Coal vs. oil creates battle royale in Sullivan County

Some of the details were made public during the Sullivan County commissioners meeting on Sept. 21, during a road closure request by American Land Holdings of Indiana  LLC, representing Peabody Energy Co. and its Bear Run Mine.

“We have a big battle royale between big players,” stated Sullivan attorney Jeff Hawkins during the meeting.

The “big players” include ALHI/Peabody on one side, with Pioneer Oil Company, Inc. and Sunrise Energy, LLC on the other side.

At issue is who has superior rights, ALHI/Peabody to mine coal or Pioneer/Sunrise to extract oil and gas on about 74 acres of land located a few miles south of Dugger.

Initial complaint

The dispute hit the courts first on Sept. 4, when Pioneer/Sunrise filed a verified complaint against ALHI/Peabody in Sullivan County Superior Court.

According to the complaint, Pioneer is the operator of a valid oil and gas lease dated Dec. 6, 2005 from the Ray Deckard Revocable Trust — the lease owned by Sunrise and operated by Pioneer under contract with Sunrise.

Pioneer, it states, applied to the Indiana Division of Oil and Gas for a permit to drill and operate its “Deckard #1-21” oil and gas well. On May 20, Pioneer sought and obtained the written consent of the surface owner, Rusty Deckard, to enter the premises for surveying and staking the location in anticipation of drilling.

The complaint notes Pioneer notified Peabody of this intention to drill by written notice received “on or about” June 4. On Aug. 28, Pioneer states it discovered the surveyed stake for its well was removed from the premises without its knowledge.

The next two days, Pioneer commenced its drilling activities, which included moving its rotary Rig 18, together with auxiliary equipment including a mud pump, onto the staked location and rigging up.

On Aug. 31, court records state, Peabody requested an informal hearing with the Division of Oil and Gas on Pioneer’s pending permit application, which was set for Sept. 2. Pioneer says the hearing included “no less than four representatives of Peabody.” The permit was subsequently issued on Sept. 4.

On Sept. 3, Pioneer claims they discovered their oil rig, mud pump, associated equipment and a bulldozer had been removed by Peabody, which secured them, under guard, on other Peabody property.

In addition, Pioneer says Peabody moved earth-moving equipment on the property, and “constructed a massive earthen berm essentially around the entire perimeter of the 74 acres in such a manner as to deny Pioneer access.”

On Sept. 4, the complaint says Peabody acknowledged it had taken the equipment and that it intended to initiate active mining operations on the property.

In Count 1, Pioneer/Sunrise is demanding a judgment of $500,000 against ALHI/Peabody. 

Count 2 demands judgment in an amount to be proven at trial for “tortious interference with contractual rights.”

Count 3 demands a permanent injunction on Peabody’s removal of equipment and obstructions to the property.

Counterclaim

ALHI/Peabody responded by filing a verified counterclaim for declaratory judgment and injunctive relief on Sept. 10.

According to the filing, Peabody states they are the leaseholder of coal located on what they call this property, the Section 21 Tract. 

They also claim they are also owners of the surface mining rights on the property “pursuant to a surface mining lease with the surface owner/Lessor, Russell (Rusty) Deckard and his wife.”  Peabody, more recently, claims they became the owners of all residual oil and gas rights on the property.

Also, the counterclaim notes, this property “has been for some time within the surface mining permit area of the Bear Run Mine and Peabody have posted all bonds and obtained all necessary permits to surface mine on (the property).”

Peabody states the property has been “part of the life of mine plan for Bear Run Mine since before its inception in 2010.”

Peabody claims they have been preparing the area for surface mining and have completed stockpiling all topsoil in the Section 21 Tract.” They stated the property “will be mined in the coming months, with surfacing mining operations in a manner that allows oil and gas exploration to expeditiously proceed once the mine has passed this property (within the next two years).”

Peabody claims Sunrise/Pioneer, “acting upon such purported and uncertain rights,” filed an Application for Well Permit with the Oil and Gas Division of the Indiana Department of Natural Resources, which seeks to drill an exploration well on the Section 21 Tract “in the planned path of the advancing Bear Run Mine pit.”

Peabody also claims on the last Sunday in August 2015, “Sunrise/Pioneer caused equipment to be parked at the site of the proposed well without the knowledge, permission, or consent of Peabody and notwithstanding the lack of a permit and/or lack of a valid lease, knowing that they could not commence drilling activities on the Section 21 Tract, and that Permit Application was set for a hearing” on Sept. 2. 

The counterclaim states Sunrise/Pioneer’s proposed well would force Peabody to mine around the well, “thereby forever foregoing the extraction of millions of ton of Indiana’s coal resources and denying Peabody their property rights for most, if not all, of the Section 21 Tract.”

Peabody also claimed drastically changing the course of their mine plans and the operations cost of bypassing the well could cost them tens of millions of dollars.

The court document further states “Sunrise/Pioneer’s permit application is ill-advised from an economic standpoint, but, is perfectly-timed to maximize interference with the advancing Bear Run Mine.” 

They also questioned Sunrise/Pioneer’s motivations saying “during face-to-face meetings, Sunrise/Pioneer refused to modify or delay the proposed well, despite offers to fully compensate them for such modification or delay. Rather, Sunrise/Pioneer have made demands well in excess of their potential losses, seizing upon the damages and havoc that could be caused by proceeding with their proposed well.”

In Count 1, Peabody says they are entitled to a declaratory judgment and permanent injunction that: (1) Sunrise/Pioneer is trespassing on the Section 21 Tract; 2) Sunrise/Pioneer is enjoined, pursuant to Indiana law, from drilling activities until it is determined they have a valid interest in the parcel’s oil and gas rights; and (3) even with a valid interest in the parcel’s oil and gas rights, they are enjoined from drilling on the property until the well is reasonably outside of the projected mining and/or behind the mining of the Bear Run Mine.

In Count 2, Peabody also requested preliminary injunctive relief for the same three reasons. 

Recusual, special judge

Sullivan Superior Court Judge Hugh Hunt granted an order on ALHI/Peabody’s motion for his recusal from the case, which he signed on Sept. 14.

According to Hunt’s order granting the motion for recusal, both sides had seven days, pursuant to Trial Rule 79(D), to agree on a new judge.

Since then, according to the case summary, ALHI/Peabody filed a jury demand on Sept. 21.

Two days later, ALHI/Peabody filed a request for certification to the presiding judge, which was entered and granted. The proposed order was sent by Hunt to presiding judge Joseph Trout.

Trout, the current Clay County Circuit Court Judge, will assign a judge from his area, which includes Clay, Vigo, Putnam and Sullivan counties.