a mineral strata is no different vis-a-vis the surface owner of Blackacre than is the owner of an adjacent surface tract. An adjacent surface tract may be served by an easement across Blackacre by implication where there is no other ingress or egress because it is presumed that the right to get to the property was intended by the parties even if it was not set out in an express easement. Similarly, when minerals are severed and nothing is said about access, the right to get to those minerals by using surface is implied. But such rights can also be express, as it was in the deed before the court in Arclar v. Gates. (The creation of express rights is generally encouraged by the courts as it prevents disputes over just what was intended by the parties by their silence. In the Illinois Basin, disputes over surface use by mineral developers, especially oil and gas producers, are very common.) Whether express or implied, the mineral owner's rights to the surface for mining purposes are part of the mineral estate — part of his bundle of sticks. The surface owner's bundle is missing these sticks, though this is sometimes forgotten as the farmer looks out over "his" fields for year after year. The passage of time since the creation of a separate mineral estate sometimes confuses attorneys and landowners but mineral rights are indeed important property rights which may be held separate from the surface of perpetuity. This fundamental principle is essential to the extraction industry, which is one of Illinois' oldest and most important industries. Efforts to take minerals by passage of time, in the guise of the Dormant Mineral Act, was held an unconstitutional taking of property rights without due process of law by the Illinois Supreme Court in Wilson v. Bishop, 412 N.E.2d 522 (1980). The Rule Against Perpetuities cannot apply because the mineral estate, which includes certain surface rights, vested at the time of the severance. Its corollary, the Rule Against Restraints on Alienation, does not apply simply because the surface estate, albeit a surface estate subject to these easements and other rights, is simply not involved. Similarly, the 75-year statute, or any other statute of limitations, has no application because again the surface estate is not involved — in the words of the court in Arclar: "Neither party is asserting by claim or color of title the same interest in the same property." In the Quarto case cited by the court, the Ohio Supreme Court did add one interesting twist. In that case, the mineral owner enforced a right to purchase surface for mining purposes in 1975. The severance deed, delivered in 1905, provided for a purchase price of $100 per acre. The court said that while the mineral estate owner's right to purchase surface would be enforced, as a court of equity it required fair market value to be paid for the land taken because time had so badly devalued the stated consideration. The U.S. District Court did not address this issue in Arclar v. Gates. Title examiners and insurers in counties with mineral development or potential (and that is most Illinois counties) often cavalierly ignore mineral severances or perhaps only search for them for 40 years. This is dangerous as there are many perpetual rights in the surface which the mineral owner may hold, including the right to cause subsidence, the right to build lease roads, pipelines, electric lines, overland conveyors and even buildings on the property, and in many instances, especially in coal producing counties, the right to take the surface itself. All of these rights have been recently upheld by various Illinois courts. Examiners and insurers are careful to note the rights of other estate owners in a real estate development with restrictive covenants or in a condominium complex. Where minerals are severed, the rights of the mineral estate holder should be noted in any examination or policy covering the surface. * * * * In the United States District Court for the Southern District of Illinois <table border="0" cellpadding="0" cellspacing="0"> <tbody><tr> <td> ARCLAR COMPANY, an Illinois Corporation Plaintiff, vs. JAMES KENNETH GATES, Defendant, </td> <td>    </td> <td> CIVIL NO. 97-4335-JLF </td> </tr> </tbody></table> <h2>MEMORANDUM AND ORDER</h2> <h3>FOREMAN, District Judge:</h3> Before the Court is defendant's Motion to Dismiss for Failure to State a Claim (Doc. 6). Plaintiff has filed a response (Doc. 12). This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1332. Plaintiff, Arclar Company, has sued James Gates for specific performance (count I) and for an injunction (count II) regarding certain land in Saline County. Specifically, Arclar seeks specific performance of an option to purchase a certain surface area of Gates' land that Arclar claims is necessary for its coal mining operation. Arclar also seeks an injunction because Gates is allegedly preventing Arclar from using an easement that Arclar claims to have acquired by deed. The original action was brought in Saline County. Gates removed it to this Court based on diversity and an amount in controversy in excess of $75,000. <h4>I. Background.</h4> Once upon a time, several members of the Choisser family, (specifically, William Choisser, Kate Choisser, De Launt Choisser, and Willie Choisser), held title to 214 17/20 acres in Saline County. In 1905, in a document called "Warranty Deed to Coal," the Choissers conveyed all of the coal underneath the surface of the 214 17/20 acres to O'Gara Coal Company (Doc. 2, Exh. A). The Warranty Deed to Coal also granted O'Gara Coal Company: ...the right to mine, dig, ventilate, drain and remove the coal therefrom, and together with the right to use the passageways and entries under the said premises for the purpose of hauling, mining and removing the coal above conveyed, and all other coal not belonging to or hereafter to be acquired by the said O'GARA COAL COMPANY, its successors and assigns, and for a "Right-of-Way" over the same, or such portion thereof as may be necessary for conveying said coal to market;... (Doc. 2, Exh. A). The parties refer to this bundle of rights as a "Conveyer Easement." Finally, the Choissers also granted O'Gara Coal Company, (and its heirs, successors, and assigns), the right at any time to purchase for $100 per acre the portion of the land's surface necessary to mine and remove the said coal. Specifically, the Choissers agreed that: The said grantors for themselves, their heirs, executors, administrators and assigns, as a covenant running with the land and the property conveyed, further agree to sell to the O'GARA COAL COMPANY, its successors or assigns, at any time hereafter, such portion of the surface of the premises hereinabove described as may be necessary for the erection of tipple, buildings, powerhouses, railroad tracks, switches and other improvements necessary for the mining and removing said coal at the price of One Hundred ($100.00) Dollars per acre, and to convey the title of said surface to said O'GARA COAL COMPANY, its successors and assigns, by good and sufficient Warranty Deed... (Doc. 2, Exh. A). By mesne conveyances, Arclar acquired the interests that O'Gara Coal Company had acquired by the Warranty Deed. In other words, Arclar has acquired: 1) the coal; 2) the Conveyer Easement; and 3) the right to purchase the surface necessary to mine the coal. Arclar claims that it is necessary to construct a conveyor over and across the Conveyor Easement to convey the coal to market. Although Arclar has the Conveyor Easement, it also claims that it needs 3.442 acres of the surface to construct a high voltage power line and water line to service the conveyor. Gates owns 33 acres, including the 3.442 acres allegedly needed by Arclar. Gates acquired these 3.442 acres with notice of O'Gara's right to buy the surface. Specifically, the deed stated that Gates' 3.442 acres was: Subject to the rights of O'Gara Coal Company, its successors and assigns, relating to purchase of the surface and ownership of a right to explore for coal attached as Exhibit A and subject to all rights which are appurtenant to ownership of coal, expressed and implied. (Doc. 2, p.3). As noted, Arclar seeks specific performance of the option to buy and an injunction preventing Gates from interfering with Arclar's use of the Conveyor Easement. Gates has filed a motion to dismiss based on various grounds discussed below. <h4>II. Standard of Review.</h4> A motion to dismiss tests the sufficiency of the complaint, not the merits of the suit. Triad Assoc, Inc. v. Chicago Housing Authority, 892 F.2d 583, 486 (7th Cir. 1989), cert. denied, 498 U.S. 845 (1990). A plaintiff is required only to provide a short and plain statement of the claim "that will give the defendant fair notice of the claim and the grounds upon which it rests." Leatherman v. Tarrant County Narcotics Intelligence Unit, 113 S.Ct. 1160 (1993) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957) (footnote omitted)). The court must accept pleaded conclusions as true. Early v. Bankers Life & Casualty Co., 959 F.2d 75, 79 (7th Cir. 1992). The sole issue when reviewing a motion to dismiss is whether relief is possible under any set of facts that could be established consistent with the allegations in the complaint. Bartholet v. Reishaur A.G., 953 F.2d 1073, 1078 (7th Cir. 1992) (citing Conley, 355 U.S. at 45-46 (1957)). <h4>III. Motion to Dismiss</h4> Mr. Gates' Motion to Dismiss is based on six (6) grounds which are addressed below. 1) Arclar's Claims are Not Barred by Illinois' 75-year Statute of Limitations. Gates argues that Arclar's claims are barred by Illinois' 75-year statute of limitation, 735 ILCS 5/13-114. This statute provides that: § 13-114 Seventy-five year limitation. No deed, will, estate,... relating to or affecting the title to real estate in the State of Illinois, which happened, was administered, or was executed, dated, delivered, recorded or entered into more than 75 years prior to July 1, 1872, or such subsequent date as the same is offered, presented, urged, claimed, asserted, or appears against any person hereafter becoming interested in the title to any real estate, or to any agent or attorney thereof, shall adversely to the party or parties hereafter coming into possession of such real estate under claim or color of title or persons claiming under him, her or them, constitute notice, either actual or constructive of any right, title, interest or claim in and to such real estate, or any part thereof, or be, or be considered to be evidence or admissible in evidence or be held or urged to make any title unmarketable in part or in whole, or be required or allowed to be alleged or proved as a basis for any action, or any statutory proceeding affecting directly or indirectly the title to such real estate. 735 ILCS 5/13-114. Gates argues that this statute bars any use or enforcement of a deed older than 75 years. Thus, according to Gates, Arclar's claimed easement and right to buy a portion of the surface to use that easement are barred because they originate from a deed dated 1905. Gates' argument must fail for several reasons. First, the statute is inapplicable. The purpose of the statute is to prevent clouds on title from lingering for more than 75 years. It applies to competing chains of title, adverse interests, and the like where the title to the land is at issue or could be affected. Specifically, the statute decrees that "No deed ...offered... against any person...becoming interested in the title...shall adversely to the party hereafter coming into possession of such real estate under claim or color of title...constitute notice, either actual or constructive, of any right, title, interest...in...or be considered to be evidence or admissible in evidence..." 735 ILCS 5/13-114. By its own terms, the statute applies when one of the parties asserting an interest in the land does so by "claim or color of title." Id. Claim or "color of title" means: The appearance, [or] semblance...of title. Also termed "apparent title." Any fact, extraneous to the act or mere will of the claimant, which has the appearance, on its face of supporting his claim of a present title to land, but which, for some defect, in reality falls short of establishing it. Black's Law Dictionary 241 (5th ed. 1979) (citations omitted); see also Anoweurth v. Burlington, 1 F.Cas. 1036, 1037 (Circuit Court, D. Illinois, No Date Given) ("The court defined the ‘claim and color of title made in good faith' under this law, to be such a title as in law would pass the estate prima facie, if a better title be not shown"). This is not a case involving "claim or color of title." Neither Arclar or Mr. Gates is seeking to assert, by claim or color of the title, the same interest in the same property. Mr. Gates simply took title to his acreage subject to the Conveyor Easement and the option to purchase the surface necessary to mine the coal. By the same token, Arclar holds title to the coal, the Conveyor Easement and the option to purchase, and is simply seeking to exercise that option. Neither party is asserting by claim or color of title the same interest in the same property. Accordingly, by its own terms, the 75-year statute of limitation is inapplicable. Secondly, even if the statute did not apply to the facts at bar, the statute also provides an exception. This exception states that: The provisions of this Section shall not apply to or operate against...any person who during the entire period herein permitted for reassertion of title, or prior thereto, has not had the right to sue for and protect his or her claim, interest or title. 735 ILCS 5/13-114. O'Gara Coal Company acquired the coal, the easement, and the option to purchase in 1905. Arclar acquired these interests by mesne conveyances. Although the Complaint does not specify when Arclar acquired these interests, Arclar's Complaint does not allege that it is necessary to use the Conveyor Easement and surface to convey the coal to market. Arguably, Arclar has not needed the easement or surface until recently and therefore, has not had the right to sue for the entire limitation period. When reviewing a motion to dismiss, the sole issue is whether relief is possible under any set of facts that could be established consistent with the allegations in the complaint. Bartholet v. Reishauer A.G., 953 F.2d 1073, 1078 (7th Cir. 1992) (citing Conley, 355 U.S. at 45-46 (1957)). Accordingly, even if the 75-year limitation did apply to this case, it appears from the Complaint that Arclar has not had the right to sue for the requisite period time period. For these reasons, Arclar's claims are not barred by Illinois' 75-year statute of limitation. 2) Arclar's Claims are Not Barred by the Rule Against Perpetuities. Gates argues that Arclar's claims are barred by the Rule Against Perpetuities. Illinois courts have noted that an option to purchase real estate is subject to the Rule Against Perpetuities. See e.g., Warren v. Albrecht, 571 N.E.2d 1179, 1180 (Ill.App. 5th Dist. 1991). The Illinois Supreme Court, however, has noted that the right to purchase surface rights is not subject to the rule against perpetuities when the owner of the right requires the surface in order to remove minerals already owned. Threlkeld v. Inglett, 124 N.E. 368 (Ill.1919). In Threlkeld, an option within a deed provided that the surface should be conveyed at the rate of $150 per acre if necessary for the purpose of the mining rights conveyed. The Illinois Supreme Court specifically rejected the Rule Against Perpetuities contention by stating that: The conveyance was to be of the coal, oil, and gas under the land, with the right to mine and remove the same, and when anything is granted, all the means to attain it and all the fruits and effects of it are granted also, and pass, together with the grant of the thing itself, without any words to that effect. * * * Where a grant is made for a valuable consideration it is presumed that the grantor intended to convey and the grantee expected to receive the full benefit of it, and therefore the grantor not only conveyed the thing specifically described, but all other things, so far as it was within his power to pass them, which were necessary to the enjoyment of the thing granted. The deed, when made, would not only pass the coal, oil, and gas, with the right to mine and remove the same, but also the right to enter upon and use so much of the surface of the land as might be necessary to the enjoyment of the property and rights conveyed, and the agreement was merely that the land taken for such use should be paid for, when located, at the rate of $150 an acre. It was not within the rule against perpetuities. Threlkeld, 124 N.E. at 371. Threlkeld was decided in 1919. It has been cited with approval by the Illinois Supreme Court in Jilek v. Chicago, Wilmington, & Franklin Coal Co., 47 N.E.2d 96, 98 (Ill. 1943); by the Illinois Appellate Court in In re Payment of Taxes, 537 N.E.2d 358 (5th Dist. 1989); by the United States Court of Appeals for the Seventh Circuit in Chicago, Wilmington & Franklin Coal Co. v. Minier, 127 F.2d 1006, 1009 (7th Cir. 1942); and Chicago, Wilmington & Franklin Coal Co. v. Herr, 127 F.2d 1010, 1012 (7th Cir. 1942); and even by courts in other states; see e.g., Quarto Mining Co. v. Litman, 327 N.E.2d 676, 681 (Ohio 1975). Accordingly, Arclar's claims are not barred by the rule Against Perpetuities. 3) Arclar's claims are Not Barred by Illinois' 40-year Statute of Limitation, 735 ILCS 5/13-118. Gates argues that Arclar's claims are barred by Illinois' 40-year statute of limitations, 735 ILCS 5/13-118. This statute provides that: § 13-118. Forty year limitation on claims to real estate. No action based upon any claim arising or existing more than 40 years before the commencement of such action shall be maintained in any court to recover any real estate in this State...against the holder of the record title to such real estate when such holder of the record title and his or her grantor immediate or remote are shown by the record to have held chain of title to such real estate for at least 40 years before the action is commenced,... 735 ILCS 5/13-118. According to Gates, this statute bars any claim to real estate older than 40 years against any owner, who along with his predecessor in title, has held title for at least 40 years. Another section of the statute, however, Chapter 735 ILCS 5/13-120, expressly excludes mineral rights and interests appurtenant to mineral rights and interest appurtenant to mineral rights. Specifically, it provides that: § 13-120. Limitations on sections. Sections13-118 through 13-121 of this Act shall not be applied: * * * * 4. To bar or extingish any separate mineral estate or any rights, immunities and interest appurtenant or relating thereto; . . . 735 ILCS 5/13-120(4). Accordingly, Arclar's claims are not barred by Illinois' 40-year statute of limitation. 4) Arclar's Claims are Not Barred by the Failure to Plead Privity of Contract with O'Gara Coal Company. Gates also argues that Arclar's claims are barred by Arclar's failure to plead privity of contract with O'Gara Coal Company. Thus, according to Gates, Arclar has failed to establish that it has an interest in the subject property. This argument is contrary to the plain allegation of the Complaint. The Complaint clearly states that Arclar acquired the interests obtained by O'Gara Coal Company. (Doc. 2, p.3, 6); see also (Doc. 2, p.7, 5). Accordingly, Arclar's claims are not barred by the failure to plead privity of contract with O'Gara Coal Company. 5) Arclar's Claims are Not Barred by Laches. Gates argues that Arclar's claims are barred by laches. Laches has been defined as "such neglect or omission to assert a right as, taken in conjunction with lapse of time of more or less duration, and other circumstances causing prejudice to the adverse party." Holt v. Duncan, 180 N.W.2d 36, 38 (Ill. App. 4th Dist. 1962) (citing Holland v. Richards, 123 N.E.2d 731, 735 (Ill. 1955)). Such neglect or omission will operate as a bar in a court of equity. Holt, 180 N.E.2d at 38. The defense of laches can be raised by a motion to dismiss if: (1) an unreasonable delay appears on the face of the pleading; (2) no sufficient excuse for delay appears or is pleaded; and (3) the motion specifically points out the defect. Holt, 180 N.E.2d at 38. No unreasonable delay appears on the face of the pleadings and Gates has not set forth any facts or legal authority to suggest that laches applies. Accordingly, Gates has not shown that Arclar's claims are barred by laches. 6) Arclar's Claims are Not Barred by the Rule Against Restraints on Alienation. Gates argues that Arclar's claimed option to purchase violates the rule against restraints on alienation. It is true that a bare option to purchase or sell real estate exercisable outside the period of the rule against perpetuities is generally held to be void as an unreasonable restraint upon alienation. Quarto Mining Co. v. Litman, 327 N.E.2d 676, 679 (Ohio 1975) (citations omitted); see also Drayson v. Wolff, 661 N.E.2d 486, 492 (Ill. App. 1 Dist. 1996). Certain options, however, do not fall within this rule. For example, courts have held that an option to purchase land is valid as part of a long-term lease of that land. Quarto Mining Co., 327 N.E. at 679 (citations omitted). Similarly, options to purchase part of an overlying surface estate have been held not to violate the rule against restraint on alienation provided that they were granted for the purpose of mining the mineral estate. Quarto Mining Co., 327 N.E.2d at 681-84 (citing Buck v. Walker, 132 N.W. 205 (Minn. 1911); and Threlkeld v. Inglett, 124 N.E. 368 (Ill. 1919)). Here, the option to purchase is clearly limited to the portion of the surface necessary for mining the coal, (specifically, that "portion of the surface...necessary for the erection of tipple, buildings, powerhouses, railroad tracks, switches and other improvements necessary for the mining and removing said coal"). Accordingly, Arclar's option to purchase is not void as a restraint on alienation. <h4>IV. Conclusion</h4> For the foregoing reasons, defendant's Motion to Dismiss (Doc. 6) is DENIED. IT IS SO ORDERED. DATED: 8/20/98 /s/ James L. Foreman DISTRICT JUDGE <a href="http://www.rhine-ernest.com/attorneys/1">John E. Rhine</a>, Rhine Ernest LLP

2009-08-11T08:07:26Z

1998-10-01 6 Coal Owner’s Right to Purchase Surface

2009-08-11T08:07:26Z

Emotional, physical and sexual abuse of individuals with physical and psychological disabilities is a problem which is growing in magnitude in this country. The care of disabled individuals is sometimes entrusted to facilities with employees who are under-qualified, disinterested in providing adequate care and supervision or purposely work to harm their clients. Many acts of abuse go unnoticed. The disabled are often unable or unwilling to effectively communicate the wrongful conduct to others. Further, when a claim is brought to light, it is often ignored. However, the law provides certain rights to the disabled which should be enforced by those interested in their care. Violence against individuals with disabilities occurs in a variety of settings. Commonly, the abuse occurs when the individual receives in-home services from a professional agency or is placed in an institution or sheltered workshop. In these situations, the individual will come into contact with a large number of people, some which may pose a threat to the safety of the individual. Also, should an institutional or sheltered workshop fail to provide adequate supervision, the individual may become subject to harm from other disabled individuals. Individuals with disabilities are, as a segment of the general population, particularly prone to abuse. Individuals with disabilities may not understand that they are being abused or, in even worse scenarios, have been subjected to such continued abuse for such a long period of time that the conduct is perceived by the individual as being normal. Further, an individual may not have loved ones or family members to protect them. Many disabled individuals lack the ability to effectively communicate that they have been harmed or may feel ashamed to do so. The extent of the problem is staggering. Research indicates that, at this time, forty percent (40%) of women with disabilities have been sexually assaulted, raped or abused. (Stimpson and Best, 1991) Further, eighty-three percent (83%) of disabled women will be sexually assaulted at some point of their lifetime. (Stimpson Best 1991). More bothersome is the fact that a large portion of the abuse occurs from the professionals which purport to provide care for the individuals. Thirty-nine percent (39%) of the disabled placed in institutional settings have been assaulted by a member of the staff of the institution. (Nibert, et al., 1989). Twenty-seven percent (27%) have been sexually assaulted by a staff member. (Nibert, et al., 1989). Amazingly, forty-one percent (41%) of nurses and aids acknowledge engaging in physical abuse of clients or patients. (Pillemar and Moore, 1990). There are remedies available to those whom have endured abuse and violence. In Illinois and Indiana, a client of a sheltered workshop or a mental health or rehabilitation facility possesses a right to humane care and to be free from abuse. When a client or patient has been assaulted by a member of the staff of the facility this duty is breached and the individual should be entitled to damages and other relief. A facility is also required to protect their clients and patients from harm. If a facility fails to adequately supervise its clients or patients and a client or patient is harmed, the law may allow the individual or his or her loved ones a cause of action against the facility. In many cases, the individual's federal civil rights may have also been violated due to the conduct of the facility. This law firm has assisted and will continue to assist the disabled and their families. We have a extensive experience in this area and our practice ranges throughout Illinois, Indiana and Kentucky. Should you be aware of an individual who has wrongly suffered from abuse, please contact us so that we may assist in the situation. <a href="http://www.rhine-ernest.com/attorneys/4">William C. Illingworth</a>

2009-08-11T07:55:08Z

1997-11-01 1 Physical and Sexual Abuse of the Disabled

2009-08-11T07:55:08Z

Over 1.6 million elderly Americans reside in nursing homes in this country. However, it has become apparent that family members can no longer assume that the nursing homes in which they have entrusted their loved one's care provides adequate treatment. Today, many nursing homes are plagued with rampant incidents of neglect of their residents. Even worse, elderly residents of nursing homes are often intentionally mistreated. Too often, the elderly are subjected to physical and mental abuse by nursing home staff, have their nutritional and medical needs ignored or have their money taken from them. It is estimated that over 820,000 of the elderly have been abused and/or neglected. This abuse or neglect can lead to dire consequences for the elderly. A recent study of California nursing homes found that more than half of the suspicious deaths of nursing homes residents were most likely due to neglect. The study further found that nearly one-third of all California nursing homes were cited for potentially life-threatening care violations. Nursing homes residents possess federally protected rights. In order to qualify for medicare and medicaid funding, nursing homes in Illinois and Indiana are required to comply with certain Federal guidelines. Generally, these guidelines require nursing homes to provide services and activities for the highest practicable physical, mental, and psychological well-being of each resident. A breach of this standard may impart the elderly or his or her family with a cause of action. Should one of your loved ones have been subjected to this type of conduct, we would be more than happy to assist you in contacting the appropriate authorities. <a href="http://www.rhine-ernest.com/attorneys/4">William C. Illingworth</a>

2009-08-11T07:56:44Z

1997-11-01 2 Elder Abuse and Neglect

2009-08-11T07:56:44Z

Anyone who practices law in support of an industry needs to know the fundamentals of how that industry works. Maritime lawyers must know the shipping industry, Entertainment lawyers must understand the peculiarities of that business. Coal lawyers have an added aspect-they occasionally need to know how the coal industry operated long ago. It is commonplace for a coal lawyer to be called upon to interpret or amend a lease, deed or contract provision which was written a century ago but still lives on governing the actions and options of the parties bound by it. Just what did the parties have in mind when, for example, they created a right-of-way before trucks were invented? Of course, the ISBA Mineral Law Section Council newsletter cannot bring you The History of Coal Mining in Illinois, but here are a few interesting historical notes as well as a few facts, interesting or not, which demonstrate the point. No state can claim an earlier coal history than Illinois. The first discovery of coal in America by Europeans was made in what is now Illinois by Louis Joliet and Jacques Marquette in 1673. Joliet located "Charbon de terra" near the present town of Utica. [<a href="#l" class="l">1</a>] Marquette's journal includes a map showing an outcropping of coal near the same spot.[<a href="#l" class="l">2</a>] LaSalle's chaplain, Father Louis Hennepin, reported an Indian "cole-mine" above Fort Creve-Coeur in his report to William III of England, published in 1689.[<a href="#l" class="l">3</a>] It was not until 1701 that Huguenot settlers discovered coal in the eastern U.S., on the James River and the anthracite deposits in Pennsylvania were not discovered until a half-century later. Until the time of the American Revolution, the abundance of wood and the paucity of industry limited the demand for coal. Small amounts of coal were imported to the colonies from England. With the revolution, the Americans looked elsewhere and coal was supplied from Pennsylvania and from that part of the Old Northwest Territory captured by George Rogers Clark, which became known as the Illinois Territory. During the Revolutionary War, coal was used to manufacture shot, shell and other war material. Coal has always been particularly important to the economy of southern Illinois. There is an early written record of regular barge shipments of coal to New Orleans in 1810 from the Brownsville settlement on the Big Muddy River in Jackson County. Large quantities, at least by pre-railroad standards, were mined in the early 1800s in St. Clair and Madison Counties and sold in St. Louis by the bushel. The 1840 census shows men employed in coal mines in the following southern Illinois counties: Edwards, Gallatin (including modern Saline County), Jackson, Lawrence, Madison, Perry, Randolph and St. Clair. Do you think that professional landmen and those coal company lawyers are recent to the Illinois coal scene? A description of the Illinois Territory published in 1820 noted that coal was to be found there, then went on to state that the inhabitants of Illinois included "a medley of landjobbers, lawyers . . . and farmers, who traverse this immense country . . . engaged in all kinds of speculation."[<a href="#l" class="l">4</a>] In 1840, Forrest Shepherd purchased 2000 acres of coal lands in southern Illinois for the Boston Association for Purchasing Mineral Property in Missouri and Illinois. Shepherd was a lawyer reported to be well acquainted with practical geology and mineral surveying. Did the Clean Air Act initiate the concern for low sulphur coal? Quality has always been important. Shepherd reported to the Boston Association that the coal underlying the Jackson County lands he purchased in 1840 were selected as "very free from sulphur and earthy impurities" and that Jackson County coal uniformly commanded a higher price at New Orleans because of its quality. This 1836 report to the Journal of Franklin Institute on the coal from Mount Carbon coal mine in Jackson County, Illinois, describes the very same qualities desired today: This coal combines the qualities of the anthracite with pure charcoal with a remarkable freedom from sulphur, slate, and other impurities, makes an open fire, ignites very easily, and burns with much flame, and a strong heat, producing little smoke, cinder and ashes. These rare qualities render this coal of great value . . . and particularly so, in the production of steam.[<a href="#l" class="l">5</a>] The 1855 publication "Statistics of Coal" noted that certain coals in central Illinois were "highly charged with sulphur which confines the use of it principally for household purposes. Boats and other machinery make but little use of it for steam, it being so destructive to grate-bars and boilers." Many believe that the parties to early mineral conveyances could not have contemplated surface mining. After all, didn't surface mining start when large machinery became available in the 20th century? A year after the end of the Civil War, America's first surface mine opened near Danville, Illinois. Horse drawn plows and scrapers were used to scrape away overburden and the coal was dug out and hauled away in wheelbarrows and carts. And those union miners? In 1861, almost 20 years before John L. Lewis was born, the American Miners' Association was formed in Belleville, Illinois. It was the first miners' union to extend beyond state borders. The advent of the railroad enhanced the value of Illinois coal. Early railroad engines burned wood and in fact the Illinois Coal Company built a short railroad from Caseyville to East St. Louis in 1851 to replace ox carts. Its engines burned wood. In 1854, locomotives with boilers capable of burning coal were introduced and the use of coal was greatly expanded. Chicago and St. Louis became railroad hubs, and the ability to easily transport Illinois coal also increased the demand for it. The rail era expansion of coal demand led to the construction of the large coal mine we are familiar with today. Coal mines opened in the late 19th century were surprisingly advanced, even compared to today's mines, and herein lies a few examples of the occasional relevance of coal mining history to present day practice. One cannot assume that all modern mining practices are in fact, modern. Many attorneys in Illinois erroneously believe that longwall mining is a new technique. Robert Beck, a law professor at Southern Illinois University, in discussing a 19112 waiver of damages for subsidence from coal mining, wrote in 1985, that "it cannot be argued that the mineral owner in 1912 purchased the mineral anticipating use of the longwall method of mining."[<a href="#l" class="l">6</a>] Citing this article, the Illinois Appellate Court held a 1912 waiver inapplicable to longwall subsidence, stating in its slip opinion, "The deed containing the waiver was executed in 1912, long before the advent of longwall mining." Professor Beck was wrong. It could indeed be argued that the mineral purchaser most certainly contemplated longwall mining. The Illinois Coal Association and the United Mine Workers of America made just that argument as amici curiae, showing that longwall mining which caused certain subsidence had been utilized for over two centuries and had been in use in Illinois since the 19th century. In fact, the Illinois State Geological Survey, the Department of Mining Engineering at the University of Illinois, and the U.S. Bureau of Mines reported numerous longwall mines operating in Illinois in 1912, the year of the waiver. That appellate court slip opinion was ultimately withdrawn and in a companion case opinion, which was published, the court upheld waivers as a defense against common law damages for subsidence.[<a href="#l" class="l">7</a>] Another court found that longwall mining, at the time of various subsidence waivers dating to 1901, was well known in the United States, and particularly in Illinois, where longwall mining had occurred at least as early as 19874. The court stated: While these excerpts cover only a small part of the history of underground mining, they suffice to show that any argument that longwall mining was a novelty in this country in the early 1970's is totally baseless. Historically, the longwall mining process, and subsidence associated with it . . . have been inextricable parts of coal mining operations. (Emphasis by the court.)[<a href="#l" class="l">8</a>] Other courts also found Beck's factual assumptions in error.[<a href="#l" class="l">9</a>] How about those new-fangled conveyor belts that lift coal over highways and go cross country? Recently an operator wanted to construct an overland conveyor belt, and counsel were called upon to interpret a turn of the century right-of-way to "convey" coal across a tract of land. What did the parties have in mind when the right to "convey" was granted? Most likely, one might assume, a railroad, mule train track or a cartway. In fact, conveyor belt systems were used in mining when the grant was made. Tom Robins, with the aid and advice of Thomas Edison, developed a conveyor belt system for a mine where Edison was experimenting with separation techniques and the first Robins Conveyor was installed in 1891. When the parties said "convey," they may well have been thinking about a "conveyor belt." Coal mining was a leading industry in Illinois, and a competitive one. Developments which made them more efficient could not go unnoticed. To be sure, conveyor belts are a lot better these days and longwall mining is more sophisticated but the holder of a right always "has the right to adapt it to the improvements of the age."[<a href="#l" class="l">10</a>] Practicing law in support of the coal industry is sometimes more challenging, and more interesting, than other practices because the coal industry is governed in part by law that is ancient and in part by extensive modern regulation. Add to that one additional, if occasional, aspect: ancient facts. Because the coal industry has been so important to the state of Illinois, there are extensive records and resources available to determine what occurred decades ago. There is usually no need to make assumptions about historical coal mining practices. You can look it up. The Illinois Basin coal industry has thus far survived three major attacks: the development of a more favorable labor climate in the American west, the passage of the Surface Mining and Conservation Reclamation Act (SMCRA) which inordinately impacted eastern coal, and the Clean Air Act which rendered much Illinois Basin coal undesirable. A fourth attack is coming-utility deregulation-which may encourage importation of electricity itself into the midwestern industrial belt and discourage coal-fired generation here, thus reducing one of this state's remaining advantages, low mine to generator transportation costs. Still, Illinois remains the sixth leading coal producing state and the fifth leading consumer of coal. Illinois has more underground reserves than any other state, four times that of Kentucky, and is second in total reserves, behind only Montana.[<a href="#l" class="l">11</a>] The mineral industry is historically a boom or bust business and there is still plenty of coal history to take place in Illinois. <a name="l"></a> 1. Decouvertes et Etablissements des Francais, I, p. 261. Published at Paris, 1681. 2. Recueil de Voyages. Published by Thevenot in France, 1681. 3. A New Discovery of a Large Country in America. Published by Thwaites in England, 1689, Vol. I, p. 152. 4. A History of America, published 1820, quoted in Illinois Coal Mining Investigations, State Geological Survey Bulletin 13, 1915. 5. Illinois Coal Mining Investigations, State Geological Survey Bulletin 13, 1915, p. 19. 6. Beck, Illinois Coal Mine Subsidence Law Updated 1985 S.I.U.L.J. 428 (1985). 7. Rocking M. Ranch v. Sahara Coal Company, 217 Ill.App.3d 162, 576 N.E.2d 1120, 160 Ill.Dec. 166 (1991). 8. Culp v. Consol. Pennsylvania Coal Co., 1989 WL 1011553, 1989 U.S. Dist. Lexis 8193, District Court (W.D. Pa. 1989). 9. See Bell v. Island Creek Coal Co., 722 F. Supp. 1370 (W.D. Va. 1989) and Wells v. American Electric Power, 48 Ohio App.3d 95, 548 N.E.2d 995 (1988). In Bell, the court noted that insofar as today's longwall mining was different from historical mining, it was different only in the degree of damage, not the kind of damage, it causes to the surface. The court stated that the coal operator could "of course, take advantage of developments in the operation of underground mines which modern technology may make available. " 722 F.Supp. at 373, quoting Phipps v. Leftwich, 216 Va. 706 at 713, 222 S.E.2d 536 at 541 (1976). The historical existence of longwall mining and other full extract mining is also revealed by old case law deciding disputes over it. See, e.g. Griffin v. Fairmont Coal Co., 59 W.Va. 480, 53 S.E. 24 (1905), Butterly Co. Ltd. v. New Hucknall Colliery Co. Ltd., A.C. 381, 99 L.T.R. 818 (1909), 1 Law Repts., Chancery Div. 37 (1910), Wesley v. Chicago, Wimington and Franklin Coal Co., 221 Ill.App. 427 (1920) and Cope v. United States Fuel Co., 229 Ill.App. 243 (1922). 10. Diller v. St. Louis, Springfield and Peoria Railroad, 304 Ill. 373 (1922). See also Bell v. Island Creek Coal Co., preceding footnote. 11. Source: Energy Information Administration, compiled by the National Mining Association in Facts About Coal, 1996-1997. <a href="http://www.rhine-ernest.com/attorneys/1">John E. Rhine</a>

2009-08-11T08:02:11Z

1997-11-01 4 Relevance of historical coal mining practices

2009-08-11T08:02:57Z

Commercial production of coalbed methane gas in the United States was very limited and sporadic until a few years ago. Coalbed methane was merely an enemy to the coal producer because dealing with it added danger and cost to underground mining and sometimes even caused a mine to permanently close. It is still a serious safety hazard, but now technology and the market have merged to make a former waste produce a valuable resource. In the United States, coalbed methane produced as a commercial energy source rose from virtually nothing in 1980 to an estimate of nearly one trillion cubic feet in 1996, produced by thousands of wells.[<a href="#l" class="l">1</a>] Commercial production began in Illinois a few years ago, but it is still certainly in the infant stage. Producers have faced the question addressed by this article: "Who owns the coalbed methane gas in Illinois?" Gas is a fugacious mineral and Illinois is among the "nonownership" states[<a href="#l" class="l">2</a>] so technically, the real question is "Who has the right to capture the coalbed methane?" There is no direct Illinois precedent but application of Illinois cases on ownership of the coal seam, and application of principles cited in coalbed ownership cases from our sister states, lead many who have studied the question to believe that in Illinois, it is the owner of the coal who has this right, at least so long as the gas remains in the coal or in the voids created by room and pillar mining. Indeed, those currently producing in Illinois have relied on this conclusion in leasing coalbed methane from the owner of the coal. Understanding the ownership question requires a knowledge of the nature of coalbed methane gas and how it is produced. Coalbed gas is almost entirely methane and is often referred to as coalbed methane, though it has traces of other hydrocarbon gases, such as propane and ethane. Because it is a component of coal, coalbed methane is not found in conventional gas reservoirs. It is always present in coal seams and even the smallest particle of coal contains at least some coalbed gas and when exposed will emit that gas. Conversely, coalbed methane contains microscopic coal dust which often must be filtered out for commercial use. Reducing pressure on coal by exposure causes the coalbed methane to desorb. The gas, which is commonly referred to as natural gas, is similar to coalbed methane, though identifiably different and of course without coal dust, and is generally found in strata below the coal veins. Coalbed methane can be produced from coal in place by various methods which cause fractures in the coal and the desorbed gas to flow to the wellbore. These methods may render the directly affected coal unmineable. Depending on a variety of factors, surrounding coal may have its mineability reduced but it may also be enhanced due to the reduction in dangerous gases. Indeed major coal operators are producing methane for the purpose of commercial sale and degasification. Coalbed methane is also produced by directly tapping into the rooms of abandoned room and pillar mines. The methane comes from the coal in the pillars, and simply accumulates in the voids. Another coalbed methane production method captures the gas released during longwall mining. It involves drilling to the longwall gob created by the fractures of strata above the roof which occur when all the coal is removed and subsidence occurs. Coal owners claim ownership of coalbed methane primarily on the simple point that coalbed methane is within the coal and is indeed a part of the coal, just like other carbon components of the coal. They point out that no one questioned the control of coalbed methane for the centuries they have vented it away. Methane gas must be removed under ventilation laws and it is impossible to mine coal without removing it and thus, the coal owners argue, it must necessarily belong to the owner of the coal Those who control the oil and gas claim ownership primarily on the equally simple theory that gas is gas, whether it occurs in stone, sand, a dome, or in coal. They do not need to own the limestone to produce gas from a limestone formation so, the argument goes, why do they need to own the coal to produce gas from it? Even surface owners have an argument for ownership, albeit a weak one, on the premise that at the time of severance of coal, oil and gas, production of coalbed methane could not have been contemplated, and therefore a grant of it was not intended by the parties. The leading case on the question of control of coalbed methane is U.S. Steel Corp. v. Hoge, 468 A.2d 1380 (1983), in which the Pennsylvania Supreme Court decided that the owner of the coal also owns the coalbed methane. This case is a leading case not only because it was the first to address the question but also because of its compelling analysis and the fact that it comes from a state with a long history of coal production, a long history of oil and gas production and a well-developed body of mineral law. The court first noted that coalbed methane is always found in coal and that methane which may be separately produced still originates as a component of the coal. The court then cited the long-established mineral law principle that gas is controlled by whoever has title to the property in which the gas is located and concluded: In accordance with the foregoing principles governing gas ownership, therefore, such gas as is present in coal must necessarily belong to the owner of the coal, so long as it remains within his property and subject to this exclusive domination and control. The landowner, of course, has title to the property surrounding the coal, and owns such of the coalbed gas as migrates into the surrounding property. We do not regard as inconsistent with this analysis the fact that the coal owner's interest in the situs occupied by the coal may be less than perpetual. In addressing questions of title to coal, and of rights of access to and through coal to secure its removal, this Court has not construed the conveyance of coal alone as a grant of a fee simple estate in the situs where the coal is located. Rather, the coal owner's interest in that situs has been regarding as being in the nature of an estate determinable, which reverts to the surface landowner by operation of law at some time subsequent to removal of the coal. Webber v. Vogel, 189 Pa. 156, 160, 42 A. 4, 5 (1899); Chartiers Block Coal Co. v. Mellon, 152 Pa. 286, 296-297, 25 A. 597, 599 (1892). The potential for reversion of the situs, however, does not diminish the character of the coal as property of its grantee, or of the gas contained therein as a mineral ferrae naturae resting inside the coal owner's property and falling within the dominion and control of the coal estate. The owner of coal may, as may any property owner, exercise dominion over his property so as to maximize his right of enjoyment thereover, within bounds limiting impingement upon the rights of other property owners. Chartiers Block Coal Co. v. Mellon, 152 Pa. at 295, 25 A. at 598. Hence the coal owner may mine his coal, extract the gas from it, or both. If he chooses to extract the gas, drilling as well as hydrofracturing are available means, so long as their utilization does not impinge upon the rights of owners of the surrounding property, since the damage to coal inflicted by these processes is within his dominion to inflict. (468 A.2d at 1383-84, emphasis by the court.) The Alabama Supreme Court in NCNB Texas National Bank v. West, 631 So.2d 212 (1993), did not fully agree with the rationale of U.S. Steel Corp. v. Hoge, but reached the same result as to coal found within the coal stratum. The court said that a grant of coal did not necessarily include coalbed methane gas, nor did a grant of gas. Nevertheless, "Careful analysis of the law of real property indicates that the ownership of coalbed gas depends upon its location at the time the gas is recovered or 'captured,' at which time it is reduced to possession." 631 So.2d at 223. The court found that so long as coalbed methane gas is within the coal seam, the holder of the coal estate has the right to extract it, but once the coalbed gas migrates out of the stratum in which it originated, the right to recover coalbed methane belongs to the holder of the gas estate. Vines v. McKenzie Methane Corp., 619 So.2d 1305 (Ala. 1993), rejected an argument that a surface owner who has conveyed the coal and other minerals can nevertheless claim control of the coalbed methane.[<a href="#l" class="l">3</a>] There have also been a handful of unreported lower court cases which follow the above precedents and ruled that, regardless of the theory applied, the owner of the coal estate controlled the coalbed methane. In Montana however, the state's highest court found that coalbed methane belonged to the owner of the gas. Carbon County v. Union Reserve Coal Co., 271 Mont. 459, 898 P.2d 680 (1995). The Montana court distinguished NCNB Texas National Bank v. West on the grounds it was based on the fact that Alabama was a nonownership state while Montana was an ownership-in-place state. It disagreed with the conclusions of the U.S. Steel Corp. v. Hoge court regarding the nature of the gas, finding that although methane was always found within coal, it was "not a chemical part" of the coal. Finally it relied on Montana statutory and regulatory definitions of "coal" and of "gas." As we have noted, Illinois is a nonownership state, but it adheres to another rule of law which makes the case for the coal owner's claim to coalbed methane perhaps stronger than the coal owners in any of the precedents discussed in this article, even where the methane gas is captured in mined out areas. That rule is the "container space doctrine." Illinois may be the only state to strictly follow this doctrine, which holds that the owner of the coal also owns the space it occupied. Schobert v. Pittsburgh Coal Co., 254 Ill. 474, 98 N.E. 945, 40 LRA NS 826 Ann. Cas. 1913B 1104 (1912), held that a coal owner retained full right to use the space formerly occupied by coal for transportation for coal, even from other lands. The court relied heavily on the Pennsylvania case of Lillibridge v. Lackawanna Coal Company, 143 Pa. 293, 22 A. 1035 (1891), quoting the following passage from it: If, then, the coal in place is pure corporeal hereditament, the title, in fee simple, to which passes to a purchaser by apt conveyance, there would be no more propriety in claiming a title in the grantor to the space it occupies than there would be in claiming a similar right in a vendor of the surface to the space developed by the vendee in digging the cellar and foundations of a house. We are altogether unwilling to adopt any such view of the rights of the parties in either of the cases. *** According to the averments of the bill, the tunnel or way is cut through a vein of coal two hundred feet below the surface and is twelve feet high, and extends in the vein all the way from the one side to the other of the tract. In this way or chamber, the plaintiffs, as owners of the surface, have no right or title. They have no access to it; they cannot use it; they are in no manner obstructed or injured by it. 254 Ill. at 479. Combining the empty container doctrine and the nonownership theory, it is difficult to escape the conclusion that, in Illinois, methane gas captured either directly from the coal or from the space formerly occupied by the coal belong to the owner of the coal. The coal seam could be viewed as just another gas producing formation and whoever owns that seam owns the right to capture gas from it, just as someone who owns, for example, the Aux Vases formation, controls the right to produce gas from it. Methane produced from longwall gob is a more difficult question. This gas has escaped the coal and even the coal stratum, due to collapse, some may be in the "space" formerly occupied by the coal. However, if recovery occurs in conjunction with longwall mining, the "escape" could be viewed as a planned release of methane from the coal, differing only in method from other in-place recovery methods, and thus the gas would be subject to capture by the coal owner. There are many questions of law which remain undecided in Illinois, but which counsel must nevertheless answer based on the weight of precedent from other states and application of established theory. This is particularly true in mineral law, where counsel and their clients often rely on foreign state decisions or arcane and sometimes ancient Illinois common law theories regarding title, leasehold, operations, duties and a whole host of other legal questions relating to development of Illinois fossil fuels. Until there is a reported decision from an Illinois court, those wanting to participate in the growing Illinois coalbed methane industry have little choice but to operate on their counsel's opinions regarding ownership where minerals have been severed and split into multiple estates and it is impractical, as it usually is, to obtain authority to capture coalbed methane from all possible claimants. Of course, an opinion of counsel is just an opinion and it is not a guarantee. All those involved in the already risky business of mineral production should be aware that there is added risk in the coalbed methane industry-ownership of the methane is not absolutely certain. <a name="l"></a> 1. In 1994, coalbed methane constituted five percent of the total natural gas production in the United States. 2. Murbarger v. Franklin, 18 Ill.2d 344, 163 N.E.2d 818 (1960), unlike solid minerals, which can be owned" title to oil and gas in a nonownership state does not pass until it is captured and reduced to possession. 3. See e.g. Rayborn v. USX Corp. (N.D. Ala 1987), unpublished, 1987 U.S. Dist. LEXUS 6920, aff'd without opinion 844 F.2d 796 (11th Cir. 1988). <a href="http://www.rhine-ernest.com/attorneys/1">John E. Rhine</a>, Rhine Ernest LLP

2009-08-11T08:04:37Z

1997-11-01 5 Ownership of Coalbed Methane

2009-08-11T08:04:37Z

The ISBA Mineral Law newsletter recently contained a summary of case law on the question of ownership of coalbed methane gas.[<a href="#l" class="l">1</a>] No Illinois precedent exists but decisions from other jurisdictions, combined with the container space doctrine followed by Illinois regarding the space formerly occupied by coal, led to the conclusion that in Illinois, the owner of the coal likely also owns the methane gas captured directly from the coal seam or from mined out areas. But the article went on to note: Methane produced from longwall gob is a more difficult question. This gas has escaped the coal and even the coal stratum, though, due to collapse, some may be in the "space" formerly occupied by the coal. However, if recovery occurs in conjunction with longwall mining, the "escape" could be viewed as a planned release of methane from the coal, differing only in method from other in-lace recovery methods, and thus, the gas would be subject to capture by the coal owner. A recent case has determined that gas produced from longwall gob wells belongs to the owner of the gas not the owner of the coal. In Hillsborough Holdings Corp., 207 B.R.. 299, a Florida Bankruptcy Court, applying Alabama law, reviewed a complex factual situation and complex ownership arguments from the ownership contestants. For several years the coal operator, pursuant to mining regulations, degasified the mine and vented the methane into the atmosphere. In 1981, it determined that the methane gas from the mine was marketable and it began to capture and sell it. Capture was by three methods: vertical wells directly into the coal seam, horizontal bore holes directly into the seam, and "gob wells" drilled into the pile of rocks that is crated when longwall mining causes the roof to collapse. The vertical holes were drilled at least five years prior to mining in order to allow time for the gas to escape the coal to be mined. The horizontal boreholes were made at the face in an active coal mine and provided additional degasification. In both methods the pipe was perforated in the coal seam. The court, citing Alabama precedent,[<a href="#l" class="l">2</a>] held that the methane gas captured by these methods belonged to the owner of the coal. The gas produced from the gob wells created a more difficult question, and there was conflicting testimony about the precise source of the methane captured there and even about where the actual capture occurred. Alabama is a nonownership state and title to gas does not pass until it is captured and reduced to possession.[<a href="#l" class="l">3</a>] The owner of the coal argued that the "capture" occurred when the coal operator exerted control over a gob well gas molecule by creating the pressure sink to cause the gas to desorb or move from its present location in the coal seam. The court rejected this argument. It pointed out testimony that by the time longwall mining occurred, the bulk of the gas had already been captured and that the gas from the gob may well come from higher seams not being mined. The court held that the coalbed gas migrated out of the coal stratum in which it originated and, therefore, the right to recover it passed to the owner of the gas. The rationale of Hillsborough Holdings Corp. could be applied, in part at least, to Illinois longwall gob methane. Illinois, like Alabama, is a nonownership state.[<a href="#l" class="l">4</a>] However, unlike Alabama, Illinois follows the container space doctrine, which holds that the owner of coal also owns the space it occupied prior to its removal.[<a href="#l" class="l">5</a>] Thus the question arises here, who owns coalbed methane gas produced from perforations in longwall gob which has fallen into that space? The coal owner which owns the space? What about perforations partly where the coal seam was and partly above it? (The rubble zone may actually exceed the height of the original coal seam.) Or could it be said that the "container" collapsed and therefore holds no gob? These may seem like angels on a pinhead type questions, but the importance of the factual detail surrounding the capture is illustrated by the Hillsborough Holdings Corp. court, which attempted to determine where "capture" occurred based on a trail which may or may not have started in the mined coal seam (depending on which expert is believed), traveled through the gob, a filter, flame arrestor, compressor, meter, and into a gas sales product line. One expert witness testified that methane gas was not controlled while it was travelling but only after it passes the first control valve. In another view, capture occurred when a gas molecule was freed from the coal and began the trail to the pipeline. In the end the court concluded that the capture was not within the originating coal seam. It is important to note that the court in Hillsborough Holdings Corp. refused to find that the coal operator was liable to the gas owner for conversion of the gas because the coal operator had a right, even a duty, to extract the gas to ventilate its coal mines under federal and state regulations. Instead the gas owner was allowed to recover under the equitable principle of unjust enrichment which entitled it to share in the profits on such sales after taking into account the cost borne by the coal owner in capturing and marketing the gas. The court sent the case back for hearing on the necessity of expenditures for coal mining obligations and "the benefits [the coal operator] received from the gob well degasification method, which is the ability to conduct its coal mining operations economically," adding intractable accounting, questions to the legal and geological Erebus which already exists for those trying to produce coalbed methane. The evidence in Hillsborough Holdings Corp. shows that no one really knows what is happening underground. What was known in that case was that the gas was coalbed methane and that it was recovered because of coal mining. The results in Hillsborough Holdings Corp. seemed absurd, both logically and in terms of public policy, in that the coal operator has a right to waste a natural resource but no right to place it into the stream of commerce. Incentive to utilize the gas is greatly reduced-much coalbed methane production is marginal anyway. Coalbed methane is one of the components of coal[<a href="#l" class="l">6</a>] and when it is recovered by the coal operator in conjunction with coal mining, it is most logical to conclude that it belongs to the coal owner. <a name="l"></a> 1. Mineral Law, Vol. 23, No. 2, April 1997, published by the Illinois State Bar Association. 2. NCNB Texas National Bank v. West, 631 So.2d 212 (1993). 3. NCNB Texas National Bank v. West, Id. 4. Murbarger v. Franklin, 18 Ill.2d 344, 263 N.E.2d 818 (1960). 5. Schobert v. Pittsburgh Coal Co., 254 Ill. 474, 98 N.E. 945, 40 LRA NS 826 Ann. Cas. 1913B 1104 (1912). 6. See U.S. Steel Corp. v. Hoge, 468 A.2d 1380 (1983). <a href="http://www.rhine-ernest.com/attorneys/1">John E. Rhine</a>, Rhine Ernest LLP

2009-08-11T07:59:38Z

1997-04-01 3 Ownership of Coalbed Methane Extracted from Longwall Mines

2009-08-17T14:01:55Z