Oil, coal companies clash over production

By Heather Richards
Casper Star-Tribune
Via Wyoming News Exchange
 
CASPER — An oil and gas firm is seeking help from the courts to stop Peabody Energy from destroying wells in a case of conflicting rights to produce coal or oil and gas.
Berenergy and the coal giant have overlapping lease rights in Campbell County, and they have fought over who gets the right to develop minerals for more than three years. The dispute traveled all the way to the Wyoming Supreme Court before the Bureau of Land Management made a final decision in August in favor of coal.
Berenergy’s wells are nearing the end of life, whereas Peabody’s coal would be part of one of the largest existing open surface mines in the country.
The Denver-based oil and gas firm is appealing the BLM’s decision to favor Peabody’s leases and wants the courts to keep the coal firm from continuing to plug Berenergy’s wells until the Interior Board of Land Appeals has made a final decision, which is due Nov. 4.
“The BLM does not have the power to ignore its own regulations, violate the first-in-tine operating rights it granted to a federal oil lessee, and act without statutory authorization in order to serve the private economic interests of a federal coal lessee,” Berenergy’s lawyers argued in court docs. “Nonetheless, that is precisely what the BLM did.”
A spokeswoman for Peabody Energy said the firm is in compliance with the Bureau of Land Management decision from August.
“Peabody fully supports this decision and will oppose all requests by Berenergy for a finding that the BLM decision is not valid or should not be effective,” Charlene Murdock said in an email Monday.
In August, the BLM suspended the oil and gas leases that would interfere with coal production, with the caveat that the coal firm would pay for plugging and abandoning the seven affected oil and gas wells. Berenergy would be allowed to restart production once Peabody is done mining.
State representatives of the Bureau of Land Management said Monday they could not discuss ongoing litigation. But in a letter to the fossil fuel companies explaining the final decision, Deputy State Director Duane Spencer noted a largely economic calculation.
“There is no dispute that the value of the coal over the Berenergy Federal oil and gas leases is many order of magnitude greater than the value of the remaining oil and gas reserves,” he wrote.
Peter Forbes of Crowley Fleck is lead attorney for Berenergy. He said it’s unfair to choose one lease over the other based on the amount of money coal can offer.
“It’s basically like every small business that sits there and a big business comes along and says well we’re worth a lot more than you,” he said. “Our view is it’s a matter of property rights. The U.S. government has to honor its contracts as well as anybody else.”
The courts have not proved a helpful arbiter in the coal versus oil and gas scuffle thus far.
The District Court in Campbell County developed a compromise in 2015, allowing Peabody to mine the coal, compensate Berenergy and place $13 million in escrow for the oil and gas firm.
Both companies disliked the deal and argued that their leases had first priority. Peabody also disputed the $13 million cost as an exorbitant amount of cash for those resources.
But when the debate hit the Wyoming Supreme Court, the lack of a decision from the BLM at that point held up a final decision.
Justice Michael K. Davis noted in January that both sides had a reasonable argument. Peabody’s production was worth more money and local jobs, he wrote in his decision.
“Berenergy seeks to protect its right to produce oil and gas, a right it has even though those wells are apparently near depletion,” he wrote. “Nonetheless, the state courts are not the proper forum to settle the rights of these federal lessees.”
Peabody had begun plugging one of seven wells when Berenergy’s appeal to the courts halted its progress. The Wyoming federal court has given Berenergy a two-week reprieve. At an Oct. 11 hearing in Casper, the judge will decide whether Peabody’s work should be put on hold until the Interior rules on Berenergy’s appeal.