CHICAGO – Keyrock Energy of Thompsonville owned methane that it pumped out of someone else’s mine, U.S. Seventh Circuit appellate judges decided on Aug. 11.
“Simply put, the first to capture the gas becomes the owner of the gas,” Circuit Judge Candace Jackson-Akiwumi wrote.
The circuit affirmed District Judge Staci Yandle of Benton, who found the rule of capture applied to gas migration whether artificial or not.
Yandle granted summary judgment on conversion and trespass claims last year.
Jackson-Akiwumi found the rule applies even if gas migrated from a neighboring tract and even if extraction depleted a pool or reservoir beneath adjoining lands.
She found a doctrine of correlative rights permits neighbors to do likewise.
Finite Resources of Harrisburg owns 90.9 percent of the former Orient Number One mine property in Franklin County.
DTE Methane acquired rights by assignment and leases in 2004, and began operating two wells.
In 2007, the state natural resources department granted DTE Methane a permit to operate a vacuum pump.
In 2012, DTE Methane assigned its interests to Keyrock Energy.
Finite Resources discovered the pump in 2018, and applied to the state for unitization status that would require sharing of proceeds.
The state denied it and Finite sued Keyrock in 2019, in Franklin County.
Finite sought judgment on trespass and conversion, an injunction against the pump, an accounting of operations, and a unitization order.
Keyrock removed the suit to district court.
In 2020, Finite counsel James Johnson of Evansville, Ind. claimed the rule of capture applied to coal beds but not coal mines.
He claimed coal bed methane is trapped in a seam and removed by stimulating coal through fracturing in a more traditional drilling technique.
“Coal mine methane depletion from a mine void is extremely rapid because the gas is trapped in an otherwise empty space,” Johnson wrote.
Keyrock counsel Benjamin Riddle of Louisville, Ky. moved for summary judgment under the rule of capture.
Yandle followed the logic of Fifth District state appellate judges who found a holder of coal rights holds rights to a void after coal is mined.
That court found coal bed methane must therefore still be part of the coal estate.
Yandle found no court has held that artificial extraction negates or alters the rule of capture in any way.
She quoted a legal manual stating an owner may drill as many wells on his land as he pleases and isn’t liable to owners whose lands he drains.
The manual stated an owner might by means of a compression or vacuum pump increase production though the result might be to drain his neighbor’s property.
She found no dispute that the state granted Keyrock a permit and hadn’t revoked it or subjected it to sanctions for 14 years.
She found Finite asked her to take action when an agency charged with addressing the issue refused to take action.
On appeal, Finite claimed the pump violated its correlative rights by causing damage or waste.
“But we find no support for this contention,” Jackson-Akiwumi wrote.
She found the state’s permit alone suggested that the pump didn’t violate rights or cause damage or waste.
Circuit judges Michael Scudder and Thomas Kirsch concurred.
Former district judge Patrick Murphy of Marion acted as Keyrock’s local counsel.