The Houston Court of Appeals in Texas recently addressed the issue of surface owners rights in the case of Key Operating & Equipment Inc. v. Will and Loree Hegar. The case involves the use of the surface of the Plaintiffs’ land by an oil and gas operator. In Texas, the owner of the minerals generally has an implied easement for reasonable use of the surface in order to explore, develop and extract the minerals. In this case, the mineral owner wanted to make continued use of a road on the Plaintiffs’ surface estate to access minerals on other tracts, after that surface estate had been severed from its minerals, and after the minerals under the Plaintiffs” tract and the minerals under the other tracts had been pooled.
The Defendant, Key Operating and Equipment owned mineral rights and operated wells on two tracts of land (the Richardson and Rosenbaum-Curbo tracts) in Washington County, Texas since the late 1980’s. The mineral leases allowed for pooling, and in 2002, Key pooled mineral interests in the two tracts, and used the road across the Curbo tract to access their two producing wells on the Richardson tract. At the time of the suit, there was no longer a producing well on the Curbo tract. In 2002, the Hegars bought the surface of the Curbo tract and a 1/4 interest in the minerals. They knew about the lease and the road–which they used themselves to get to their house. They objected, however, when Key drilled a new well on the Richardson tract and used the road more frequently. Mr. Hegar stated, “We’re trying to raise a family and we can’t do it with a highway going through our property.” So in 2007, they sued Key for trespass and asked for a permanent injunction to prohibit Key from using the road. The Hegars claimed that no oil is actually being produced from the Curbo tract and Key only pooled the interests in order to continue to use the access road. Key claimed that the Curbo oil is migrating towards the Richardson tract, and that is why they pooled the two tracts.
The trial court agreed with the Hegars and permanently enjoined Key from using the road “for any purpose relating to the extraction, development, production, storage, transportation, or treatment of minerals produced from an adjoining” tract.
On appeal, Key argued that the both its oil and gas leases and the pooling of the two tracts authorized the use of the road. The Hegars contended that the road could be used only for production of minerals from the Curbo estate but could not be used for the production of minerals from adjacent tracts despite the pooling of the two tracts, since the pooling declaration had been executed after the severance of the surface and minerals of the Curbo tract.The Hegars contended that Key’s use of their surface is limited to the rights that existed when the surface and minerals in the Curbo tract were severed, and the severance occurred before the oil and gas leases and the pooling agreements were executed.
The Houston Court of Appeals agreed with the Plaintiffs that the Key leases and pooling agreement were not part of the Plaintiffs’ chain of title and did not bind them. However, the Court decided that Key had “the right to use the surface of the Curbo tract to produce oil from beneath the surface, regardless of whether that oil is co-mingled with oil from other tracts.” The Court explained that Key’s right to use the road can arise from the usual implied easement of a mineral owner to use the surface, so long as some of the oil is being produced comes from beneath the Curbo tract. The Court of Appeals noted that there was evidence at trial that the oil being produced from the wells on the Richardson tract did not from beneath the Curbo tract. As a result, the Court of Appeals affirmed the issuance of the permanent injunction prohibiting Key’s use of the road across the Plaintiffs’ property.
This case illustrates the tensions that often arise between a surface owner and the mineral owner. It will be interesting to see what the Texas Supreme Court decides.Oral argument before the Texas Supreme Court occurred on February 4, 2014 but the opinion has not yet been issued.
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