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32 nd Mineral Law Conference Energy & Mineral Law Foundation CONFLICTS IN MINERAL DEVELOPMENT William M. Mattes, Esq. Dinsmore & Shohl LLP 175 S. Third.

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Presentation on theme: "32 nd Mineral Law Conference Energy & Mineral Law Foundation CONFLICTS IN MINERAL DEVELOPMENT William M. Mattes, Esq. Dinsmore & Shohl LLP 175 S. Third."— Presentation transcript:

1 32 nd Mineral Law Conference Energy & Mineral Law Foundation CONFLICTS IN MINERAL DEVELOPMENT William M. Mattes, Esq. Dinsmore & Shohl LLP 175 S. Third Street, Suite 1000 Columbus, Ohio Telephone: (614)

2 CONFLICTS IN MINERAL DEVELOPMENT COAL RIGHTS V. GAS RIGHTS A CASE STUDY American Energy Corporation, et al. v. Charles Datkuliak, et al. Monroe County Ohio Case Number: & 153 On appeal Seventh District Court of Appeals, Ohio Case Number: 07 MO 03 William M. Mattes, Esq. Dinsmore & Shohl LLP

3 THE FACTS 1922 Coal Severance Deed Coal severance deed granted: A.The right to mine all coal B.Without reservation or liability for damages to surface or improvements upon the surface C.The right and privilege to use necessary surface over coal to construct and maintain air shafts to ventilate mines

4 THE FACTS 1922 Coal Severance Deed Reserved The Grantors stated they: reserve unto themselves and their heirs and assigns the right to drill and operate through said vein of coal for oil and gas and any and all other minerals.

5 THE FACTS October 1984 Ohio Department of Natural Resources issued a Coal Mining Permit for the area

6 THE FACTS 1989 Datkuliaks – successor grantors of surface estate-leased to Oxford Oil the right to drill and operate a gas well.

7 THE FACTS Due to lack of production, Oxford sold well and all liability to the Datkuliaks in May of 1990 for $3,000 Complete waiver obtained

8 THE FACTS Consolidated Land Company purchased the coal rights Leased right to American Energy Corporation

9 THE FACTS American Energy Corporation applied for a Permit to plug ODNR said – American Energy Corporation does not own the well and cannot plug Datkuliaks refused to realistically negotiate for sale of well

10 THE LAWSUITS On the 6 th of May, 2007, Plaintiffs filed their lawsuit alleging several counts: 1.Declaratory Judgment 2.Preliminary and Permanent Injunction 3.Mandatory Injunction 4.Specific Performance 5.Conversion 6.Trespass 7.Private Nuisance

11 THE LAWSUITS One day later – instead of a compulsory Counter-Claim, Defendants filed a Complaint with a single count for Declaratory Judgment on the rights of the Parties

12 TRIAL COURT DECISION Matter of Deed Construction Key rulings: Deed language is clear and unambiguous Allowed Court to construe as a matter of law

13 TRIAL COURT DECISION Key rulings: Deed language constitutes a complete and clear waiver without reservation or liability for damage that may arise by reason of mining said coal or the operation of said mine or mines to the surface or to the improvements upon the surface over said coal… Damages were contemplated by the parties

14 TRIAL COURT DECISION Key rulings: Waiver of damages: does not conflict with right to drill for gas Continued use of gas well: interferes with right to mine ALL coal and effectively sterilizes coal Right to mine ALL coal coupled with Waiver of damages grants enormous entitlement to mine coal.

15 TRIAL COURT DECISION Key rulings: Construe as a matter of law Clear and unambiguous – deed is conclusively presumed to express intent of parties No extrinsic evidence may be admitted Language in deed is dispositive of all questions of intent

16 TRIAL COURT DECISION Reservation v. Exception In this case the Datkuliaks only had a reservation which allowed them to drill and operate through said vein of coal Coal owned by Plaintiffs Reservation – they did not keep title to any coal Exception – You except out a portion of what is granted – i.e. you may except or keep ownership in the coal around the well

17 TRIAL COURT DECISION Clear right to mine all coal Gas well sterilizes coal Reservation does not diminish ability to mine all coal Defendants ordered to: immediately plug and cap the gas well at issue to assure their well does not interfere with Plaintiffs mining and Defendants are further prohibited from interfering with Plaintiffs right to safely mine all of its said coal. The End! – not quite

18 ON APPEAL Datkuliaks raise several issues: Trial Court erred by determining right to mine coal is paramount to right to operate gas well Trial Court erred by refusing expert testimony Order to plug and cap without compensation is an unconstitutional taking without due process

19 CURRENT STATUS Well is capped and plugged at the Datkuliaks expense MSHA approval pending No decision on Appeal

20 APPLICABLE CASE LAW 1. Parties to deed stand in same position as parties to original deed. US Coal Co. v. Wayne Coal Co., (1919), 12 Ohio App. 1,4 2. Language from other deeds is irrelevant. Wiseman v. Cambria Products Co., (1989), 61 Ohio App.3d 294, Clear and unambiguous deed language is conclusively presumed to express the intent of the parties at time of execution of the deed. Sword v. Sword, (1993), 86 Ohio App.3d at 161, 166

21 APPLICABLE CASE LAW 4. No extrinsic evidence allowed to demonstrate intent of parties to a deed. Consolidated Land Co. v. Capstone Holding Co., (Ohio App. 7 District 2002), 2002 Ohio 7378 at p The right to drill for gas through a coal seam does not compromise the mining operators right to mine for coal. Redman v. Ohio Dept. of Natural Resources, 1997 Ohio App. LEXIS 4209 at Right to mine coal and waiver of damages provided in deed can be superior and dominant over surface rights of gas company. The Ohio Valley Coal Co. v. The East Ohio Gas Co., Court of Common Pleas, Belmont County, Ohio, (1992), Case No. 91-CIV-210

22 APPLICABLE CASE LAW 7. If gas operator interferes with mining operators ability to mine its coal, the coal estate is entitled to damages. Skivolocki v. East Ohio Gas Co., (1974), 38 Ohio St.2d New wells can be prevented by objections from coal estate. A.W. Tipka Oil and Gas, Inc. v. American Energy Corp., No (Div. of Mineral Resources Mgmt., ODNR Resources, June 28, 2006). 9. Reservation – entire title to property passes to grantee – just reserve a limited benefit. Clark v. Guest, (1896), 54 Ohio St.298,

23 APPLICABLE CASE LAW 10. Reservation – strictly construed against the grantor. Campbell v. Johnson, (1993), 87 Ohio App.3d Exception – grantor retains title to past excepted – grantee takes subject to exception. Campbell v. Johnson, (1993), 87 Ohio App.3d Intent should be manifested in deed. Smith v. Newell, (Ohio Ct. App. 2007), 2007 Ohio 72, p.24

24 Applicable Case Law 13. Deeds are strongly construed against Grantor. Pure Oil Co. v. Kindall, (1927), 116 Ohio St. 188, No extrinsic evidence allowed to prove latent ambiguity if document is clear and unambiguous. Shifrin v. Forest City Enterprises, Inc., (1992), 64 Ohio St.2d Pennsylvania Case Law Even if right to drill through coal for gas exists, it must be suspended during coal mining activities to prevent interferences with coal operators right to mine its coal. If interference occurs, surface owner must respond in damages. Chartiers Block Coal Co. v. Mellon, 152 Pa. 286, 297 (1893)

25 Attachments William M. Mattes, Esq. Dinsmore & Shohl LLP 175 S. Third Street, 10 th Floor Columbus, Ohio Telephone: (614) mattes.dinslaw.com 1.Court decision deed


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