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Energy and Environment Monitor

Northern District Decisions Add Uncertainty to Subsidence Law

June 24, 2016

By: Chris M. Hunter

In Schoene v. McElroy, the Federal District Court for the Northern District of West Virginia recently issued a series of unpublished opinions calling into question the ability of mine operators to rely on severance deeds as a legal basis for employing longwall miners. Additionally, the Court abandoned the long-standing rule in West Virginia that the less costly option between repair of subsidence damage or compensation for loss of value is the appropriate measure of damages in subsidence cases.  Instead, the Court held that the choice between repair or compensation should be left to the surface owner.

January 29, 2016 Order Denying Defendants’ Motion for Summary Judgment

We previously reported on the Court’s January denial of McElroy Coal Company’s (“McElroy”) motion for summary judgment. https://www.jacksonkelly.com/2016/02/federal-court-in-wv-voids-severance-deed-waiver-because-longwall-mining-not-contemplated-in-1902.html.  To briefly summarize the facts at issue in Schoene, McElroy’s mining rights derived from a 1902 severance deed granting an express right to subside the surface “without leaving any support for the overlying stratas and without liability for injury….” In longwall mining, two widely spaced tunnels are driven into the coal seam from the main haulage tunnel and are linked by a third tunnel. The longwall shearer then advances by removing the coal seam in its entirety, thereby widening the third tunnel.

 

Longwall

Given that the entire coal seam within the bounds of the longwall panels is removed, surface subsidence within the footprint of the panel virtually guaranteed to occur. With room and pillar mining, subsidence can occur where the pillars left to support the mine roof are “pulled” or “second-mined.”  It is difficult, however, to precisely predict when the pressure from the overlying strata will crush the remaining pillars and cause surface subsidence.  Thus, the surface impacts of longwall mining are not necessarily different from those observed in high extraction room and pillar mining, just more predictable.

McElroy longwall mined beneath or near the Schoene property, and the Shoenes sued, alleging both statutory and common law claims. McElroy moved for summary judgment, arguing that the waiver in the severance deed absolved it of liability for common law damages. 

In the Court’s January Order, Judge Bailey ruled that McElroy’s severance deed did not insulate it from liability for subsidence damage because the mining method it employed—longwall mining—was not contemplated by the parties to the 1902 deed. The Court cited Cogar v. Sommerville, 379 S.E.2d 764 (W.Va.1989) for the proposition that mining methods not contemplated at the time of the waiver may not be used. The Cogar Court’s focus, however, was not whether pre-SMCRA waivers were sufficient to immunize an operator against the common law claims at issue in Schoene or whether the parties to the severance deed reasonably contemplated a particular method of mining.  Rather, in Cogar it was a given that the deed waiver at issue was valid as to common law liability for subsidence:

Here, the old severance deeds waived only surface damages and did not authorize mining operations within three hundred feet of an occupied dwelling.  We believe that permitting a waiver of the three-hundred-foot requirement in these circumstances would be contrary to one of the purposes of Congress in enacting the federal surface mining law-the protection of property owners…It would be impossible to conceive that the parties to old severance deeds would have any contemplation of waiving future statutory rights.

Id. at 769 (emphasis added).

The inquiry in Cogar was actually whether broad-form deed waivers also immunized a mine operator against the statutory protections of the West Virginia Surface Coal Mining and Reclamation Act limiting the zones in which mine operators could conduct surface mining:

The dispositive issue here is whether the broad form waivers contained in the two severance deeds, see notes 2 and 3, supra, constitute a waiver of the petitioners’ statutory right not to have mining operations conducted within three hundred feet of an occupied dwelling.

Cogar v. Sommerville, 379 S.E.2d 764, 767 (W.Va.1989)(emphasis added).

West Virginia’s surface mining rules provide surface owners the right to either have subsidence damage repaired or be compensated for resulting diminution in property value unless the operator possesses a specific waiver of that right. W.Va. Code St. R. § 38-2-16.2.c.2.  To the extent Cogar analyzed the contemplation rule, its analysis focused on whether the parties to the deed could have contemplated a waiver of statutory rights that did not yet exist.  Therefore, Cogar’s applicability to Schoene should be limited to whether the 1902 deed waiver was sufficient to waive statutory protections that did not yet exist in 1902. Cogar simply did not focus on the type of mining method employed and whether longwall mining was contemplated at the time the mineral estate was severed from the surface. 

The Court went on to state that it was “not suggesting that the validity of the waiver prevents the mining of the coal…the coal producer must pay the landowner for all of the damages caused by the mining operations.” Given that the mining had already occurred, the surface owner was suing for damages rather than an injunction to prohibit longwall mining. Just what the Court’s ruling might mean for permit applicants seeking State approval to conduct longwall mining is unclear.

February 18, 2016 Order Denying Request for Reconsideration

On February 18, 2016, the Court denied McElroy’s Motion to Reconsider its summary judgment ruling. In its Motion to Reconsider, McElroy urged the Court to follow two unpublished decisions previously issued out of the Northern District: Sendro v. Consolidation Coal Co., 1991 WL 757723 (N.D. W.Va. March 27, 1991) and Giza v. Consolidation Coal Co.,Civil. No. 85-0056-W(S) (N.D. W.Va. Dec. 12, 1991)(unpublished), aff’d, 972 F.2d 339 (4th Cir. 1992).  The Court’s reliance on Cogar is all the more puzzling given how similar the facts of Sendro are to those in Schoene. In Sendro, a 1902 deed waiver granted the right to subside without leaving any support, and the successor in interest to the surface tract claimed that the 1902 waiver did not grant Consolidation Coal Co. the right to conduct longwall mining.  Faced with the same facts at issue in Schoene, the Sendro Court previously held that “the language of the 1902 deed is so clear and unambiguous that the owner of the surface could only have intended to waive the right to subjacent support whatever method of coal removal was employed.” Id. at *7 (emphasis added).  In declining to follow Sendro and Giza, however, Judge Bailey simply stated that the unpublished decisions were non-binding and that the Court disagreed with their reasoning.

June 9, 2016 Order Denying Motion to Alter or Amend  

After a jury awarded the Plaintiffs $547,000, McElroy filed a Motion to Alter or Amend Judgment, arguing that the jury should not have been allowed to consider common law damages.  In its Order Denying Motion to Alter or Amend, the Court reiterated that the longwall method of mining is different from conventional room and pillar mining in that there is only the “possibility” of subsidence with the room and pillar method, whereas subsidence is a “virtual certainty” with longwall mining.  The Court did not, however, explain why the odds of subsidence are significant in analyzing the effect of the deed waiver.  The severance deed at issue in the case clearly gave McElroy the right to subside without leaving any support for the surface estate.  As the Court in Sendro observed, the type of damage—subsidence—was clearly contemplated by the parties to the 1902 deed.   Whether the company exercises its right to subside via longwall mining or high extraction room and pillar mining should be irrelevant.

As discussed above, Judge Bailey’s January 29th order suggested that the deed construction issue was simply a damage issue—that longwall mining could proceed provided the mine operator paid damages.  In its June Opinion, however, the Court stated that West Virginia law is clear: “[m]ining methods not contemplated at the time of the severance deed may not be utilized.”  6/9/16 Opinion, p. 2 (emphasis added).  Just how the two opinions can be reconciled is unclear.

The Court next considered the appropriate measure of damages. As noted earlier, West Virginia’s surface mining rules require mine operators to “either correct material damage resulting from subsidence caused to any structures or facilities by repairing the damage or compensate the owner of such structures or facilities in the full amount of the diminution in value resulting from the subsidence.” W.Va. Code St. R. §38-2-16.2.c.2. While the Court correctly noted that the rule is silent as to which entity makes the selection between repair or compensation, the general rule as to the measure of damages recoverable for subsidence has been recovery of the cost of repairs, if such cost is not greater than the diminution in value of the premises. Jarrett v. E. L. Harper & Son, Inc., 235 S.E.2d 362, 365 (W.Va. 1977).  Thus, the rule has historically been interpreted as providing for the less expensive of the two options. 

The Court, however, held that the rule should be interpreted liberally in favor of surface owners and interpreted it to provide for the “repair of the damage to the extent that it is reasonable and feasible with the diminution in value award to the extent that the damage cannot reasonably be repaired.” 6/9/16 Opinion, p. 4.  The Court went on to state that “the election of remedies in such a situation is a choice to be made by the injured landowner and not the coal operator who caused the problems in the first instance.” Id

The opinion is unpublished and, therefore, not controlling precedent in any court. The widespread adoption of the Court’s conclusions, however, could complicate future longwall permitting and create uncertainty as to the measure of damages associated with surface subsidence.

The article was authored by Chris M. Hunter, Jackson Kelly PLLC.

 

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