Off-Lease Drilling Locations and Claims of Subsurface Trespass (Part Two)

In Lightning Oil Co. v. Anadarko E&P Onshore LLC, No. 04-14-00903-CV, 2015 Tex. App. LEXIS 8673 (Aug. 19, 2015), the San Antonio Court of Appeals concluded that a mineral estate owner was not entitled to prevent an adjacent mineral estate owner from drilling horizontal wells crossing through the other party’s mineral estate to access the adjacent mineral estate. This decision addresses the issue of subsurface trespass, while an earlier decision, Lightning Oil Co. v. Anadarko E&P Onshore, No. 04-14-00152-CV, 2014 Tex. App. LEXIS 11844 (Oct. 29, 2014), discussed here, denied Lightning’s application for injunctive relief.

The dispute in Lightning Oil arose from Anadarko E&P Onshore’s (“Anadarko”) attempt to drill horizontal wells that would enter and cross through Lightning Oil Co.’s (“Lighting”) mineral estate. Lightning owned the mineral estate to land known as the Cutlass Lease, a severed mineral estate under a portion of Briscoe Ranch. Id., at *2. Adjacent to the surface estate overlying the Cutlass Lease is the Chaparral Wildlife Management Area (“Chaparral WMA”). Id., at *3. Anadarko obtained an oil and gas lease giving it the right to develop the mineral estate underlying the Chaparral WMA. Id. In a separate agreement, Anadarko entered into a written Surface Use and Subsurface Easement Agreement with the surface owner of Briscoe Ranch allowing it to place rigs on the surface estate overlying the Cutlass Lease and to drill through the earth under the Briscoe Ranch to form wells that open and bottom in the Chaparral WMA. Id. However, Lightning opposed Anadarko’s planned drilling operations and brought suit for trespass to prevent Anadarko from drilling the proposed wells that would cross within the boundaries of the Cutlass Lease. Id.

Addressing Lighting’s claim of subsurface trespass, the San Antonio Court of Appeals evaluated whether Lightning satisfied the requirements to prove trespass, specifically whether Lightning proved they owned or otherwise had a legal right to exclude others from their property. Id., at *7-8. Lighting argued that the ownership of the mineral estate includes the right to exclude others from the subsurface estate. Id., at *8 (citing Chevron Oil Co. v. Howell, 407 S.W.2d 525, 526 (Tex. Civ. App. – Dallas 1966, writ ref’d n.r.e.; Hastings Oil Co. v. Tex. Co., 149 Tex. 416 (Tex. 1950); Villarreal v. Grant Geophysical, Inc., 136 S.W.3d 265, 268 (Tex. App. – San Antonio 2004, pet. denied)). However, the facts of each case cited by Lighting were distinguished by the court. Id., at *8-12. On the other hand, Anadarko argued that Briscoe Ranch, as the surface owner of the Cutlass Lease, owned and controlled the earth surrounding the minerals, and therefore, only Briscoe Ranch had the legal right to exclude Anadarko from drilling through the earth underneath the Cutlass Lease. Id., at *12. To support its argument, Anadarko argued that “the conveyance of mineral rights ownership does not convey the entirety of the subsurface.” Id., at *13 (citing Dunn-McCampbell Royalty Interest, Inc. v. Nat’l Park Serv., 630 F.3d 431, 441 (5th Cir. 2011)).

The San Antonio Court of Appeals agreed with Anadarko and concluded that the surface estate owner controls the earth beneath the surface estate. Id., at *14. The court explained: “[A]bsent 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 of the [conveyed land.]'” Id., at *13 (citing Dunn-McCampbell, 630 F.3d 431, 441). Therefore, because Anadarko obtained permission from Briscoe Ranch, Anadarko’s drilling through the Cutlass Lease did not constitute a subsurface trespass provided that Anadarko did not open or bottom its wellbores in, or otherwise produce oil or gas from, the Cutlass Lease. Id., at *14.

The long-standing theory, and practice, has been that the surface owner is the one who can grant permission for an off-lease drilling location. Therefore, typically, operators have obtained surface use agreements for off-lease well pads, but do not obtain agreements from owners of adjacent mineral estates. Lightning Oil affirms that practice and operators can continue to only obtain surface use agreements from the surface estate owner and do not need to obtain agreements from the owners of those adjacent mineral estates unless they plan to open or bottom out their wellbores in, or otherwise produce oil or gas from, the adjacent mineral estates.