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UNITED STATES STEEL CORPORATION v. MARY JO HOGE (08/27/82)

filed: August 27, 1982.

UNITED STATES STEEL CORPORATION, APPELLANT,
v.
MARY JO HOGE, JESSIE LEE COWAN, HARVEY C. COWAN AND MARY L. CUNNINGHAM AND KINLOCH DEVELOPMENT CORPORATION, MARY L. CUNNINGHAM, HARRY A. MURDOCK, JR., AND DONIS M. MURDOCK



COUNSEL

Gilbert J. Helwig, Pittsburgh, for appellant.

R. Wallace Maxwell, Pittsburgh, for appellees.

Cercone, President Judge, and Brosky and Hoffman, JJ.

Author: Cercone

[ 304 Pa. Super. Page 185]

This is an appeal from the final decree of the Court of Common Pleas of Greene County*fn1 dissolving a preliminary injunction against certain drilling operations, quieting title in coalbed gas*fn2 contained in a certain coal seam in favor of the surface owners (which coalbed gas was the object of the temporarily enjoined drilling), and permitting the surface owners and their gas lessee to drill into the coal seam and to extract the gas contained therein, subject to certain restrictions imposed by the chancellor to prevent damage to the coal owner's interest in the coal.

We deal here with a question of first impression: the ownership of coalbed gas. Appellant, U.S. Steel, is the owner of the coal. The appellees are the surface owners of two tracts of land in Greene County, and their gas and oil lessee is Cunningham. The coal seam in question is known as the Pittsburgh or River seam and lies approximately 800 feet below the surface. The first surface tract is owned by appellees Mary Jo Hoge, Jessie Lee Cowan and Harvey C. Cowan; the second tract is owned by Harry A. Murdock, Jr. and Donis A. Murdock. (Hereinafter referred to jointly as surface owners or appellees). The appellees' predecessors in title relinquished their rights to the coal underlying the surface tracts by severance deeds to appellant's predecessor

[ 304 Pa. Super. Page 186]

    in title in the early part of this century.*fn3 However, the surface owners reserved "the right to drill and operate through said coal for oil and gas without being held liable for any damages." Appellee Cunningham obtained an oil and gas lease to the Hoge-Cowan tract in December of 1976; and she obtained a similar lease to the Murdock tract in June of 1977.*fn4 The respective lessors granted Cunningham

[ 304 Pa. Super. Page 187]

"all of the oil and gas and all of the constituents of either in and under" the surface tracts. In return, Cunningham promised to deliver to her respective lessors one-eighth "of all methane gas as well as . . . all gas and casing head gas produced and sold" under the respective leases.

U.S. Steel opened its Cumberland Mine in August of 1977 with the intention of eventually recovering coal in that portion of the Pittsburgh seam underlying both the Hoge-Cowan and Murdock tracts, which lay several miles distant from the mine's face. In January of 1978 Cunningham, the gas and oil lessee, began drilling a well on the Hoge-Cowan tract for the express purpose of recovering coalbed gas contained in the subjacent Pittsburgh coal seam. Cunningham drilled for the same purpose on the Murdock tract, beginning on March 31, 1978. Upon learning of the drilling operations and Cunningham's apparent intention to stimulate production of coalbed gas through a method known as hydrofracturing,*fn5 U.S. Steel initiated these consolidated actions in equity to terminate this instrusion and trespass upon its coal seam property. It sought injunctive relief based on the alleged irreparable injury which would occur if hydrofracturing of the coal seam were performed, and further sought to preserve its right, title and ownership of the coal. U.S. Steel also sought a determination of the ownership and

[ 304 Pa. Super. Page 188]

    right to develop the coalbed gas in the portion of the Pittsburgh seam beneath the two surface tracts.

The chancellor granted the preliminary injunction pending a disposition on the merits. Appellees filed preliminary objections which were subsequently denied. On March 24, 1980, after extensive testimony and argument, the chancellor entered his adjudication and decree nisi, permitting appellees to drill for coalbed gas contained in appellant's coal seam, but forbidding them from using any hydro-fracturing methods to obtain the gas. U.S. Steel filed timely exceptions. The chancellor denied the exceptions and filed an opinion and final decree in the matter on September 29, 1980.

On appeal, U.S. Steel questions the propriety both of the chancellor's conclusions of law and of the final decree.*fn6 Essentially U.S. Steel argues that the chancellor

[ 304 Pa. Super. Page 189]

    erred in concluding that the title to the coalbed gas or the right to recover it did not pass to the coal owners by the coal severance deeds in question. It puts forward four arguments based on the severance deeds, which would place the right to recover, or title to the coalbed gas in them and not in the surface owners. A fifth argument sounds the call of public policy. We will consider these arguments seriatim.

In our discussion of the coal severance deeds we are mindful of the applicable rules of construction. Those rules require that the instrument be construed to give effect to the intention of the parties to the instrument. See In re Conveyance of Land Belonging to City of DuBois, 461 Pa. 161, 335 A.2d 352 (1975); Hardes v. Penn Charcoal & Chemical Co., 175 Pa. Superior Ct. 431, 107 A.2d 176 (1954). The rules of construction further require that a deed should be considered in its entirety, giving effect to all its terms and provisions, and reading the language in light of conditions existing at the time of its execution. In re Conveyance of Land Belonging to City of DuBois, supra; St. Michael & Archangel Russ. O.G. Cath. Ch. v. Uhniat, 451 Pa. 176, 301 A.2d 655 (1973). If the language of the deed prove ambiguous then it will be interpreted mostly strongly against the drafter of the deed. New Charter Coal Co. v. McKee, 411 Pa. 307, 191 A.2d 830 (1963); Lacy v. Montgomery, 181 Pa. Superior Ct. 640, 124 A.2d 492 (1956). However, this latter rule of construction may not be employed as some talismanic solution or magic formula for the construction of the ambiguous language or resolution of the dispute since, first and foremost, we must always keep an eye to the parties' intentions.

[ 304 Pa. Super. Page 1901]

.

U.S. Steel argues that its fee simple interest in the coal embraces everything in the geological stratum comprising the coal vein. It bases its argument on the supposed precedent of several ancient cases. Since the case of Caldwell v. Fulton, 31 Pa. (7 Casey) 475 (1858) coal ownership has been considered in the nature of a corporeal hereditament, severable from the surface, and attended with all the attributes of other forms of land ownership.*fn7 In Lillibridge v. Lackawanna Coal Co., 143 Pa. 293, 22 A. 1035 (1891), the question arose whether the surface owner could enjoin the coal owner from transporting coal mined under an adjacent tract through

[ 304 Pa. Super. Page 191]

    shafts and passageways cut in the coal under the first tract. The Court held that since the coal was a corporeal hereditament under Caldwell v. Fulton, supra, and that no injury to the complainant was either proved or averred, the coal owner could not be enjoined as the complainant desired. In its opinion in Lillibridge the Court stated the following:

The proposition that the plaintiffs have a fee in the chamber or space left by the removal of the coal, antagonistic to the right of the defendant to use it, is a novel one. No authority is cited to support it, and it seems quite incongruous with the admitted ownership and estate of the defendant in the coal displaced. Under all the decisions, the coal in place was absolutely owned in fee-simple by the defendant. In a state of nature, the coal necessarily occupied space. How could the defendant own the coal absolutely and in fee-simple, and not own the space it occupied? Or, how is it possible to conceive of such a thing as the ownership of the space independently of the coal? If the coal in place is a part of the very substance of the soil, more corporeal than the surface, as was said in Caldwell v. Fulton, how can the law regard the space which the substance occupies, as other than the substance itself? Of course, such an idea is incapable of practical application, except upon the theory that the coal is not a corporeal substance to be sold and delivered, but that only an incorporeal right to remove it passes to the grantee under a conveyance. And such is the real nature of the appellants' argument. It could not be otherwise. Certainly, if such were the nature of the defendant's right, the argument and the ...


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