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Foundation Coal Resources Corp. v. Dep't of Environmental Protection

April 27, 2010

FOUNDATION COAL RESOURCES CORPORATION, PENNSYLVANIA LAND HOLDINGS CORPORATION, AND REALTY COMPANY OF PENNSYLVANIA, PETITIONERS
v.
DEPARTMENT OF ENVIRONMENTAL PROTECTION AND PENNECO OIL COMPANY, INC., RESPONDENTS



The opinion of the court was delivered by: President Judge Leadbetter

Argued: October 14, 2009

BEFORE: HONORABLE BONNIE BRIGANCE LEADBETTER, President Judge, HONORABLE DAN PELLEGRINI, Judge, HONORABLE ROBERT SIMPSON, Judge, HONORABLE MARY HANNAH LEAVITT, Judge, HONORABLE JOHNNY J. BUTLER, Judge.

OPINION

Foundation Coal Resources Corporation, Pennsylvania Land Holdings Corporation, and Realty Company of Pennsylvania (collectively, Foundation Coal) petition this court for review of the order of the Environmental Hearing Board (EHB), upholding the issuance of seven oil and gas well permits by the Department of Environmental Protection (DEP) to Penneco Oil Company, Inc. (Penneco). The issues are whether Foundation Coal had standing to file objections under Section 202 of the Oil and Gas Act*fn1 as a "projected and platted but not yet being operated" coal mine, to the permits issued by DEP to Penneco; and whether DEP improperly issued the permits without the conditions Foundation Coal proposed in order to avoid undue interference with or endangerment to its coal mine. After review, we affirm.

Foundation Coal is the owner of massive coal reserves in Greene County, known as the Greene Manor and CNG coal reserves covering approximately 45,000 acres. Foundation Coal intends to mine what is known as the Pittsburgh Seam located roughly 1000 to 1200 feet below the earth's surface; and possibly thereafter, the Sewickley Seam located 80 to 90 feet above the Pittsburgh Seam. Foundation Coal plans to call this future mine the Foundation Mine, and it predicts that it will take approximately three years for the permit review process and then another two years for the issuance of the permit before it can commence operations at the mine. Foundation Coal estimates that its coal mining operations at the Foundation Mine will continue for about 40 years once actual coal extraction has begun.

Penneco has approximately 20,000 acres of oil and gas leases in Greene County, a substantial portion of which intersects with Foundation Coal's coal reserves. The oil and gas producing formations that Penneco seeks to target are generally located 3000 to 4000 feet below the surface and below the coal producing formations identified as the Pittsburgh and Sewickley Seams.

Therefore, Penneco would have to drill through Foundation's proposed mine to reach the oil and gas reserves. Between 2005 and 2007, Penneco filed permit applications to drill seven new wells, four of which are oil wells (identified as Braddock 1, 2, 3 and 4), and three of which are natural gas wells (identified as Gaines, Porter and Orndoff).

In accordance with Section 201(b) of the Oil and Gas Act, 58 P.S. § 601.201(b), Penneco identified Foundation Coal as the "owner of record or operator of all known underlying workable coal seams . . . in the tract to be drilled." Section 201(b) requires that Penneco provide Foundation Coal with copies of maps showing the proposed well locations. Foundation Coal objected to the permits, even though it did not yet have an operating coal mine on the Pittsburgh and Sewickley Seams, claiming it had "an already projected and platted but not yet being operated" coal mine as identified in Section 202(b) of the Act, 58 P.S. § 601.202(b). This section provides:

In case any well location referred to in section 201(b) is made so that the well when drilled will penetrate anywhere within the outside coal boundaries of any operating coal mine or coal mine already projected and platted but not yet being operated or within 1,000 linear feet beyond such boundaries and the well when drilled or the pillar of coal about the well will, in the opinion of the coal owner or operator, unduly interfere with or endanger such mine, then the coal owner or operator affected shall have the right to file objections in accordance with section 501 to such proposed location. [Emphasis added.]

First, Foundation Coal alleged that the proposed oil and gas wells could jeopardize the safety of its miners; and second, that the proposed wells could impose economic burdens on it. Foundation Coal ultimately asked DEP to include the following special conditions with each permit, which are set forth here:

1. After the well authorized hereby is drilled, the permittee shall promptly conduct a directional deviation survey from the point of penetration at the surface to the target depth so as to locate the well bore precisely at each workable coal seam. Upon completion of the survey, it shall notify in writing each coal owner, operator and lessee that such has been completed. Thereafter it shall promptly provide a copy to the Department and to any coal operator, owner or lessee requesting one.

2. The permittee will obtain a well log (i.e., a standard gamma, density and neutron well log) from the surface to the target depth so as to accurately be able to identify the depth and thickness of potentially workable coal seams. Upon completion of the well log, it shall notify in writing each coal owner, operator and lessee that such has been completed. Thereafter it shall promptly provide a copy of the well log from the surface to a depth of 1,500 feet to the Department and to any coal operator, owner or lessee requesting one.

3. For purposes of this permit condition 3, the plugging requirement solely addresses the manner of plugging and not the timing of when the well is to be plugged and abandoned. Such timing shall be determined by the permittee, an agreement of the respective parties, court order or by Department action. When the well is plugged and abandoned, and in order to ensure safety and maximum recovery of resources, it will be done in a manner so as to allow the unimpeded and safe mining at a future date of all workable coal seams. For purposes of this permit a "workable" coal seam shall be any coal seam located at a depth above 1,500 feet from the surface, and which is either (1) greater than 36 inches in thickness at the well bore, or (2) determined by the Department after consultation with the coal operator, owner or lessee to be considered part of a proven (measured) or probable (indicated) recoverable coal reserve. With respect to all such workable coal seams, the plugging and abandonment procedures will result in the removal of all metal from within the well bore for a distance of at least two times the seam thickness. The metal removal area shall extend equal distances above and below the coal seam. Metal may be removed by pulling the casing, milling the casing, or such other procedures as may be available at that time to remove all metal. After all such metal is removed, the well bore will be filled with a solid plug of expanding cement from the total depth to the surface. Notwithstanding the foregoing, the well shall at all times be plugged and abandoned in a manner which will allow unimpeded mining through the well bore in accordance with applicable Commonwealth or federal laws and regulations in force at the time of the plugging and abandonment.

4. After removal of the metal from the workable coal seams, and prior to plugging with cement, the permittee shall obtain a log, video or use another appropriate technique to confirm removal of the metal. Upon completion of the log or other method to confirm removal of the metal from the workable coal seams, it shall notify in writing each coal owner, operator and lessee that such has been completed, and thereafter promptly provide a copy to the Department and to any coal operator, owner or lessee requesting one. The Certificate of Well Plugging (or any other similar form subsequently instituted by the Department) prepared and delivered to the Department shall explain therein (1) the procedure used to remove the metal from the workable coal seams, and (2) the method used thereafter to confirm such removal.

5. The requirements of the foregoing special conditions are in addition to all other requirements imposed by this Permit and/or applicable current and future statutes and regulations.

May 21-24 and June 6, 2007 Hearings, Exhibit A-34; Reproduced Record (R.R.) at 1364a-1365a. Although at the time it lodged its objections, Foundation Coal had not yet submitted a coal mining activity permit application (known as a "CMAP") to DEP for the Foundation Mine, DEP nevertheless held four conferences pursuant to Section 501(a) of the Act, 58 P.S. § 601.501(a), "for the purpose of discussing and endeavoring to resolve by mutual agreement" Foundation Coal's objections.*fn2

At the conclusion of the conferences, DEP granted all of Penneco's permit applications. The permits included two conditions derived from Foundation Coal's proposed special conditions: first, Penneco was required to notify Foundation Coal when it was going to conduct well logging and allow Foundation Coal to conduct a deviation survey and well logging at the same time; and second, Penneco was required to notify Foundation Coal when it intended to plug a well and allow Foundation Coal to inspect the well to ensure compliance with all applicable regulations for the safe mining of the well bore. Foundation Coal appealed the grant of Penneco's permits to the EHB.

At the hearing, the parties presented documentary and testimonial evidence over a five-day period. The EHB issued a 70-page adjudication, which included 176 findings, 26 pages of discussion and 21 conclusions of law. After discussing the factual and procedural history of these consolidated appeals, the EHB made the following relevant findings:

17. Section 202 of the Oil and Gas Act provides that coal owners and operators may submit written objections to a well permit application if the well is proposed to be located in one of three places: 1) within the boundaries of an operating coal mine; 2) within the boundaries of a projected and platted but not yet operating coal mine; and 3) within one thousand linear feet of the boundaries of 1 or 2. (N.T. 12)

18. If the coal operators meet one of the above criteria they are entitled to have a Section 501 conference to discuss their objections and try to resolve them. (N.T. 12)

20. Foundation Coal objected to the oil and gas permits on two grounds: 1) the proposed wells could jeopardize the safety of miners, and 2) the proposed wells could impose economic burdens on them. They also said the wells['] location could be in future longwall mine panels and if they were, that would necessitate mining around the wells. (N.T. 12, 31; Exhibits C-12(a)-(e), C-15, A-34)

21. Appellants asserted in their objections that if drilled without Appellants' proposed special conditions, the wells would "(1) cause a large block of coal to be rendered forever unmineable, thus the Commonwealth's natural resources will not be protected and maximum recovery achieved; (2) impose higher costs on the coal owners; (3) potentially endanger the safety of personnel and facilities employed in the mining of coal, and (4) adversely impact the property rights of the coal owners in the area." (Exhibit C-12(a)-(d))

22. Appellants' Proposed Special Conditions are virtually identical for each well. (N.T. 30-31; Exhibit C-12(a)-(d)) . . . .

27. When an oil and gas well is "mined around," the Pennsylvania [DEP] requires a pillar which is a block of coal of adequate size around the well to protect the well from damage and prevent gas from migrating into the coal mine. (N.T. 32-33) . . . .

29. Appellants further proposed requiring that Penneco plug the wells by removing steel casing from boreholes either by pulling it out or by grinding or milling it. (N.T. 36-37, 405, 414, 428-429; Exhibits C-12(a)-(d), A-34)

30. Plugging involves injecting expandable cement into an oil or gas well to prevent the vertical migration of liquids and gases either to the surface or into any ground water or seams of coal penetrated by the well. Well plugging enhances mine safety because it prevents fluid movement into the coal seams. (N.T. 49-50; 58 P.S. § 601.210 and 25 Pa. Code §§ 78.91-78.98)

31. Foundation Coal's objections were the first objections the Pennsylvania [DEP] ever received from a coal company that was neither mining coal nor had even filed a permit to mine coal. (N.T. 34) . . . .

36. Foundation Coal wanted a deviation survey to be conducted on each of the wells. Foundation Coal requested logging through the coal seams. (N.T. 36)

37. A deviation survey indicates how far off plumb or true vertical the well bore itself is and it would be run from the surface to the bottom of the well to show what the deviation was within that well bore. The logging would be done through the coal ...


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