Surface damage – what must operators do to accommodate existing uses of the surface estate?

Today we conclude Blawgletter's seven-part series on the Hottest Oil & Gas Claims for 2015, a paper we co-wrote for the 66th Oil & Gas Law Conference in Houston. This last piece deals with maybe the hardest claim to make out — a claim by the surface owner against an oil and gas lessee for interfering with pre-existing uses of the property.

Legal backdrop

Common-law states like Texas give the owner of minerals that underlie a tract of land priority over the owner of the tract’s surface. The mineral owner thus has the “dominant” estate, the surface owner the “subservient” one. Louisiana law likewise infers a right of the mineral owner — or, much more often, the lessee under an oil and gas lease — to make reasonable use of the surface. See, e.g., Caskey v. Kelly Oil Co., 737 So.2d 1257, 1262-63 (La. 1999).

In rare instances, the surface owner may get damages for an oil and gas operator’s abuse of its dominant position. The surface owner must prove that the operator’s use of the surface completely precludes or substantially impairs her existing use of the surface, she has no reasonable alternative way to continue the existing use, and the operator could accommodate the existing use by employing a reasonable and customary method that the oil and gas industry accepts. Merriman v. XTO Energy, Inc., 407 S.W.3d 244, 249 (Tex. 2013) (holding that rancher failed to carry burden of showing that “he had no reasonable alternative means of maintaining his cattle operations” on a 40-acre tract); see Key Operating & Equip., Inc. v. Hegar, 435 S.W.3d 794, 799 (Tex. 2014) (holding that lessee’s “implied surface easement extends to the surface of [a] pooled area”).

What options do surface owners have when they believe an operator has overstepped its right to use the surface?

Plaintiff's claim

Although difficult to establish, a claim for misuse of the surface will involve these factors: 

• History of using the surface of the lease area for a specific profit-seeking purpose;

• Excessive or indiscriminate damage to or occupation of the surface; and

• Substantial loss of income due to interference with the existing use.

Wrap up

We appreciate your interest in the Hottest Oil & Gas Claims for 2015 series. You can read the rest of it by clicking on the links below.

• Hottest Oil & Gas Claims, Part 1: Busting Leases
• Hottest Oil & Gas Claims, Part 2: New Technology
• Hottest Oil & Gas Claims, Part 3: What Counts as a Well?
• Hottest Oil & Gas Claims, Part 4: Flaring Gas
• Hottest Oil & Gas Claims, Part 5: Exculpatory Clauses
• Hottest Oil & Gas Claims, Part 6: Unreasonable Expenses

Something new

Blawgletter will have a surprise for you in the next couple of weeks. Please stand by.