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When asked the question "who owns the rights to natural resources under the soil?", you might expect the answer to be pretty straightforward.

In 1887, the federal government reserved title to subsurface lands and the resources within them on all land sales, eventually transferring these rights to the province in 1930.

The Canadian Pacific Railway, which was the recipient of a massive 25 million acre land grant in 1880, was allowed to retain ownership of natural resources on land it had obtained prior to 1887.

Lines first began to blur in 1905, when the CPR began selling the land it had acquired from the federal government to the waves of settlers who were arriving on the prairies.

While recognizing the value in retaining the rights to coal and petroleum on these lands, the CPR saw no value in retaining the rights to other hydrocarbons and minerals.

Therefore in a period stretching from 1905 to 1912, the CPR failed to reserve title to natural gas on land it sold to newly arrived settlers across the prairie provinces.

As a result a "split title" situation arose, with the CPR retaining the rights to coal or petroleum found below ground only, leaving those settlers and their heirs with ownership of the natural gas under their property.

While it has been over a century since the first split-title lease was sold in Alberta, the explosion in coal bed methane development (CBM) over the past two years has given former CPR subsidiaries EnCana and Fording Coal, and other coal companies cause to question just who owns the natural gas that is sequestered in coal seams.

"With CBM being developed in Alberta, now the people that own the coal, being EnCana, Fording Coal, are saying 'coal bed methane comes out of the coal, we think we own that gas'," said Freehold Owner Association (FHOA) member Brad Murray. "Whereas the gas owners are saying, 'No, it's just like gas in any formation, it's gas'."

EnCana and Luscar, the holders of coal rights on many of these disputed parcels, have recently gone as far as to file numerous objections with the Alberta Energy and Utilities Board (EUB) against a handful of energy companies, claiming they are legally entitled to the coa lbed methane in numerous split-title lease situations in the Clive, Ewing Lake, Stettler and Wimborne fields.

According to EnCana spokesperson Alan Boras, his company is hoping to establish in law that it has ownership of natural gas within coal seams.

"The ownership is subject to the specifics of the title, we have rights to the coal," said Boras. "We believe we have rights to the coal, we have rights to the gas, and we objected to the development in order to preserve our rights to that gas."

As a result of the objections from EnCana and Luscar, the EUB initiated hearings to help sort out the legal entitlement of CBM, issuing a Notice of Hearing on Apr. 26.

In conjunction with this initiation of proceedings, the EUB also placed all applications where entitlement to CBM is at issue "in abeyance", effectively putting a moratorium on all activity on the land in question.

According to Murray, this delay has led to a situation where energy companies will either pay the coal rights owner what they want, or the companies drill all around the freehold, effectively draining it.

The FHOA has applied for third party intervenor status in the hearings, alleging that freehold lands are often being drained by development on off-setting crown lands where the entitlement issue has been clearly defined.

Because of the nature of CBM gas itself, EnCana's Boras doesn't think competitive drainage is much of an issue.

"(With) conventional (gas) you may drill a hole in a reservoir and that reservoir may have good porosity for a long lateral distance," said Boras. "In an unconventional reservoir because of the tight nature of it the gas doesn't travel unless you fracture it and you have to stimulate it down hole."

With proceedings getting underway this fall, FHOA spokesman David Spears believes any decision rendered by the EUB will be appealed in front the Court of Appeal of Alberta.

"The problem we see in this is that the court of appeal may or may not make a decision regarding entitlement, they'll probably just make a decision regarding the board's right to make that determination," said Spears.

While Spears would prefer to see the issue come for full disclosure before the Court of Queen's bench, he fears the Court of Appeal may make a decision on ownership based on the information in front of the EUB right now.

Spears worries this process would not include the full production of documents, which he says would go to the intent back in the early 1900s with the Canadian Pacific Railway when it came to reserving coal for their own accounts.

"I'd be very surprised if the CPR had any interest in the time at coal bed methane in reserve coal, because nobody had heard of coal bed methane in the context of a valuable commodity," said Spears.

"It was essentially something that blew up coal mines, I wouldn't expect that the CPR wanted it."