Levisa Coal Co. v. Consolidated Coal Co.

• Court: Virginia Supreme Court
• Writing for the Court: Lawrence L. Koontz, Jr.
• Citation: Levisa Coal Co. v. Consolidated Coal Co., 662 S.E.2d 44 (2008)
• Decision Date: 06 June 2008
• Docket Number: Record No. 070580.
• Parties: LEVISA COAL COMPANY v. CONSOLIDATION COAL COMPANY.

662 S.E.2d 44

LEVISA COAL COMPANY v. CONSOLIDATION COAL COMPANY.

Record No. 070580.

Supreme Court of Virginia.

June 6, 2008.

J. Scott Sexton, Roanoke (Monica Taylor Monday; Benjamin A. Street; S. Thomas Mullins, Grundy; Gentry, Locke, Rakes & Moore; Street Law Firm, on briefs), for appellant.

Charles M. Simms (Everette G. Allen, Jr.; Vernon E. Inge, Jr.; Robert Wm. Best, Richmond; James R. Creekmore; LeClair Ryan; The Creekmore Law Firm, on brief), for appellee.

Present: All the Justices.

OPINION BY Justice LAWRENCE L. KOONTZ, JR.

This appeal arises from a dispute between the owner of a solid mineral estate subject to a long-term mining lease and a third party. The dispute involves the storage of wastewater from the third party's mining operations on other lands in a particular mine located within the subject leasehold but with the lessee's permission. The owner of the solid mineral estate sought an injunction and declaratory judgment to prevent the third party from using the mine, which had been idled by the lessee, as a wastewater storage pit. We consider whether the circuit court erred in adjudicating that the third party "has a right to store excess water" from its mine in the mine in question and in denying the requested injunctive relief.

BACKGROUND

In 1937, Levisa Coal Corporation, the predecessor in interest to Levisa Coal Company, the plaintiff-appellant herein, acquired by severance deed the solid mineral estate and timber rights on various parcels of land in Buchanan County ("the Buchanan County parcels").¹ The severance deed conveyed to Levisa Coal ownership of "the coal, metals and timber, together with all the rights, privileges and easements incident thereto, in, on or under" the lands described in the deed. However, the severance deed did not expressly convey to Levisa Coal the right to use any part of the estate conveyed or the attendant easements to support mining activities on other lands. By a separate and subsequent severance deed, the rights to the oil and gaseous mineral estates of the Buchanan County parcels were conveyed to another party. Levisa Coal later acquired an interest in these estates through an oil, gas and coalbed methane lease.

In 1956, Levisa Coal entered into a lease with Island Creek Coal Company (Island Creek Coal) granting that company "the sole and exclusive right and privilege of mining and removing all of the coal from all the seams underlying the Tiller [V]ein or seam of coal or the horizon of such seam" in and upon the Buchanan County parcels conveyed by the 1937 deed.² The 1956 lease further provided Island Creek Coal with the right "generally, to make any use of the leased premises which [Island Creek Coal] may deem needful or convenient in carrying on its mining or other operations." Among the specific uses permitted was the right to "dump water or refuse on said premises." These rights, however, were "limited to such rights as [Levisa Coal] owns and has the right to lease," and the lease did not expressly purport to convey any right to use the leasehold for the support of mining operations on other lands.

Under the 1956 lease, Levisa Coal retained certain rights to the ownership and continued use of its solid mineral estate below the Tiller Vein and to easements serving Island Creek Coal's leasehold. As relevant to this appeal, Levisa Coal retained "[t]he entire ownership and control of all the leased premises, and the coal ... and other minerals and products therein and thereon, for all purposes (except those hereinbefore expressly set forth as leased to [Island Creek Coal])." Additional express rights reserved to Levisa Coal included "the right and privilege of draining water ... over, across, or through the leased premises," as well as "the right and privilege of searching for oil, gas, or any other minerals or products and removing same when and wherever found." In furtherance of these rights, the lease provided that Levisa Coal could make excavations and bore "slopes, shafts, drifts, tunnels, and wells" so long as these operations did not interfere with Island Creek Coal's right under the 1956 lease to remove coal from below the Tiller Vein. Levisa Coal also retained a right of inspection within Island Creek Coal's works and mines to assure compliance with an agreed upon mining plan and calculation of royalties due under the lease and "to use freely the means of access to the said works and mines without hindrance or molestation" consistent with its rights under the 1937 deed.

The initial term of the 1956 lease was for five years with the lease automatically renewing for successive terms of twenty years so long as Island Creek Coal fulfilled its obligation to mine coal on the property and pay royalties to Levisa Coal, or in lieu thereof to make minimum payments to Levisa Coal for the lost opportunity if coal was not being mined. At issue in this appeal is a mine designated by Island Creek Coal as the "VP3 Mine," which was opened on land subject to the 1956 lease in 1968. Although Island Creek Coal suspended its mining operations at the VP3 Mine in 1998, Levisa Coal does not contend that Island Creek Coal has failed to pay royalties or fulfill its other obligations under the lease and, thus, under its terms the lease remains in force until at least 2021. Moreover, Levisa Coal, through its managing general partner John C. Irvin, conceded during the proceedings of this case that it is not presently economically feasible to resume coal mining operations at the VP3 Mine.

In 1993, CONSOL, Inc. (CONSOL), a subsidiary of CONSOL Energy, Inc., acquired Island Creek Coal and all of its assets, including the rights and obligations of the 1956 lease. CONSOL has maintained Island Creek Coal as a separate corporate entity, although Island Creek Coal no longer has any active mining operations or employees and its corporate officers are also officers or employees of CONSOL or its subsidiaries. CONSOL is also the parent company of Consolidation Coal Company (Consolidation Coal), the defendant-appellee herein. Consolidation Coal maintains a coal mining operation, designated as the "Buchanan Mine" or "Buchanan No. 1 Mine" in the vicinity of Island Creek Coal's VP3 Mine as well as other idled mines once operated by Island Creek Coal.

Excess ground water naturally flowing into any deep mine as a result of mining operations hampers extraction of coal. Mine operators routinely remove such excess water or wastewater on a daily basis. The removal of excess water in the Buchanan Mine, as well as the excess water in the VP3 Mine, was initially accomplished by pumping that water directly into the nearby Levisa River or one of its tributaries. At some point after the acquisition of Island Creek Coal by CONSOL, it became necessary for Consolidation Coal to devise an alternate drainage system for the removal of excess water naturally flowing into its Buchanan Mine and the additional water released into that mine as a result of its continuing mining operations there. In general terms, the drainage system devised by Consolidation Coal involved pumping the excess water from the Buchanan Mine into a series of nearby idled mines once operated by Island Creek Coal which functioned as storage pits for the water until the water could be pumped into the Levisa River. Ultimately, this drainage system was designed to include the idled VP3 Mine. The rate of discharge of the wastewater into the river was to be limited from time to time so that the Levisa River could accommodate the increased water flow resulting from this discharge.

Ultimately, the chloride content of the anticipated discharged water into the Levisa River became an issue to be resolved in order for Consolidation Coal to comply with certain water standards established by the State Water Control Board and to obtain the necessary permits to allow it to continue to pump mine water into the Levisa River. Consolidation Coal applied to the Virginia Department of Mines, Minerals, and Energy (DMME) for permits to discharge wastewater from the Buchanan Mine into idled mines under Island Creek Coal's control, including the VP3 Mine, and ultimately into the Levisa River in accord with its designed drainage system.³ Subsequently, Consolidation Coal began discharging wastewater into the "Beatrice" and "VP1" mines and, when these mines could not accommodate additional water, the discharge was diverted to the VP3 Mine. The present rate of wastewater discharge from the Buchanan Mine into the VP3 Mine is nearly 2,500 gallons per minute. The VP3 Mine has a capacity to hold approximately 6.4 billion gallons of wastewater.

On July 10, 2006, Levisa Coal filed a complaint for injunctive relief and declaratory judgment against Consolidation Coal in the Circuit Court of Buchanan County seeking to prohibit Consolidation Coal from continuing to divert wastewater from the Buchanan Mine to the VP3 Mine. In seeking temporary and permanent injunctive relief, Levisa Coal maintained that "[t]he proposed pumping and storage of Buchanan Mine water in Levisa [Coal]'s properties will cause irreparable harm to Levisa [Coal]'s property and business interests." Specifically, Levisa Coal maintained that storing water in the VP3 Mine would result in absorption of coal bed methane gas and, with regard to the remaining coal in the property, would "vastly increase the costs that will be required in order to safely access and mine the coal in the future, effectively making it unminable." Levisa Coal further maintained that it had no adequate remedy at law to redress these alleged injuries.

Levisa Coal premised its action for declaratory judgment on the assertion that Consolidation Coal "lacks the legal right to pump and store its Buchanan Mine water in the [VP3 Mine]." It sought a declaration that Consolidation Coal "has no right to utilize Levisa [Coal]'s subject properties for temporary or permanent storage of Buchanan Mine water, and for judgment...