Did Virginia's Senate Bill 376 give the Gas and Oil Board power to decide who owns coalbed methane gas?

Plain-English summary

Virginia's coalbed-methane scheme uses compulsory pooling to bring all the gas owners in a drilling unit into a single operation, even those who never signed leases. When some unit owners are unknown or when there are conflicting claims to the gas itself, the operator pays the disputed royalties into an escrow account managed by the Virginia Gas and Oil Board. The Board's chairman asked whether Senate Bill 376 (2010) gave the Board new power to actually decide ownership disputes (by interpreting deeds or contracts) and order payment out of escrow. The AG said no.

The General Assembly has never given the Board adjudicatory power over ownership. Section 45.1-361.11 contains an express cautionary directive that the factors it lists shall not be construed to authorize the Director or the Board to "supersede, impair, abridge or affect any contractual rights or obligations" between coal and gas owners. The Board's escrow-payment authority is limited by § 45.1-361.22(5) to three narrow situations: a final court decision adjudicating ownership, an agreement among all claimants, or (added in 2010) an agreement among all affected parties to arbitrate.

Senate Bill 376 added a new § 45.1-361.21:1 stating that a conveyance, reservation, or exception of coal does not include coalbed methane gas, with no effect on prior settlements or judgments. Nothing in that language gave the Board new authority to interpret deeds or decide ownership. So the bill changed substantive coalbed-methane property law (clarifying that a deed of "coal" does not automatically convey the methane), but it left the Board's jurisdictional limits exactly where they were.

Currency note

This opinion was issued in 2010. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Q: What is the Virginia Gas and Oil Board?
A: A citizen board staffed by the Division of Gas and Oil within the Department of Mines, Minerals and Energy. It administers Virginia's Gas and Oil Act, approving or denying compulsory-pooling applications and managing royalty escrows when ownership is disputed.

Q: What is compulsory pooling?
A: A regulatory mechanism that brings all owners of gas rights within a drilling unit into a single operation for production purposes, including owners who never signed leases. The Board orders the pooling and the operator pays the unleased owners (or pays their share into escrow if they cannot be located or if ownership is disputed). See § 45.1-361.21; § 45.1-361.22.

Q: How do disputed royalties get paid out of escrow?
A: Only in narrow circumstances. Section 45.1-361.22(5) authorizes the Board to release escrowed funds only after (1) a final court decision adjudicating ownership, (2) an agreement among all claimants, or (3) after 2010 amendments, agreement to arbitration among all affected parties.

Q: What did Senate Bill 376 actually do?
A: It added § 45.1-361.21:1 to clarify that a conveyance, reservation, or exception of "coal" does not include coalbed methane gas. This is a substantive property-law rule (it resolved a recurring question in deed interpretation), not a grant of new authority to the Board.

Q: Why doesn't the Board have power to interpret deeds even though it manages the escrow?
A: Because the legislature drew a clear line between administering pooling/escrow (Board) and adjudicating ownership (courts). The Board's enabling statute (the § 45.1-361.11 cautionary directive) expressly says the listed factors shall not be construed to authorize the Board to affect contractual rights or obligations between coal and gas owners. The escrow-release statute, § 45.1-361.22(5), then lets the Board pay out only after a court decision, an agreement among claimants, or arbitration by agreement.

Q: Who interprets the deeds, then?
A: A court of competent jurisdiction. Conflicting claimants must take their dispute to circuit court (or agree among themselves, or now arbitrate). The Board waits.

Background and statutory framework

The Virginia Gas and Oil Act sits at Va. Code Ann. §§ 45.1-361.1 through 45.1-361.26. It creates the Gas and Oil Board and the Division of Gas and Oil within the Department of Mines, Minerals and Energy, and sets out the rules for permitting, pooling, and royalty management. The Act contemplates compulsory pooling for unleased interests (§§ 45.1-361.21, -361.22) and escrow management for disputed royalties.

The opinion applies standard administrative-law principles: agencies have only the powers granted by statute, and where a power is expressly set out, additional powers will not be inferred. The General Assembly's 2010 changes (including Senate Bill 376 and the amendment adding arbitration to § 45.1-361.22(5)) tweaked the substantive law but did not expand Board jurisdiction.

Citations

• Va. Code Ann. §§ 45.1-361.1 to 45.1-361.26 (Virginia Gas and Oil Act)
• Va. Code Ann. § 45.1-361.11 (factors and cautionary directive)
• Va. Code Ann. § 45.1-361.21 (compulsory pooling)
• Va. Code Ann. § 45.1-361.21:1 (added 2010, coal conveyance does not include coalbed methane)
• Va. Code Ann. § 45.1-361.22 (escrow procedures; release conditions)
• Senate Bill 376 (2010 Session), enacting § 45.1-361.21:1
• Browning-Ferris Indus. v. Residents Involved in Saving the Env't, 254 Va. 278 (1997) (plain-language interpretation)
• Commonwealth v. County Bd. of Arlington Cty., 217 Va. 558 (1977) (canon: where a power is expressly set out, others will not be inferred)

Source

• Landing page: https://www.oag.state.va.us/annual-reports-opinions/official-opinions
• Original PDF: https://www.oag.state.va.us/files/Opinions/2010/10-035_Lambert.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain. The linked PDF is authoritative.

COMMONWEALTH of VIRGINIA
Office of the Attorney General
Kenneth T. Cuccinelli, II, Attorney General
June 24, 2010

Mr. Bradley C. Lambert
Chairman, Virginia Gas & Oil Board
Department of Mines, Minerals and Energy
P.O. Box 900
Big Stone Gap, Virginia 24219

Dear Mr. Lambert:

I am responding to your request for an official advisory opinion in accordance with § 2.2-505 of the Code of Virginia.

Issue Presented

You ask whether pursuant to Senate Bill 376, as enacted by the 2010 Session of the General Assembly, the Virginia Gas and Oil Board is authorized to render decisions and issue orders to determine property rights based on the interpretation of deeds and contracts.

Response

It is my opinion that Senate Bill 376 does not expand the authority of the Virginia Gas and Oil Board to decide ownership claims involving conflicting claimants to gas royalties, property rights disputes, or contract interpretation.

Applicable Law and Discussion

The Virginia Gas and Oil Board ("Board") is a citizen board staffed by the Division of Gas and Oil ("Division" or "DGO") within the Department of Mines, Minerals and Energy ("DMME"). Among other responsibilities, the Board is tasked with approving or denying applications allowing for compulsory pooling or unitization for unleased interests in gas well drilling units.

When units include owners who are unknown or who cannot be located, or when there are conflicting claims of ownership of the gas resource or the land in the forced pooled unit, any royalties payable by the operators to those possible owners are paid into an escrow account established by the Board. Royalties claimed by conflicting or unknown claimants are held in the Board's escrow account until the conflicting claims can be resolved by agreement between the parties or by court order.

The General Assembly has not delegated to DMME or that agency's divisions and boards the power to decide matters involving interpretation of contracts or deeds. Indeed, the Act contains a specific cautionary directive to the Board emphasizing its lack of authority to make decisions based on contract or deed interpretations:

The factors in subsection C of [§ 45.1-361.11] are not intended to and shall not be construed to authorize the Director, or the Board under § 45.1-361.36, to supersede, impair, abridge or affect any contractual rights or obligations now or hereafter existing between the respective owners of coal and gas or any interest therein.

The most conclusive evidence of the legislature's continuing intent to limit the Board's jurisdiction, is found in § 45.1-361.22(5), which provides that:

The Board shall order payment of principal and accrued interest, less escrow account fees, from the escrow account to conflicting claimants only after (i) a final decision of a court of competent jurisdiction adjudicating the ownership of coalbed methane gas as between them or (ii) an agreement among all claimants owning conflicting estates in the tract in question or any undivided interest therein. [Emphasis added.]

This language is clear and unambiguous and the statute must be interpreted according to that plain meaning.

The 2010 Session of the General Assembly revisited this statute and enacted significant revisions, including adding a third avenue for claimants seeking payment out of escrow, arbitration by agreement of all affected parties. It is essential to note, however, that the General Assembly did not change the wording of § 45.1-361.22(5) that provides for payments from escrow "only after" one of the now three contingencies has occurred. Thus, the power of the Board to pay out escrowed funds in conflicting claims situations remains limited to the three enumerated situations.

The 2010 Session of the General Assembly also enacted Senate Bill 376. This legislation creates a new statute, § 45.1-361.21:1, and provides, in relevant part, that:

A conveyance, reservation, or exception of coal shall not be deemed to include coalbed methane gas. Nothing in this section shall affect a coal operator's right to vent coalbed methane gas for safety purposes or release coalbed methane gas in connection with mining operations. The provisions of this section shall not affect any settlement of any dispute, or any judgment or governmental order, as to the ownership or development of coalbed methane gas made or entered prior to the enactment of this provision.

Nothing in the plain language of this enactment purports to create new authority or to expand the existing authority of the Board to adjudicate mineral ownership rights.

Conclusion

Accordingly, it is my opinion that Senate Bill 376 does not expand the authority of the Virginia Gas and Oil Board to decide ownership claims involving conflicting claimants to gas royalties, property rights disputes, or contract interpretation.

With kindest regards, I am
Very truly yours,
Kenneth T. Cuccinelli, II
Attorney General