Background: Competing Claims to Coal Mine Methane

This case involves competing claims to coal mine methane from the abandoned Gibson North Mine in Gibson County, Indiana. In May 2022, Pioneer Oil Company obtained an exclusive lease from Heidenreich Farms to develop and produce methane from coal mine voids underlying the Pioneer Leasehold Parcel. The lease granted Pioneer exclusive rights

for the purpose of exploring by geophysical and other methods, drilling (vertically, horizontally and directionally) and operating for, and producing coal bed methane (CBM), and coal mine methane (CMM) and their constituent products

within 800 feet of the surface. Pioneer obtained DNR permits to drill three wells descending into the Gibson North Mine voids to extract methane.

The Dispute: Methane Capture Through an Existing Tunnel

The dispute arose when Gibson County Coal, LLC (GCC), which held a lease on an adjacent parcel, entered into a methane lease agreement and partnered with ECC Bethany, Inc. to produce methane by unsealing and repurposing the Slope—a 1,500-foot tunnel extending diagonally from the underground mine voids beneath Pioneer's parcel to the surface of GCC's parcel. GCC had previously used this tunnel for coal mining operations but sealed it in 2020 when mining ceased. Pioneer alleged that defendants' use of mechanical equipment to draw methane through the Slope constituted an unpermitted directional well that siphoned methane from Pioneer's leasehold, interfering with Pioneer's exclusive rights and amounting to trespass, conversion, and civil conspiracy.

The Court's Analysis: Rule of Capture Controls

The Court of Appeals affirmed the trial court's dismissal, applying Indiana's longstanding rule of capture. The court explained that the

rule of capture is principle of oil and gas law that recognizes migratory nature of oil and gas and provides that first to capture, i.e., raise to surface and sever from earth, through operations on their own land becomes owner of captured natural resources.

Critically, Pioneer failed to allege that defendants physically entered any portion of Pioneer's leasehold, either at the surface or subsurface. The court held that allegations defendants

reopened and used existing tunnel leading from surface of its leased property to tunnels under oil company's adjacent leasehold to capture methane from underground mine voids on both properties by artificially stimulating flow of methane through tunnel and up to surface of its leased property

did not amount to trespass absent physical entry onto Pioneer's property.

On the conversion claim, the court held that even if Pioneer's allegations that GCC's operations exceeded its lease rights were true, this did not preclude application of the rule of capture. The court noted that GCC's operations were within the broad mining rights granted under its lease, and Pioneer failed to allege defendants engaged in waste or destruction of the common gas source or violated any DNR orders or regulations. The court emphasized that Pioneer

did not have exclusive right to underground gas flowing between the two parcels of property.

Because the underlying tort claims failed, the conspiracy claim also failed as a matter of law.

Implications for Coal Mine Methane Operations

This decision has significant implications for operators pursuing coal mine methane projects, particularly where abandoned mine workings extend beneath multiple surface parcels. The ruling confirms that Indiana applies traditional oil and gas capture principles to coal mine methane, meaning that exclusive lease rights do not extend to uncaptured, migratory gas in underground voids. Operators with access to existing mine infrastructure—such as sealed slopes or ventilation shafts—may lawfully use that infrastructure to capture methane from common mine voids, even if those voids extend beneath adjacent leaseholds, provided they operate entirely within their own property boundaries. The decision also suggests that allegations of regulatory violations or lease exceedances, without more, will not overcome the rule of capture's protection. For lessees like Pioneer, the case underscores the importance of securing surface access and infrastructure rights across all parcels overlying target mine voids, rather than relying solely on exclusive subsurface rights to prevent competitive drainage.