Peabody

Haul trucks transport coal at Peabody Energy’s North Antelope Rochelle mining complex in the Powder River Basin in 2012. The Wyoming Supreme Court weighed the rights of oil and gas and coal leases on same patch of land. 

Contributed

The Wyoming Supreme Court threw up its hands Thursday in a contested case between a coal company and an oil and gas firm over the right to mine.

Peabody Energy, the largest coal producer in Wyoming, and Berenergy, a private, Denver-based oil company, each argue that they have superior rights to mine coal and drill for oil and gas, on the same patch of Wyoming.

Their federal leases essentially overlap and the minerals cannot be economically mined at the same time, according to the court documents.

The companies sought court decisions to solve their conflict, both arguing that various statutes and policies governing leasing of federal minerals gave their businesses priority. The federal agency that oversees leasing of federal minerals in Wyoming has not been part of the legal disagreement between Peabody and Berenergy.

That’s a problem, according to Justice Michael K. Davis, who wrote the Supreme Court’s decision. The conflict requires a federal decision, Davis wrote. The court acknowledged the importance of the outcome of this dispute to both firms, and to the local county that receives the revenue.

“Berenergy seeks to protect its right to produce oil and gas, a right it has even though those wells are apparently near depletion,” Davis wrote.

Peabody would make substantially more money from mining the coal, not to mention benefit the community from revenue and jobs, he added.

“Nonetheless, the state courts are not the proper forum to settle the rights of these federal lessees,” he said.

The case came to the Supreme Court after the companies appealed a two-year-old compromise brokered by the District Court of Campbell County.

It had Berenergy shutting down its wells and allowing Peabody to extract the coal when it was ready to do so. Peabody would then have to compensate the oil and gas company, and put $13 million in escrow to cover the oil and gas firm’s potential costs down the line.

But, neither company was pleased with the decision. Berenergy protested halting oil production, for what amounted to first use rights for the coal firm, despite Berenergy’s preexisting lease rights, while the coal firm contested fronting $13 million, an amount that they alleged was extortionist.

The myriad policies regarding who is right all lead back to the feds, the Interior Department, or even Congress, the justice wrote.

Both the Wyoming Supreme Court decision, and the District Court decision from 2015, note the curiosity of the Bureau of Land Management’s absence in the dispute.

“Political issue can be thorny, but in this case, the political issue of who should go first (oil and gas or coal) when concurrent mineral development on federal lands may not be possible, seems to be a thorny issue that the BLM should be answering,” the District Court decision states. “The entity charged with protecting the public’s interest has decided to sit this one out.”

A spokeswoman for the agency did not comment on the details of the case.

“BLM Wyoming is currently reviewing the recently issued decision to determine our next steps,” said Spokeswoman Kristen Lenhardt.

The case concerns the area of the North Antelope Rochelle Mine, just south of Wright. It is the largest surface coal mine in the country and employed more than 1,300 miners as of September.

A spokeswoman for the company said she could not comment on the details of the case, but said that Peabody looks forward “to working with the appropriate parties to resolve the issue.”

A message left at the Berenergy offices in Denver was not returned by press time.

Wyoming Supreme court has remanded the case back to the lower court to figure out if the federal agency can join.

“If it cannot be made a party or does not choose to participate, which is very likely,” Davis wrote. “The district court must dismiss the case.”

Follow energy reporter Heather Richards on Twitter @hroxaner

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Energy Reporter

Heather Richards writes about energy and the environment. A native of the Blue Ridge Mountains in Virginia, she moved to Wyoming in 2015 to cover natural resources and government in Buffalo. Heather joined the Star Tribune later that year.

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