Finite Resources, Ltd. v. DTE Methane Resources, LLCFinite Resources, Ltd. v. DTE Methane Resources, LLC
Appeal from the United States District Court for the Southern District of Illinois.
No. 3:19-CV-00802-SMY — Staci M. Yandle, Judge.
Before SCUDDER, KIRSCH, and JACKSON-AKIWUMI, Circuit Judges.
I
Finite is the majority owner of the Orient #1 Mine, an abandoned coal mine in Franklin County, Illinois. It owns 90.9% of the property, while the other 9.1% belongs to the Royal Talon Company. In 2004, DTE acquired a lease and interest in the Orient #1 Mine for the purpose of extracting coal mine methane from its section of the property. Coal mine methane is gas released from the coal and surrounding strata due to mining activities. Once treated as a safety hazard, coal mine methane is now considered a commercially valuable resource.
To extract coal mine methane from the property, DTE drilled two wells on its section of the Orient #1 Mine and, in 2007, obtained a vacuum permit from the Illinois Department of Natural Resources. The permit allowed DTE to use a vacuum pump to assist in extracting coal mine methane from the wells. DTE used a vacuum pump until 2012, and then assigned its operations to Keyrock. For more than ten years, Finite was unaware that defendants obtained a vacuum permit to extract coal mine methane from the wells on the property. Finite discovered defendants’ use in 2018, after a shut-in test revealed that coal mine methane had been drained extensively from the Orient # 1 Mine. At first, Finite petitioned
Defendants removed the case to federal court, where the district court granted summary judgment in favor of defendants. At summary judgment, the district court determined that, under the rule of capture, Finite was not the owner of the coal mine methane, which could not be owned until extracted. The district court explained that this rule applied regardless of whether extraction occurred by means of a vacuum pump. Because Finite‘s claims hinged on ownership, the district court concluded that the rule of capture foreclosed Finite‘s trespass, conversion, and accounting claims, as well as injunctive and declaratory relief. The district court also granted summary judgment to defendants on Finite‘s common law unitization claim because the IDNR previously denied Finite‘s petition for unitization. This appeal followed.
II
We review de novo a district court‘s ruling on a motion for summary judgment. Flexible Steel Lacing Co. v. Conveyor Accessories, Inc., 955 F.3d 632, 643 (7th Cir. 2020). Summary judgment is appropriate when “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
This case concerns two core principles of oil and gas law — the rule of capture and correlative rights. The rule of capture, which governs the ownership of natural resources including gas, provides that “gas that migrates from one property to another is subject to recovery and possession by the holder of the gas estate on the property to which the gas migrates.” Cont‘l Res. of Illinois, Inc. v. Illinois Methane, LLC, 364 Ill. App. 3d 691, 694 (5th Dist. 2006); see also Brown v. Spilman, 155 U.S. 665, 670 (1895). Stated simply, the first to “capture” the gas becomes the owner of the gas. See 3 JOYCE PALOMAR, PATTON AND PALOMAR ON LAND TITLES § 730.3 (3d ed. 2003). The rule of capture permits an owner to extract gas from the owner‘s land, even if the oil and gas migrated from a neighboring tract, and even when extraction depletes a single pool or gas reservoirs lying beneath adjoining lands. See Briggs v. Southwestern Energy Production Co., 224 A.3d 334, 337 (Pa. 2020).
Because the rule of capture allows an owner to extract gas from their property without restraint, it limits the “correlative” rights of neighboring owners. That‘s where the doctrine of correlative rights comes in. The doctrine of correlative rights protects adjoining landowners by permitting them to “go and do likewise.” Williams and Meyers, Oil and Gas Law, 4th ed., (1990) § 204.4; see also Stephens County v. Mid-Kansas Oil & Gas Co., 113 Tex. 160, 167 (1923) (“[i]f the owners of adjacent lands have the right to
On appeal, Finite does not dispute that the rule of capture governs coal mine methane. They insist that they “do not claim absolute ownership rights in [the] coal mine[‘s] gas.” Rather, Finite argues that the defendants’ use of a vacuum pump violates their correlative rights because it causes damage or waste. Therefore, Finite reasons, they should be able to proceed on their trespass claim. But we find no support for this contention.
To begin, the IDNR — the state agency tasked with regulating oil and gas — specifically issued a vacuum permit to defendants. Before issuing a permit, the IDNR considers an owners’ correlative rights.
Moreover, the limited authority to address this question suggests that the use of a vacuum pump to extract gas from the property is permitted and does not negate the rule of capture. See, e.g., Briggs, 224 A.3d at 337 (citations omitted) (“rule of capture applies even where devices such as pumps are used to bring the mineral to the surface and thereby reduce the production of neighboring wells“); Coastal Oil & Gas Corp. v. Garza Energy Trust, 268 S.W.3d 1, 13 (Tex. 2008) (“[an owner] may use hydraulic fracturing to stimulate production from his own wells and drain the gas to his own property“); Williams and Meyers, Oil and Gas Law, 4th ed., (1990) § 204.4 (under the rule of capture, the owner of a tract of land, no matter how small, “may by means of a compression or vacuum pump increase the production from his well though the result may be to drain his neighbor‘s property“). Finite has not identified any binding, or even persuasive, authority that calls this proposition into question. To the contrary, no court has held that correlative rights prevent the use of a vacuum pump, or that the use of the vacuum pump negates the rule of capture.
Instead, Finite argues that, to the extent it is unclear whether the doctrine of
We acknowledge that the Illinois Supreme Court has not yet ruled on the issue of vacuum pumps and correlative rights, but after considering the above factors, we do not find that this is a proper case for certification. Given the limited authority on this topic and the IDNR‘s regulation of the oil and gas industry, including the issuance of vacuum permits, we doubt the issue in this case is likely to recur. Finite also has not shown how certification would be outcome determinative. See Allstate, 285 F.3d at 639 (explaining that fact specific issues, as well as issues upon which there is no serious doubt or issues that are not dispositive of the case, are not candidates for certification). Finite raised claims such as trespass that depend on possession of coal mine methane. Finite conceded that they do not claim absolute ownership of the gas in this case, and the doctrine of correlative rights does not grant Finite the ownership rights that they need to sustain any of their claims. And although Finite argues that the doctrine of correlative rights purportedly prevents the use of a vacuum pump and therefore negates the rule of capture, the IDNR‘s actions and other sources suggest otherwise. We therefore have no serious doubt about the answer to the question. Finite‘s request to certify is denied.
III
In sum, the rule of capture controls and the doctrine of correlative rights does not prevent the use of vacuum pumps or otherwise vitiate the application of the rule in this case. We decline to certify to the Illinois Supreme Court a question about whether the doctrine of correlative rights prevents the use of a vacuum pump. Accordingly, we AFFIRM the district court‘s judgment.