The Oil and Gas Addendum

Let’s assume you own a 115 acre farm in Greene County. The farm has been in the family since the early 1900’s.  You own both the oil and gas and the coal underlying the farm. In 1915, your great-grandfather entered into a coal lease with XYZ Mining. Pursuant to that lease, XYZ Mining operated an extensive “room and pillar” mine under your farm and the adjacent parcels (the “Athens Mine”).  As part of the mining process, XYZ Mining constructed a large subterranean tunnel to transport the raw coal out of the Athens Mine and onto the surface. The tunnel surfaces on your neighbor’s parcel – Mr. Stockton. In 1985, XYZ Mining halted its coal extraction operations within the Athens Mine and the mine was decommissioned, closed and sealed. XYZ Mining installed a number of vertical vents on your property and Mr. Stockton’s to allow the methane gas to safely escape from the abandoned mine. The tunnel, although sealed, remains in place and runs directly under your farm.

In October 2025, you discovered that your neighbor, Mr. Stockton, entered into a “coal bed methane” lease with Green Energy, Inc. (“GEI”). Instead of drilling a vertical gas well into the Athens Mine coal seam, GEI simply uncovers the tunnel, seals the vents where methane in the Athens Mine was previously escaping to the surface and installs equipment on Mr. Stockton’s property to stimulate the flow of methane gas out of the Athens Mine via the tunnel. The old tunnel is essentially repurposed as a large, horizontal well bore.

You immediately contact GEI and demand that they stop removing the coal mine methane gas from that portion of the Athens Mine under your property. They decline and insist that their use and operation of the “tunnel” is authorized by something known as the “rule of capture.” You are frustrated, angry and confused. How can GEI remove methane gas from that area of the Athens Mine beneath your property?  A recent decision from the Indiana Court of Appeals addressed the novel question of who can extract methane gas from an idle coal mine. 

Before we address the substance of the court’s opinion in Pioneer Oil Company, Inc. v. Gibson County Coal LLC, et al. (No. 24-A-PL-02878, Indiana Court of Appeals, October 9, 2025), a brief primer on coal bed methane (“CBM”) gas and coal mine methane (“CMM”) gas is warranted.

CBM and CMM, sometimes called “coal seam” gas, are naturally occurring forms of methane gas found within coal seams.  Unlike conventional natural gas, which accumulates in porous rock formations, CBM is “adsorbed” onto the surface of coal. The coal acts like a sponge, holding the methane molecules within its geologic matrix. To produce CMB, operators typically drill vertically into the coal seam itself and remove water from the formation. This process, known as dewatering, reduces the pressure in the coal seam and allows methane to “desorb” and flow into the wellbore. As the pressure within the coal seam declines due to the pumping of water from the coal seam, both gas and produced water will come to the surface. Since 1983, Pennsylvania law has recognized that the owner of the coal seam also owns the CBM contained in the seam itself.  See, U.S. Steel Corp. v. Hoge, 468 A.2d 1380 (Pa 1983) (opining that gas present in the coal seam “must necessarily belong to the owner of the coal, so long as it remains within his property and subject to his exclusive dominion and control”).

Alternatively, underground mining itself can cause the methane to release from the coal and accumulate in the mine voids created by coal extraction.[1]  This is referred to as CMM gas. When underground mining activity ceases, passive surface venting is often required to mitigate the buildup of CMM in the idle mine voids.  Diffused CMM is highly combustible and must be carefully managed. Such venting typically consists of vertical vents in the mine voids where methane – which is lighter than air – can escape.  Technological advancements have now made the capture and production of diffused CMM commercially viable. But who “owns” the diffused CMM?

At issue in Pioneer Oil was an idle coal mine located in Gibson County, Indiana.  The “room and pillar” mine ceased operations in 2019 and the 1500-foot service tunnel into the mine, known as “the Slope”, was also sealed. The Slope was the primary access point into the underlying Gibson North Mine and surfaced on what was known as the “GCC Tract.” Given the amount of diffused CMM remaining in the Gibson North Mine, the operator installed surface vents on two adjacent parcels (i.e. the “Pioneer Tract” and “GCC Tract”) above the former mine.  Following the decommissioning of the Gibson North Mine, the surface owner, Heidenreich Farms, entered into two separate CMM leases with different operators.  Each CMM lease covered a distinct and separate area of the former mine: the Pioneer Tract Lease and the GCC Tract Lease.

The dispute arose in 2022 when the operator of the GCC Tract Lease (“GCC”) unsealed the Slope and installed equipment on the GCC Tract to artificially stimulate the flow of methane gas from the idle Gibson North Mine. GCC also sealed the surface vents on the GCC Tract.  No vertical wells were drilled by GCC.  Instead, GCC relied upon the repurposed Slope as a conduit and/or channel to facilitate the movement of CMM gas from the voids underneath the Pioneer Tract and into the methane processing equipment on the GCC Tract. The operator of the Pioneer Tract Lease (“Pioneer”) objected and claimed that GCC gas no right or authority to remove the CMM gas from the voids under and within the Pioneer Lease Tract.  Pioneer argued that the GCC Tract Lease only authorized the removal of gas from that portion of the Gibson North Mine under the GCC Tract Lease.  Since the Slope was being used to collect and siphon CMM gas from the voids under the Pioneer Lease Tract, Pioneer argued that it was really no different than an improper deviated wellbore.[2] GCC refused to suspend its CMM operations. Pioneer then filed suit in March 2023 asserting claims for subsurface trespass, conversion and civil conspiracy.

GCC defended the suit on essentially two grounds. First, GCC argued that Pioneer’s claims were barred by the “rule of capture.”  This well-recognized rule acknowledges that due to the transient and fluid nature of oil and gas, ownership of the oil and gas does not occur until they are reduced to “actual control.”[3] Because Pioneer did not legally “own” the uncaptured CMM gas within the voids, GCC argued it could not be liable for the removal of the same by virtue of its lawful activities on the GCC Tract Lease.  Second, GCC argued that no trespass occurred because there was never any physical intrusion onto or into the Pioneer Lease Tract. The mere act of unsealing of the Slope could not constitute a trespass: all of GCC operations and activities occurred exclusively on the GCC Tract Lease. And the mere fact that CMM gas flowed out via the Slope was immaterial, as per the “rule of capture.”  Since GCC never entered any portion of the Slope that was under the Pioneer Lease Tract, no trespass occurred.  GCC filed a motion to dismiss which was granted by the trial court on October 30, 2024. 

On appeal, the Indiana Court of Appeals affirmed.  First, the Court of Appeals observed there can be no subsurface trespass without an actual physical encroachment upon the Pioneer Tract Lease. Since GCC “captured methane utilizing the preexisting Slope without physically entering the Pioneer Lease Tract”, no physical intrusion occurred and, therefore, no trespass claim could be asserted.  Next, the panel opined that Pioneer’s conversion claim was precluded by the “rule of capture.”  Because Pioneer did not have the “exclusive right to the underground gas flowing behind the two parcels,” the “rule of capture” insulated GCC from liability: 

“[t]he rule of capture is a principle of oil and gas law that recognizes the migatory nature of oil and gas and provides that the first to capture (i.e. raise to the surface and sever from the earth) through operations on their own land becomes the owner of the captured natural resource”

See, Pioneer Oil Company v. Gibson County Coal, LLC, at 11. The Pioneer Oil panel implicitly rejected Pioneer’s argument that the Slope was essentially being used as a horizontal wellbore and instead viewed the Slope as just another void that existed beneath both parcels[4].  And since the uncaptured CMM gas was naturally flowing in and between the voids underlying both parcels, GCC’s effort to extract the same clearly fell within the protective sphere of the “rule of capture.”

Finally, the Court of Appeals rejected Pioneer’s contention that the absence of a Department of Natural Resources (“DNR”) well permit foreclosed application of the “rule of capture.”  Pioneer had argued that GCC’s repurposed use of the Slope was akin to the drilling and operation of a new wellbore.  Such use and operation, like most oil and gas jurisdictions, required a properly issued permit. GCC had no DNR permit to operate a new well or the Slope.  As such, Pioneer argued that GCC’s operations were improper and, therefore, outside the protections of the “rule of capture.” The panel was unpersuaded and simply adopted GCC’s argument that the Slope was not a wellbore under Indiana law. As such, no DNR permit was needed or required.

A couple observations about the Pioneer decision.  First, the Court of Appeals correctly applied the “rule of capture”, provided that the repurposed Slope was not a wellbore.  The author questions this conclusion. Functionally, the Slope was being used as a large horizontal wellbore.  If GCC had drilled a horizontal well into the Pioneer Lease Tract without authority, it is clear that the “rule of capture” would be inapplicable. See, Supreme Court Decision in Briggs v. Southwestern Energy is “Win” for Pennsylvania Landowners (January 15, 2020); See also, Briggs v. Southwestern Energy, 224 A.3d 334 (Pa. 2020) (“. . . if there is such a physical invasion the rule of capture will not insulate a developer engaged in hydraulic fracturing from trespass liability”). Why should repurposing an underground tunnel be treated any differently?

Second, the panel’s causal rejection of Pioneer’s “no well permit” theory is disconcerting. The result may have been different under Pennsylvania law. For instance, Section 3211(a) of the Oil and Gas Act states that a person may only “drill, operate or alter” a well after a proper permit has been issued. See, 55 Pa.C.S. § 3211(a).[5]  Pennsylvania law further defines a “well” as a “bore hole drilled or being drilled for the purpose of or to be used for producing, extracting or injecting gas . . . .” See, 58 Pa.C.S. §3203. A wellbore has also been defined as a “tunnel or circular hole made by boring for the purpose of obtaining water, oil or gas.” See, Effective Exploration LLC v. Pa. Land Holdings, Inc., 2:14-cv-845, (W.D. of Pa. May 8, 2015). And it is worth noting that the Coal Refuse Disposal Control Act defines a “coal bed methane well” as a hole or well which is “sunk, drilled, bored or dug into the earth” for the production of gas from a coal seam or “a mined-out area.” See, 52 P.S. § 30.53. Given these definitions, it is unclear whether a former subsurface casement or tunnel like the Slope could be characterized as a “well” under the Pennsylvania law.  But in light of the repurposed use of the Slope, a plausible argument could be made under Pennsylvania law that a well permit would be required to operate the tunnel as a conduit for CMM extraction. And the absence of a permit could negate the protections of the “rule of capture.”

In short, the issue of who can extract CMM gas is fluid and evolving. As operators and investors seek to monetize unused natural resources such as abandoned coal mines, Pennsylvania courts will likely be confronted with a similar fact pattern in the near future. Nonetheless, landowners who live in heavily coal mined areas should be mindful of potential CBM or CMM leasing opportunities.

If you have any questions about coal mine methane gas or a coal mine methane lease, please call Robert J. Burnett at 412-916-3552 or rburnett@hh-law.com

[1] “Room and pillar” mining is an underground method used to extract coal where a grid of “rooms” is excavated while leaving behind “pillars” of the original coal seam to support the mines roof. These “rooms” or voids can collect CMM after mining operations cease.

[2] One commentator has observed that “[I]f a well deviates from the vertical and produces oil or gas from under the surface of another landowner, that is a trespass, for which the adjacent owner is entitled to an accounting . . .” See, 1 Summers Oil and Gas § 2.4 (3d ed).

[3] The “rule of capture” has been recognized in Pennsylvania since the 1880’s and generally precludes liability for drainage of oil and gas from under another’s land.  See, Mineral Run Oil v. United States Forest Services, 670 F.3d 236 (3^rd Cir. 2011) (the rule of capture “permits an owner to extract oil and gas even when extraction depletes a single oil and gas reservoir lying beneath adjoining lands”).

[4] Pioneer had asserted the GCC’s use of the Slope was “substantively no different than if GCC had drilled a brand new directional well into Pioneer’s parcel without authorization . . .”

[5] A separate well permit is required under Pennsylvania law to drill or operate a coal bed methane well.