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Court Says Natural Gas Rights Don't Flow with Coal Rights

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By Tanya Roth, Esq. on April 30, 2012 4:01 PM

The Eighth Circuit Court of Appeals ruled last week on whether or not the holders of coal rights had a right to natural gas from the mine as well.

The case involves a mine in Sebastian County, Arkansas.

A deed from the 1960s conveyed surface and coal rights for the mine, which were eventually acquired by Sebastian Mining in 2010.

In a different deed, executed before the deed eventually acquired by Sebastian Mining, a document conveyed interest in oil, gas and other mineral rights, with the exception of coal rights to several parties. This deed eventually went to several parties.

The key issue in the case related to the royalties from natural gas. Seeing as the rights to the land had been split over the years, and there was no specific provision made in any deed as to who owned the rights to natural gas, the issue went to trial.

EnerVest Operating filed the initial lawsuit in federal district court. The company argued that it should not have to pay gas royalties to Sebastian Mining, the company that held coal rights to the mine, nor to a group of people and companies who held the mineral rights to the mine.

The group of people and companies holding the rights include Andromeda Partners, Ream Interests, Anadarko Petroleum, and Jack and Deborah Crissup.

In defense of its case, Sebastian Mining stated that the economic value of coal bed methane gas was unknown at the time the mineral rights were sold. At that point, they argued, the seller had no intention for the mineral rights to include natural gas rights.

The three-judge panel of the Eighth Circuit Court of Appeals agreed with the lower court in holding that the deed transferring the mineral rights included the rights that extended to vapors and liquids-- essentially to any substance which was "embraced within the meaning of the word 'mineral.'"

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