Use of Vacuum Pump to Facilitate Production of Coal Mine Methane Did Not Negate Rule of Capture

Professor Keith B. Hall
LSU Law School

Finite Resources, Ltd. and certain other companies (collectively, “Finite”) own both the surface estate and the coal in most of the area occupied by an abandoned coal mine in Franklin County, Illinois. Royal Talon Company (“Royal”) owned the remaining portion of the abandoned mine. In 2004, Royal granted a lease to DTE Methane Resources, LLC (“DTE”) to extract coal mine methane [1] from Royal’s portion of the mine. [2]

DTE drilled two wells to extract methane from the portion of the mine covered by its lease. [3] In 2007, DTE applied for and obtained a permit from the Illinois Department of Natural Resources (“DNR”) to use a vacuum pump on the two wells. [4] Under Illinois regulations, use of a vacuum pump to produce oil or gas is prohibited, unless the operator obtains a permit. [5] DTE proceeded to use a vacuum pump to facilitate production of methane. [6] In 2012, DTE assigned its lease interest to Keyrock Energy LLC, which continued to operate the wells and use a vacuum pump on the wells. [7]

Finite asserts that it first learned about DTE’s and Keyrock’s use of a vacuum pump in 2018. [8] Finite petitioned DNR for a compulsory unitization order that would create a single unit that included its portion of the mine and that where Keyrock was operating, but DNR denied the petition. [9] Finite then sued DTE and Keyrock in state court, asserting claims for trespass, conversion of methane, an accounting, and common law unitization. [10] The defendants removed the case to federal court and moved for summary judgment, arguing that the rule of capture applied and precluded the claims asserted by Finite. [11] The district court granted the motion and Finite appealed. [12]

On appeal, Finite argued that the defendants’ use of a vacuum pump violated Finite’s correlative rights and negated application of the rule of capture. [13] The United States Court of Appeals for the Seventh Circuit rejected Finite’s arguments. The appellate court noted that the Illinois DNR had specifically granted the defendants a permit to use a vacuum pump. [14] Further, oil and gas jurisprudence from other states has held that neither the use of crude oil pumps nor processes such as hydraulic fracturing will negate the rule of capture. [15] In addition, the Seventh Circuit quoted the Williams and Meyers oil and gas treatise for the proposition that use of a vacuum pump does not negate the rule of capture. [16] Finally, the court noted that Finite had not provided any authority—binding or persuasive—that use of a vacuum pump would negate the rule of capture. [17] For these reasons, the Seventh Circuit affirmed the district court’s judgment dismissing Finite’s claims. [18]

[1] Coal mine methane is methane released from coal in a mine. See “About Coal Mine Methane” at U.S. EPA website, https://www.epa.gov/cmop/about-coal-mine-methane. Coal mine methane is distinguished from coalbed methane, which is extracted from coal seams that have not been mined. Id. [2] Finite Resources, Ltd. v. DTE Methane Resources, LLC, 2022 WL 3274105 *1 (7th Cir. 2022). [3] Id. [4] Id. [5] 62 Ill. Admin. Code 240.1010. [6] Finite Resources, 2022 WL 3274105 at *1. [7] Id. [8] Id. [9] Id. [10] Id. [11] Id. at *2. [12] Id. [13] Id. [14] Id. at *3. [15] Id.

[16] Id. [17] Id. One Texas appellate court decision has held that, because Texas law prohibited the use of vacuum pumps on wells, the rule of capture did not apply in favor of a party that had used a vacuum pump. See Peterson v. Grayce Oil Co., 37 S.W.2d 367 (Tex. App.—Forth Worth 1931). The Texas Supreme Court itself has commented on that case and stressed that the logic of the appellate court’s holding was premised on the use of vacuum pumps being illegal. Coastal Oil & Gas Corp. v. Garza Energy Trust, 268 S.W.3d 1, 13 n.39 (Tex. 2008). Because Illinois regulations allow an operator to use a vacuum pump, provided the operator has a permit to do so, 62 Ill. Admin. Code 240.1010, and the defendants had such a permit, 2022 WL 3274105 at *1, the Texas jurisprudence does not favor Finite’s position.

[18] 2022 WL 3274105 at *1. The Seventh Circuit also denied Finite’s request that the court certify the legal issue to the Illinois Supreme Court. Id. The Seventh Circuit stated that it was reasonably certain that it had reached the right result under Illinois law and that it was not likely the issue would come up again. Id. at *3-4.

Keith B. Hall

Keith B. Hall

Nesser Family Chair in Energy Law, Campanile Charities Professor of Energy Law, and John P. Laborde Endowed Professorship in Energy Law 3 and 4 Director of the Energy Law Center; Director of the Mineral Law Institute; Professor of Law

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