Amicus Curiae Brief — Amoco Production Co. v. Southern Ute Tribe

No. 98-830

CLERK

es ae

In The

Supreme Court of the United States

October Term, 1998

¢

AMOCO PRODUCTION COMPANY,

on behalf of itself and the class it represents,

Petitioners,

Vv.

SOUTHERN UTE INDIAN TRIBE,

Respondent.

¢

On Writ Of Certiorari To The

United States Court Of Appeals

For The Tenth Circuit

«

BRIEF OF AMICI CURIAE

CAMPBELL COUNTY, WYOMING

IN SUPPORT OF PETITIONERS

AMOCO PRODUCTION COMPANY, ET AL.

+

Micuaet D. Futier S. THoMaAs THRONE

Campbell County Attorney Counsel of Record

500 S. Gillette Ave. 2 North Main, Suite 402

Suite 112 Sheridan, Wyoming 82801

Gillette, Wyoming 82717 307-672-5858

307-682-4310

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 342-2831

18

i

TABLE OF CONTENTS

TABLE OF AUTHORITIES

INTRODUCTION

CONGRESS COULD NOT AND DID NOT

INTEND TO RESERVE COALBED METHANE

WHEN IT RESERVED COAL UNDER 1909

AND 1910 COAL LANDS ACTS

A REVIEW OF HISTORY OF THE UNITED

STATES AND THE WEST CLEARLY INDI-

CATES THAT CONGRESS COULD NOT

HAVE INTENDED TO RESERVE COALBED

METHANE IN 1909 AND 1910. CURRENT

TREATMENT OF COALBED METHANE

CONFIRMS THE HISTORICAL INTENTIONS

MINERAL OWNERS AND OIL AND GAS

EXPLORATION COMPANIES HAVE RELIED

UPON THE HISTORICAL TREATMENT

THAT COALBED METHANE IS GAS AND

THEREFORE IS INCLUDED IN THE GRANT

TO THE PATENTEES

THE DECISION WILL HAVE SEVERE

ADVERSE IMPACT ON CAMPBELL

TABLE OF AUTHORITIES

Page

CASES

Consumer Safety Comm‘n v. GTE Sylvania, Inc., 447

U.S. 102 (1900) .. ...icccccesdbuawh wea ae 5, 7

Leo Sheep Co. v. United States, 440 U.S. 668 (1979) ..5, 12

Perrin v. United States, 444 U.S. 37 (1979)........ S & 7

Pioneer Inv. Serv. v. Brunswick Assocs., 507 U.S. 380

(1993) . ccc -ccccveacns ect cule nn 5, 6, 7

Southern Ute Indian Tribe v. Amoco Production Com-

pany, 151 F.3d 1251 (10th Cir. 1998)................ 1

Southern Ute Indian Tribe v. Amoco Production Com-

pany, 119 F.3d 816 (10th Cir. 1997)................ 11

United States v. Labonte, 520 U.S. 751, 177 S.Ct.

1673 (1997)...ccccccsvecedeveuns Osensseee 5

United States v. Ron Pair Enter., Inc., 489 U.S. 235

(1969)... cccncccccecesvused e's biee iain nnn 5

United States v. Smith, 508 U.S. 223 (1993)............ 5

STATUTES AND REGULATIONS

Act of March 3, 1909, 35 Stat. 844 (30 U.S.C.

G G1)... ccc cccacccdeced uke n abe piatneeenn anna passim

Act of June 22, 1910, 36 Stat. 583 (30 U.S.C. § 85) . .passim

Public Law 105-367, 112 Stat. 3313................. 3, 4

Wyo. Stat. § 30-5-101 et seq. (1977) ................. 10

RuLes

Supreme Court Rule 374 ..... «snceethsns meee 1

ee

-

TABLE OF AUTHORITIES - Continued

Page

OrHer AUTHORITIES

1997 and 1998 Wyoming Property Taxation....... 14, 15

Buffalo, Wyoming Resource Office of the BLM....... 2

Gerald A. Danzer, J. Jorge Klor de Alva, Louis E.

Wilson, Nancy Woloch, The Americans (1998) ....... s

James West Davidson, Michael B. Stoff, American

EEE eh dic aed coe Ghd he bueeses seccsccees 8

Roy A. Jordan and S. Scott DeBoer, Wyoming, a

Shs etl vc ec enadéaebesseess 9, 13

T.A. Larson, Wyoming, a History (1984) ............... 9

The Century Dictionary and Cyclopedia 1067

Ne oe al oa waccenwescees 6

The Shorter Oxford English Dictionary 330 (1936) ..... 6

The Universal Encyclopedic Dictionary 945 (1905) ..... 6

U.S. Department of the Interior, Bureau of Land

Management, Public Land Statistics, 1993 .......... 3

Herman J. Viola, Why We Remember, United States

History, Civil War to the Present (1998).............. 8

Webster's New International Dictionary 892 (1916) ..... 7

Webster's New International Dictionary 511 (2d

CR MMULUGLE, SECU This ede diver iccdcccceccce 6

Webster’s New International Dictionary of the

English Language 424 (1916)..................6005. 6

Webster’s Third New International Dictionary 432

SRE UR eet i ieh side ob bbs seececcesccccccces 7

Wyoming Oil and Gas Conservation Commission

Website: http/www.wogcc.state.wy.us ...... 10, 11, 14

ooo

INTRODUCTION

Campbell County, Wyoming, a governmental entity,

by and through the undersigned Counsel files this amicus

curiae brief in support of the defendant class’ appeal filed

by Amoco Production Company.' The Tenth Circuit's

holding in Southern Ute Indian Tribe v. Amoco Production

Company, 151 F.3d 1251 (10th Cir. 1998), is of grave con-

cern to Campbell County, Wyoming because it changes

ownership rights in approximately 400,000 acres of land

in the county which are owned by residents of the county.

Failure to reverse the decision of the Tenth circuit holding

that the United States reserved coalbed methane, as well

as coal in the 1909 and 1910 Coal Lands Acts, will have a

devastating economic impact on the local institutions and

on the individual residents of Campbell County, Wyo-

ming. Campbell County, Wyoming therefore respectfully

requests that the United States Supreme Court reverse the

Tenth Circuit’s decision regarding the ownership of

coalbed methane.

INTEREST OF AMICUS CURIAE

Campbell County, Wyoming is located in the center

of the Powder River Basin in northeastern Wyoming and

borders Montana. Gillette is the county seat and largest

town in the county. Mineral development has been, and

' Campbell County, Wyoming is a county and files this

brief pursuant to Rule 37.4 of the Rules of the Supreme Court of

the United States. None of the parties authored this brief. The

brief was authored by counsel of record.

is, of vital importance to Campbell County. According to

the BLM records, there are approximately 400,000 acres in

Campbell County patented under the 1909 and 1910 Coal

Lands Acts and approximately 1.4 million acres in Camp-

bell, Sheridan and Johnson Counties.2 Campbell County

is located in the coal and petroleum rich Powder River

Basin. A large portion of the economic activity in Camp-

bell County involves natural resources development.

Wyoming is the largest coal producing state in the United

States and Campbell County is the largest coal producing

county in Wyoming. Because the Powder River Basin in

Campbell County is a mature basin for oil and gas explo-

ration, coalbed methane exploration and development is

vital to the future of the local economy.

The decision of the Tenth Circuit is of extraordinary

concern to the county because in one decision, the Tenth

Circuit changed ownership rights in coalbed methane gas

in 400,000 acres of land in Campbell County alone. The

Tenth Circuit ruled that coalbed gas “was reserved to the

United States” when Congress reserved “coal” under the

1909 and 1910 Acts.* This ruling is not confined to the coal

owned by the Southern Ute Indian Tribe; followed to its

logical conclusion, the decision affects the ownership of

2 Information regarding the amount of acreage obtained

from the Buffalo, Wyoming Resource Office of the BLM.

Campbell, Sheridan and Johnson Counties comprise most of the

Powder River Basin in which coalbed methane production

exists and is anticipated in the future.

> Act of March 3, 1909, 35 Stat. 844 (30 U.S.C. § 81) (“the

1909 Act”); Act of June 22, 1910, 36 Stat. 583 (30 U.S.C. § 85)

(“The 1910 Act”), (collectively known as the “Acts” or “Coal

Lands Acts”).

coalbed gas in 16 million acres of land patented under the

1909 and 1910 Acts across the West.4 According to the

decision, mineral owners who own all oil and gas in lands

as successors-in-interest to the patentees under the 1909

and 1910 Coal Lands Acts do not own the coalbed gas.

For over eighty years, the patentees and their suc-

cessors have conducted business believing gas was gas

and not included as part of the coal. Because of Public

Law 105-367, the mineral owners who were fortunate

enough to have obtained production or executed leases,

prior to October 21, 1998, have some relief. However, for

those who do not have production, but have executed a

lease, the protection expires when the lease expires under

the current state of the law. Mineral owners who were not

fortunate to have their lands under lease on October 21,

1998, lost their rights to any coalbed methane production.

If the Supreme Court does not reverse the Tenth

Circuit Court of Appeals decision, the residents of Camp-

bell County will be stunned by the taking of their mineral

interests by the Federal Government without notice and

without compensation.

+

SUMMARY OF THE ARGUMENT

The plain meaning of the terms of the Acts should be

used in determining the intention of Congress when it

enacted the Coal Lands Acts of 1909 and 1910. The mean-

ing of “coal” in 1909 and 1910 is the same as it is now, a

* U.S. Dept. of Interior, Bureau of Land Management,

Public Land Statistics, 1993, p. 16.

solid black substance to be recovered as a solid and not a

gas. Coal was reserved by the United States in 1909 and

1910 because coal was valuable to the United States.

Coalbed methane was a waste by-product which Con-

gress could not have intended to reserve.

The history of the United States and the West sup-

ports the conclusion that Congress did not intend to

reserve coalbed methane when it reserved coal under the

1909 and 1910 Coal Lands Acts. The availability and use

of the solid coal was significant in establishing the route

of the Union Pacific Railroad across southern Wyoming.

The mining of the coal provided fuel for the steam

engines and freight for the trains. Coalbed methane, on

the other hand, caused mine explosions which resulted in

the worst coal mining disasters in Wyoming in 1903 and

1908. Congress knew coalbed methane was dangerous,

therefore, Congress could not have intended to reserve

coalbed methane with the coal in 1909 and 1910.

Campbell County, Wyoming and its residents will

suffer economic impact if the Tenth Circuit decision is not

reversed. The discovery and development of coalbed

methane was undertaken with the understanding that

coalbed methane belonged to the patentee and that devel-

opment should be honored. Any protection offered by

Public Law 105-367, 112 Stat. 3313 (1998) will be short-

lived upon the expiration of contracts and leases existing

as of October 21, 1998.

Campbell County requests that the Supreme Court of

the United States reverse the decision of the Tenth Circuit

Court of Appeals regarding the ownership of coalbed

methane for lands patented under the 1909 and 1910 Coal

Lands Acts.

ARGUMENT

I. CONGRESS COULD NOT AND DID NOT INTEND

TO RESERVE COALBED METHANE WHEN IT

RESERVED COAL UNDER 1909 AND 1910 COAL

LANDS ACTS.

The controlling intent is the intent of the Congress

that actually passed a particular statute being interpreted.

“[T}he pertinent inquiry in the case is the intent of Con-

gress when it granted land to Union Pacific in 1862”. Leo

Sheep Co. v. United States, 440 U.S. 668, 681 (1979). When

looking at the language of the statute, a court must

“assume” that congressional intent is reflected by the

ordinary meaning of the words used, United States v.

Labonte, 520 U.S. 751, 177 S.Ct. 1673, 1677 (1997). The

Supreme Court has ruled that when Congress does not

define a term in a statute, that term is to be construed in

accordance with the ordinary meaning. United States v.

Smith, 508 U.S. 223, 228 (1993).

In statutory interpretation, the court “look[s} to the

plain language of the statute and give[s] effect to its

meaning”, United States v. Ron Pair Enter., Inc., 489 U.S.

235, 241 (1989). “Courts properly assume, absent suffi-

cient indication to the contrary, that Congress intends the

words in its enactments to carry ‘their ordinary, contem-

porary, common meaning.” Pioneer Inv. Servs. v.

Brunswick Assocs., 507 U.S. 380, 388 (1993) (quoting Perrin

v. United States, 444 U.S. 37, 42 (1979)); accord Consumer

EEE Eo

Products Safety Comm'n v. GTE Sylvania, Inc., 447 U.S. 102,

108 (1980). The “ordinary meaning” of an undefined stat-

utory term is the meaning in existence when Congress

enacted the statute. Perrin, 444 U.S. at 42.

Applying these principles to the Acts, Congress

expressed its intent to reserve “coal” in patents issued

under the Acts. Because Congress did not define the

word “coal,” it must be construed in accord with its

“ordinary, contemporary, common meaning” at the time

Congress passed the Acts. Pioneer Invs. Servs., 507 U.S. at

388; Perrin, 444 U.S. at 42. The ordinary and common

meaning of “coal” when Congress passed the Acts was “a

black, or brownish black, solid, combustible mineral sub-

stance.” Webster's New International Dictionary of the

English Language 424 (1916) (emphasis added). Other

sources of the day define “coal” as a black or brownish

black solid combustible mineral substance. See also The

Century Dictionary and Cyclopedia 1067 (1906) (“A solid and

more or less distinctly stratified mineral, varying in color

from dark-brown to black, brittle, combustible, and used

as a fuel.”) (emphasis added); The Universal Encyclopedic

Dictionary 945 (1905) (“A carbonaceous mineral sub-

stance, black, shiny or dull, easily broken, often splintery,

inflammable, and used for fuel.”).

The popular and common understanding of “coal” as

a black or brownish black solid combustible mineral sub-

stance has been consistent from the time of the Acts to the

present. See, e.g., The Shorter Oxford English Dictionary 330

(1936) (“A mineral, solid, hard, opaque, black or blackish,

found in seams in the earth, and largely used as a fuel.”)

(emphasis added); Webster's New International Dictionary

511 (2d ed. 1958) (“A black, or brownish-black, solid,

- —-

=

combustible substance formed by the partial decomposi-

tion of vegetable matter without free access of air.”)

(emphasis added); Webster’s Third New International Dic-

tionary 432 (1986) (“A black or brownish black solid com-

bustible mineral substance.”) (emphasis added).

Turning to the issue before the Court, Congress’

unqualified use of the word “coal” means that Congress

reserved the black or brownish black solid combustible

mineral substance commonly known as “coal” in patents

issued under the Acts. See Pioneer Invs. Servs., 507 U.S. at

388; Perrin, 444 U.S. at 42. Coalbed gas is neither black or

brownish black nor is it a solid. The word coal thus does

not include coalbed gas. No one has identified a defini-

tion of “coal” that includes coalbed gas. Coalbed gas

instead falls within the ordinary and popular definition

of “gas” as “an aeriform fluid, having neither indepen-

dent shape nor volume, but tending to expand indefi-

nitely.” Webster's New International Dictionary 892 (1916).

In 1909 and 1910, Congress expressed its intent in

unambiguous terms. Patents issued under the Acts

reserved to the United States the black or brownish black

solid combustible mineral substance commonly known as

“coal.” Congress conveyed coalbed gas and all other min-

erals that do not fall within the ordinary and popular

meaning of “coal” to the patentees. The word “coal” in

the Acts thus unambiguously excludes coalbed gas. That

language is conclusive on the issue before the Court. E.¢.,

Consumer Product Safety Comm'n, 447 U.S. at 108. Con-

gress did not reserve coalbed methane gas.

Il. A REVIEW OF HISTORY OF THE UNITED

STATES AND THE WEST CLEARLY INDICATES

THAT CONGRESS COULD NOT HAVE

INTENDED TO RESERVE COALBED METHANE

IN 1909 AND 1910. CURRENT TREATMENT OF

COALBED METHANE CONFIRMS THE HISTORI-

CAL INTENTIONS.

In 1909 and 1910, the United States reserved coal

because it was a necessary and useful source of energy

for the development of the country. American History

texts and sourcebooks taught in our public schools

emphasize that coal and steel were the foundations of

American Industry. In discussing the growth in the

United States following the civil war, a Smithsonian his-

torian wrote, “Coal deposits provided fuel for steam

engines and furnaces of the iron industry”, Herman J.

Viola, Why We Remember, United States History, Civil War

to the Present, at page 262. Another historian wrote for our

school children, “the industrial age would not have been

possible without abundant deposits of coal and iron

which could be turned into steel”. Gerald A. Danzer, et

al., The Americans, at page 411. In the chapter discussing

“The Rise of Industry”, the authors stated “large deposits

of coal fueled the nations steel mills”. James West David-

son, Michael B. Stoff, American Nation, at page 543. Con-

gress clearly considered the nation’s best interests when

it decided in 1909 and 1910 to reserve the solid coal that

was critical to the economic development of the nation at

the beginning of this century.

At the time the Coal Lands Acts were enacted, the

solid coal was a valuable resource to the country and to

Wyoming in particular. Coal was produced in Wyoming

before the Wyoming territory was established in 1869.

The easy access to coal reserves heavily influenced the

Union Pacific decision in the 1860's to build its railroad

through Wyoming. Roy A. Jordan and S. Scott DeBoer,

Wyoming a source book at page 169, T.A. Larson, Wyoming,

a History, at 144. The solid coal was valuable and conse-

quently Congress reserved the coal when passing the

1909 and 1910 Acts.

Coalbed mcthane gas, on the other hand, was neither

useful nor desired when the United States reserved coal.

Many Wyoming underground coal mines in the nine-

teenth century had fires burning “out of control” in them

for years. Most of these fires were ignited by spontaneous

combustion of gas that had collected in the mines. Jordan,

et al., supra at page 198. In two separate explosions, one

on June 30, 1903 and one on March 28, 1908, a total of 228

miners died in Hanna Mine #1 in southern Wyoming. The

1903 explosion was the worst mine disaster in Wyoming's

history. Jordan, et al., supra at page 167. Because of the

hazards of the methane in the coal in Wyoming at the

time the Coal Lands Acts were enacted, as evidenced by

the two accidents, Congress would not have intended to

reserve the coalbed methane when it reserved coal in

1909 and 1910. Congress could not have intended to

reserve a harmful by-product when it reserved the valu-

able coal in 1909 and 1910. Taken from another perspec-

tive, Congress clearly knew that coalbed methane existed

because of these disasters, yet, they did not specifically

express an intention to reserve the coalbed methane gas.

Because Congress knew the existence of coalbed methane

gas and did not mention it in the reservation, Congress

clearly did not intend to reserve the coalbed methane gas.

Se

10

For as long as there has been mineral activity in the

Powder River Basin, all mineral owners, including

owners of coal rights, have transacted business using the

clear and obvious definitions set forth above. Simply put,

coal is coal and gas is gas and the coalbed gas industry

has developed in Campbell County and elsewhere on the

basis of this distinction. As a gas, coalbed gas has always

been widely viewed as a part of the oil and gas estate that

may be leased by the gas estate owner in a standard oil

and gas lease. The Wyoming Oil and Gas Conservation

Commission (WOGCC), the administrative agency which

regulates oil and gas exploration in Wyoming,> issues

permits to drill for coalbed methane wells. The WOGCC

has held hearings regarding the best spacing density for

the development of coalbed methane wells. The mineral

owners, the coalbed producers as well as the administra-

tive agency, treat coalbed methane as a natural gas

belonging to the patentee, and not part of the coal owned

by the United States. Coalbed gas has not been treated in

Campbell County as part of the coal estate because by

definition it is not coal; nor, have coal owners purported

to lease the right to develop coalbed gas in coal leases.

This practice fits with the reality of coalbed gas develop-

ment: it is drilled for, produced, and transported to mar-

ket in pipelines just like any other gas. From wellhead to

burnertip, coalbed gas is gas.

> See Wyoming Stat. § 30-5-101 et seq. (1977).

6 See Wyoming Oil and Gas Conservation Commission

Website — http/ /www.wogcc.state.wy.us.

11

Ill. MINERAL OWNERS AND OIL AND GAS EXPLO-

RATION COMPANIES HAVE RELIED UPON THE

HISTORICAL TREATMENT THAT COALBED

METHANE IS GAS AND THEREFOKE IS

INCLUDED IN THE GRANT TO THE PAT-

ENTEES.

Campbell County’s coalbed gas resources are enor-

mous. Over the last six years, coalbed gas leasing, explo-

ration, drilling, and production in Campbell County has

grown from virtually nothing into a major economic

activity. The activity has been undertaken under the

belief that coalbed methane gas belonged to the patentee

or its successors under the 1909 and 1910 Coal Lands

Acts. Coalbed methane development is the most active

exploration activity currently underway in Campbell

County. For example, between July 1996 and June 1997,

when all parties were operating under the commonly

held belief, 672 applications for permits to drill coalbed

gas wells were filed for drilling on federal, private, and

state lands in Campbell County.” ® During this same

period, Campbell County ranked as the top county in the

Rocky Mountain Region for coalbed gas permitting and

drilling activities.

Approximately 400,000 acres of land in Campbell

County were patented under the 1909 and 1910 Acts

construed by the court in the Tenth Circuit decision. The

mineral owners in Campbell County are ordinary people

7 See Wyoming Oil and Gas Conservation Commission

Website — http/ /www.wogcc.state.wy.us.

8 Southern Ute Indian Tribe v. Amoco Production Co., 119 F.3d

816 (10th Cir. 1997). This decision was issued in July 1997.

OP 62 1 ip Sk RI, NE ra RSID Rg UR IR IER INERT ae RE

12

and make up a diverse group — ranchers, working people,

public employees, large landowners, small landowners,

widows, and retired people. Many mineral owners are

descendants of the original patentees. Because Congress

reserved only the solid mineral coal under the 1909 and

1910 Acts and conveyed all other minerals to the pat-

entees, Campbell County landowners who own lands

patented under the 1909 and 1910 Acts own all oil, gas

and other minerals, except coal in their lands.

From the beginning of the coalbed gas exploration

and development boom in Campbell County, everyone -

petroleum companies, mineral owners, landowners, coal

mining companies, and the state and federal governments

- has treated coalbed gas as owned by the oil and gas

estate owner. The original development of coalbed meth-

ane occurred because of oil and gas leases from mineral

owners who received their interest under the 1909 and

1910 Coal Lands Acts. This Court has traditionally recog-

nized the special need for certainty and predictability

where land titles are concerned. Leo Sheep Co. at 688. The

entire coalbed gas industry rests on the basic foundation

that coalbed methane is a part of the oil and gas estate

and naturally passed on to the patentees. Until the Tenth

Circuit decision, Campbell County residents relied upon

this basic understanding of property law. The growth of

the coalbed gas industry has greatly affected and

impacted Campbell County mineral owners who own the

oil and gas estate in their lands, including those who own

some of the 400,000 acres patented under the 1909 and

1910 Acts.

13

Campbc"' County and its residents see the resolution

of this issue as straightforward and uncomplicated. Wyo-

ming mines more coal than any other state, producing

20% of the nations total coal output. In 1993, Campbell

County mines produced 181.9 million tons of the 209.9

million tons mined in Wyoming. Jordan, supra at 165. All

of the coal mined in Campbell County is mined using

open pit surface mines. Virtually all the residents of

Campbell County are familiar with coal. Coal is the solid

black substance shoveled by a dragline into trucks that

haul the coal from the pit to be loaded on to trains which

then transport the solid coal to a distant power plant. No

one concludes that the black solid substance is a “gas”.

IV. THE DECISION WILL HAVE SEVERE ADVERSE

IMPACT ON CAMPBELL COUNTY TAX REVE-

NUES.

The adverse impact on the tax revenues of Campbell

County resulting from the Tenth Circuit Court of

Appeals’ decision is enormous.

Mineral owners execute oil and gas leases to explora-

tion companies, granting the right to explore for oil and

gas to the exploration companies. The mineral owner

reserves a portion of the revenue free of cost in exchange

for the right to explore for oil, gas or other minerals. The

amount reserved by the mineral owner is commonly

referred to as the “royalty” interest. If the mineral rights

are owned by the patentee or its successors, the royalty is

paid to the fee mineral owners. If the mineral rights are

owned by the United States, the federal government

receives the royalty payment.

EE ee

14

Campbell County receives an ad valorem (property

tax) revenue in the amount of 5.97% of the value of

production on royalty paid to fee mineral owners.”

Campbell County does not and cannot receive tax reve-

nue for Ad Valorem Tax on royalties paid to the United

States. The tax revenue lost if the royalty payments are

made to the United States rather than to the patentees is

significant. Assuming 50% of the acreage subject to the

1909 and 1910 Acts is productive, and assuming that 50%

of the productive acreage is unleased, there are 100,000

acres still subject to the Southern Ute Indian decision in

Campbell County alone. (400,000 x .5 = 200,000; 200,000 x

5 = 100,000). Currently, one well is being drilled on each

40 acre tract in Campbell County, Wyoming. Therefore,

there are 2,500 potential drill sites on unleased acreage.

The average daily production rate of a coalbed methane

(“CBM”) well in the Powder River Basin on every 40 acre

tract is 200 mcf (200 thousand cubic feet) per well per

day.’° Based upon an examination of the records in the

Campbell County Clerk and Recorders Office,'' the aver-

age royalty reserved on leases from fee mineral owners is

15% of the value of the production. The average price for

coalbed methane for 1998 has been $1.80/ mcf. Therefore,

the Southern Ute decision will cost Campbell County tax

revenue of $2,941,717/year [(200/mcf/day x $1.80 (price/

* See portions of the 1998 Wyoming Property Taxation

prepared by the Wyoming Taxpayers Association lodged with

the Clerk of the United States Supreme Court

© See Wyoming Oil and Gas Conservation Commission

Website — http/ /www.wogcec.state.wy.us.

!! Examination made by counsel of record for Campbell

County, Wyoming

15

mcf) x .15 (royalty rate) x .0597 (tax rate) x 365 (days per

year) x 2500 (number of wells)].!?

With oil prices and coal prices falling, production of

coalbed methane is necessary to maintain Campbell

County's tax revenues. In 1997, 18.22% of Campbell

County’s tax revenue was from ad valorem taxes on oil

and 58.06% of the tax revenue was from ad valorem tax

on coal production. The value of these commodities is

decreasing and consequently, the tax revenues to the

County are decreasing. The valuation on coal decreased

$61,464,820 or 6.5% from 1997 to 1998 and the valuation

of oil decreased $48,333,619 or 15% from 1997 to 1998.

Valuations are based on prior year prices. With current

prices declining, next year’s valuations will be even

lower for oil and coal. In the same time frame, natural gas

valuation rose from $29,135,435 in 1997 to $42,761,158 in

1998, an increase of $13,625,723 or 46.7%." Almost all of

this increase in natural gas valuations is due to new

coalbed methane production. With the value of the other

commodities declining, increased tax revenue from

coalbed methane development is critical to Campbell

County government functions.

'2 Using the same formula for the approximate 1.4 million

acres subject to the decision in Campbell, Sheridan and Johnson

County, will cost the counties a combined total of $10,347,750 in

lost tax revenue [1,400,000 x 5 = 700,000; 700,000 x .5' 350,000

350,000 + 40 = 8,750 wells, 200 mcf/day x $1.80 x .15 x .06 x 365 x

8,750 = $10,347,750]

3 See portions of the 1997 and 1998 Wyoming Property

Taxation prepared by the Wyoming Taxpayers Association

lodged with the Clerk of the United States Supreme Court. All

revenue data was obtained from these publications.

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