The Evolving Law of Subsurface Trespass in Texas

The Evolving Law of Subsurface Trespass in Texas

By Miguel Suazo and Chelsea Allen

          In a long anticipated ruling, this month, the Texas Supreme Court held that an oil and gas operator who, with the surface owner’s permission, drills through the mineral estate to extract minerals from an adjoining leasehold, will not necessarily commit a subsurface trespass. Lightning Oil Co. v. Anadarko E&P Onshore, LLC, settled the question in Texas as to this particular factual scenario, but left open the possibility that other situations could result in a finding of trespass.

          The court in Lightning examined “whether a lessee’s rights in the mineral estate include the right to preclude a surface owner or an adjacent lessee’s activities that are not intended to capture the lessee’s minerals, but rather are intended only to traverse, or bore through, the formations in which the lessee’s minerals are located,” or whether such an intrusion constitutes a kind of trespass on the mineral lessee’s property. Ultimately, in this situation at least, the court found that on balance the lessee’s right to exclude all others from traversing or boring through its mineral lease was outweighed by broader interests in the efficient production of oil and gas and the minimization of waste. While Lightening did not specifically prognosticate about other situations that might cause a trespass, it alluded to the fact that they were possible.

          One of the most critical legal questions of the case was exactly which rights belong to a mineral lessee, and whether those rights include the right to exclude. In its analysis, the court acknowledged that, as a general matter, ownership carries with it the right to exclude all others from using the property. Even so, the court qualified, “ownership of property does not necessarily include the right to exclude every invasion or interference based on what might, at first blush, seem to be rights attached to the ownership.”  Furthermore, of the several rights conveyed to the mineral estate upon severance – namely: “(1) the right to develop, (2) the right to lease, (3) the right to receive bonus payments, (4) the right to receive delay rentals, and (5) the right to receive royalty payments” – a mineral lessee such as Lightning typically receives only the right to develop (at least, in Texas).  That right to develop, the court opines, includes the rights to explore for, produce, and posses the minerals in the property, but not to possess the actual “place or space” itself – literally, the earthen subsurface – where the minerals are located.  Therefore, the court reasons, an intrusion such as Anadarko’s drilling through the mineral estate “constitutes a trespass as to the mineral estate only if the interference infringes on the mineral lessee’s ability to exercise its rights.”  On this point, the court quickly dismissed Lightning’s contention that the presence of Anadarko’s wellbore might interfere with Lightning’s ability to extract minerals in future as simply too speculative to be relied upon.

          Among its other unsuccessful arguments, Lightning tried to assert that by drilling through its mineral lease, Anadarko was not just trespassing upon the location of its minerals, but actually interfering with the minerals themselves.  In essence, Lightning claimed that “Anadarko’s proposed well-drilling activities will extract minerals embedded in the physical matter that will be drilled out of the ground and removed.”  Though this argument seems rather weak, the court did not attempt to suggest that no minerals at all would be disturbed or extracted by Anadarko’s drilling. Instead, it focused on the fact that the total amount of minerals that could possibly be extracted along with dirt removed from the space of the wellbore would be extremely small, and that, on balance, “the loss of minerals Lightning will suffer by a well being drilled through its mineral estate is not a sufficient injury to support a claim for trespass.”

          Ultimately, the take away seems to be that, going forward in Texas, a lessee who has permission from the surface owner but not the mineral lessee, may nonetheless drill from the surface estate and bore through the mineral estate below it, to produce from an adjoining property, without fear of committing a subsurface trespass. Like other fairly recent decisions in neighboring states (see, e.g., our article: “Where to Start: New Mexico’s Evolving ‘Commencement of Drilling’ Standard,”) the Lightning case is important because it helps clarify one aspect of Texas oil and gas law and thus provides lessees with a more certain legal foundation from which to make drilling decisions.

Leave a Reply

Your email address will not be published. Required fields are marked *