beneath the surface estate” and that “absent the grant of a right to control the subterranean structures in which the oil and gas molecules are held, the mineral estate owner does not control ‘the mass that undergirds the surface.’” Lightning Oil Co. v. Anadarko E & P Onshore LLC, 480 S.W.3d 628, 635 (Tex. App. – San Antonio 2015, aff ’d sub nom. Lightning Oil Co. Anadarko E &P Onshore, LLC, 520 S.W.3d 39 (Tex. 2017)). The Supreme Court determined that Lightning’s claims turned on “whether a lessee’s rights in the mineral estate includes 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.” Lightning Oil Co., 520 S.W.3d at 46. The primary issue under consideration was whether Anadarko’s proposed drilling activities constituted a trespass. The court broke the claim into two inquiries: the first being whether Anadarko’s drilling would interfere with Lightning’s use of the surface and subsurface and the second being whether Anadarko’s drilling would interfere with Lightning’s enjoyment of the minerals. The court considered the three primary principles relied on by the court of appeals regarding ownership and control of the subsurface: (1) the surface overlying a leased mineral estate is the surface owner’s property, including the geological structures beneath the surface, (2) the surface owner, and not the mineral owner, owns all non-mineral molecules of land, and (3) the mineral estate owner is only entitled to a fair chance to recover the oil and gas in place. The court of appeals concluded that Lightning could not exclude Anadarko because Lightning “does not own or exclusively control the earth surrounding any hydrocarbon molecules”, and because Lightning did not have the right to exclude Anadarko, Anadarko could not be trespassing on Lightning’s property. Lightning Oil Co., 480 S.W.3d at 635. The court agreed that the surface owner controls the mass that undergirds the surface, but advised that such ownership did not necessarily mean the surface owner could make or permit physical intrusions where the minerals are located and remove those minerals. The court explained that when the mineral estate is severed from the fee simple, five rights, often referred to as the “bundle of sticks,” are conveyed to the transferee, including the
right to develop, lease, receive bonus payments, receive delay rentals and receive royalties. As an oil and gas lessee, Lighting was granted to the right to develop under a lease, which right includes the right to explore, obtain, produce and possess the minerals subject to the lease, but not the right to possess the place where the minerals are located. Thus, the court determined that “an unauthorized interference with the place where the minerals are located constitutes a trespass as to the mineral estate only if the interference infringes on the mineral lessee’s ability to exercise its rights.” Lightning Oil Co., 520 S.W.3d at 49. Considering whether Anadarko’s proposed operations infringed Lightning’s ability to develop, the court held, first, that Lightning had not offered proof that the Railroad Commission drilling regulations concerning the location and number of wells were insufficient to preserve Lightning’s rights and second, that Lightning’s leased mineral estate remained the dominate estate subject to the accommodation doctrine, meaning Anadarko had no rights to use the surface greater than what Briscoe Ranch as the surface owner had. Considering whether Anadarko’s proposed operations interfered with the minerals themselves, the court agreed with Lightning that Anadarko’s drilling activities would necessarily extract minerals embedded in the ground to which Lightning would otherwise be entitled, but that the quantum of minerals which would be removed would be small. The court weighed the relevant interests of society and the oil and gas industry against the interest of an individual operator and concluded that if Anadarko’s proposed activities were a non-actionable interference with Lightning’s rights, the policy of the state of Texas to encourage recovery of minerals and minimize waste would outweigh the minimal loss of minerals Lightning might suffer.
About the Author:
Melissa Munson practices in the areas of business and energy and natural resources law. Her practice focuses on energy transactions, including those involving oil and gas exploration and production and upstream and midstream asset
acquisitions and dispositions. Melissa.munson@steptoe-johnson.com
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