Daily GPI / NGI All News Access

Court Hands Coalbed Victory to Amoco, Royalty Owners

Court Hands Coalbed Victory to Amoco, Royalty Owners

The 7-to-1 decision by the U.S. Supreme Court in favor of Amoco Production Co. in the case that pitted the company and numerous royalty owners against the Southern Ute Indian Tribe is good news for coalbed methane gas production, observers said.

"The Supreme Court did the right thing," trumpeted Wyoming Governor Jim Geringer in a press release praising the court's decision. Wyoming contended an earlier court decision favoring the Southern Ute tribe would have "retard[ed] coalbed gas activities for years."

The Supreme Court reversed an earlier decision of the United States 10th Circuit Court of Appeals and found that the historical private mineral holders own the gas in the coal formation within the Southern Ute Indian Tribe's reservation boundaries.

In July the appeals court awarded ownership of the gas contained in the 200,000 acres of Colorado land to the tribe (see Daily GPI July 27, 1998). The Southern Ute Tribe's original litigation was filed in 1991 when it argued that it not only owns the coal which is found on its reservation, as required by the Coal Land Acts of 1909 and 1910, but also the gas that the coal produces. The oil companies argued that all the minerals except coal belonged to the original homesteaders of the land and that they acquired the minerals from the homesteaders legally. The appellate court decision reversed a 1994 ruling by a lower court that was in favor of Amoco and about 3,000 gas royalty owners.

In October federal lawmakers passed legislation to grandfather coalbed methane lease contracts and block the potential negative impact of the July appellate court ruling in the Amoco-Southern Ute case (See Daily GPI Oct. 16, 1998). The legislation was crafted to soften the impact of the appellate court decision that changed 80 years of federal policy by concluding the gas within coal is part of the coal itself and owned by the coal owner, i.e. the federal government directly and the Southern Ute Indian tribe indirectly.

"In a sense, Wyoming could have just gone along with the original decision in the 10th Circuit Court, since we would have received royalty payments over and above income generated from private holdings," Geringer said in his statement this week. "But, we were committed to something more than just collecting windfall revenues to the state. We have private property owners who are successors to the patents granted under Congressional Acts dating back to 1909 and 1910. Those property owners have justifiably relied upon the long defined principle that natural gas, including coal bed methane, produced from their lands belongs to them. The simple fact was coal is coal and gas is gas."

An Amoco spokesman said the company is now directing its accounting department to start processing payments to royalty owners that had been put in escrow until the case's resolution. A settlement agreement between the company and the Southern Ute tribe is still in the review phase, he said.

©Copyright 1999 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.

ISSN © 2577-9877 | ISSN © 1532-1231
Comments powered by Disqus