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

“The Supreme Court did the right thing,” trumpeted WyomingGovernor Jim Geringer in a press release praising the court’sdecision. Wyoming contended an earlier court decision favoring theSouthern Ute tribe would have “retard[ed] coalbed gas activitiesfor years.”

The Supreme Court reversed an earlier decision of the UnitedStates 10th Circuit Court of Appeals and found that the historicalprivate mineral holders own the gas in the coal formation withinthe Southern Ute Indian Tribe’s reservation boundaries.

In July the appeals court awarded ownership of the gas contained inthe 200,000 acres of Colorado land to the tribe (see Daily GPI July 27, 1998). The Southern UteTribe’s original litigation was filed in 1991 when it argued that itnot only owns the coal which is found on its reservation, as requiredby the Coal Land Acts of 1909 and 1910, but also the gas that the coalproduces. The oil companies argued that all the minerals except coalbelonged to the original homesteaders of the land and that theyacquired the minerals from the homesteaders legally. The appellatecourt decision reversed a 1994 ruling by a lower court that was infavor of Amoco and about 3,000 gas royalty owners.

In October federal lawmakers passed legislation to grandfathercoalbed methane lease contracts and block the potential negativeimpact of the July appellate court ruling in the Amoco-Southern Utecase (See Daily GPI Oct. 16, 1998). Thelegislation was crafted to soften the impact of the appellate courtdecision that changed 80 years of federal policy by concluding the gaswithin coal is part of the coal itself and owned by the coal owner,i.e. the federal government directly and the Southern Ute Indian tribeindirectly.

“In a sense, Wyoming could have just gone along with theoriginal decision in the 10th Circuit Court, since we would havereceived royalty payments over and above income generated fromprivate holdings,” Geringer said in his statement this week. “But,we were committed to something more than just collecting windfallrevenues to the state. We have private property owners who aresuccessors to the patents granted under Congressional Acts datingback to 1909 and 1910. Those property owners have justifiablyrelied upon the long defined principle that natural gas, includingcoal bed methane, produced from their lands belongs to them. Thesimple fact was coal is coal and gas is gas.”

An Amoco spokesman said the company is now directing itsaccounting department to start processing payments to royaltyowners that had been put in escrow until the case’s resolution. Asettlement agreement between the company and the Southern Ute tribeis still in the review phase, he said.

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