This article originally provided by The Observer-Reporter

March 28, 2008

Property owner files suit over gas extraction

By Bob Niedbala, Staff writer
niedbala@observer-reporter.com

WAYNESBURG - A group of property owners have filed a $20 million lawsuit against CNX Gas Co. LLC and Consol Energy Inc. claiming the companies have extracted coal-bed methane gas from their properties without compensating them.

The suit was filed Wednesday in Greene County court by Earl Kennedy, Elizabeth Kennedy, Charles G. Ely II, James Sisley, Joanna Storer, John O. Harker and the Earl Kennedy Trust.

The plaintiffs collectively own two tracts of land in Gilmore Township that together contain more than 842 acres. They have retained ownership of the underlying oil, gas, water and mineral rights, the suit claims.

During the years, various tracts of Pittsburgh seam coal beneath the properties were sold to the Consolidation Coal Co. In neither of the tracts, however, was all the Pittsburgh seam coal conveyed to Consolidation Coal, the suit said.

The companies began drilling for coal-bed methane gas in 2005, with five wells that included horizontal and vertical drilling.

The plaintiffs claim the companies have drilled into, and extracted gas from the Pittsburgh seam as well as from surrounding strata, including the "Rider Coal Zone," which was not conveyed to Consolidation Coal and is owned by the plaintiffs.

The Rider Coal Zone (RCZ) is about 4.23 feet thick and is above the Pittsburgh seam. It is separated from the Pittsburgh seam by about 21/2 inches of shale, the complaint said.

In submissions to the state Department of Environmental Resources, "Defendants stated that their intention was to drill their wells within the Pittsburgh or river vein of coal as well as the RCZ seam," the suit states.

The suit claims the companies had no right to extract coal-bed methane gas from the Rider Coal Zone nor from the Pittsburgh seam.

The companies apparently believe they can extract coal-bed methane from the Pittsburgh seam based on a 1983 decision by the Pennsylvania Supreme Court in U.S. Steel v. Hoge, the lawsuit said.

That decision gave the owner of the coal the right to coal-bed methane within the seam.

The plaintiffs maintain, however, the Hoge decision is invalid in light of a 1999 U.S. Supreme Court decision in Amoco Production Co. v. Southern Ute Indian Tribe.

In that case, the suit said, the court held that coal-bed methane is not owned by the coal owner but by the owner of the gas estate.

"Our clients maintain the companies have captured gas outside their ownership by going outside the seam," said attorney John Smith, one of the attorneys representing the plaintiffs.

"And if the court employs the analysis used in the U.S. Supreme Court decision in Amoco, all the coal-bed methane gas is owned by our clients," he said.

The lawsuit asks for damages, including punitive damages, in an amount in excess of $20 million. It also seeks a permanent injunction to halt further coal-bed methane extraction from the property.

Consol spokesman Joseph Cerenzia said Thursday that it is the company's policy not to comment on lawsuits. A spokesman for CNX, which is owned primarily by Consol, could not be reached for comment.

Copyright Observer Publishing Co.