Thursday, September 20, 2018
Land ownership includes two separate estates in land – the surface estate and the mineral estate. The mineral estate can be severed from the surface estate with the result that ownership of the separate estates is in different parties. In some states, the mineral estate is dominant. That means that the mineral estate owner can freely use the surface estate to the extent reasonably necessary for the exploration, development and production of the minerals beneath the surface.
The “accommodation doctrine” is a court-made doctrine relating to the mineral owner's right to use the surface estate to drill for and produce minerals. ... The doctrine requires a balancing of the interests of the surface and mineral owner. How that balancing works was at issue in a recent case.
The accommodation doctrine – that’s the topic of today’s post.
The Accommodation Doctrine
If the owner of the mineral estate has only a single method for developing the minerals, many courts will allow that method to be utilized without consideration of its impact on the activities of the surface estate owner. See., e.g., Merriman v. XTO Energy, Inc., 407 S.W.3d 244 (Tex. 2013). But, under the accommodation doctrine, if alternative means of development are reasonably available that would not disrupt existing activities on the surface those alternative means must be utilized. For example, in Getty Oil co. v. Jones, 470 S.W.2d 618 (Tex. 1971), a surface estate owner claimed that the mineral estate owner did not accommodate existing surface use.
To prevail on that claim, the Texas Supreme Court, determined that the surface owner must prove that the mineral estate owner’s use precluded or substantially impaired the existing surface use, that the surface estate owner had no reasonable alternative method for continuing the existing surface use, and that the mineral estate owner has reasonable development alternatives that would not disrupt the surface use. A question left unanswered in the 1971 decision was whether the accommodation doctrine applied beyond subsurface mineral use to the exercise of groundwater rights. But, in 2016, the court said that the doctrine said the doctrine applied to groundwater. Coyote Lake Ranch, LLC v. City of Lubbock, No. 14-0572, 2016 Tex. LEXIS 415 (Tex. Sup. Ct. May 27, 2016).
Harrison v. Rosetta Res. Operating, LP, No. 08-15-00318-CV 2018 Tex. App. LEXIS 6208 (Tex Ct. App. Aug. 8, 2018), involved a water-use dispute between an oil and gas lessee and the surface owner. The plaintiff owned the surface of a 320-acre tract. The surface estate had been severed from the mineral estate, with the minerals being owned by the State of Texas. In October 2009, the plaintiff executed an oil and gas lease on behalf of the State with Eagle Oil & Gas Co. Eagle began its drilling operations, but before completing its first well it assigned the lease to Comstock Oil & Gas, L.P., subject to an agreement to indemnify Eagle against claims arising from its operations to that point. Within a few months, the plaintiff and several other plaintiffs sued Eagle for negligently destroying the plaintiff’s irrigation ditch as well as damage resulting from road construction, among other claims. Comstock defended Eagle in the lawsuit and settled a few months later. According to the settlement agreement, Comstock would make repairs to a water well on the plaintiff’s land and purchase 120,000 barrels of water from the plaintiff at a rate of fifty cents per barrel. A plastic-lined “frac pit” was also built on the property to store water produced from the well, although the pit was not a requirement of the settlement agreement. Comstock complied with the agreement and purchased the required amounts of water from the plaintiff at the agreed price. Comstock completed two oil wells on the property that year and began constructing a third well the following year. Before completing the third well, however, Comstock assigned the least to Rosetta Resources Operating, LP, the defendant in this case, who continued construction of the third well and began construction of several more. Unlike Comstock, the defendant did not purchase its water from the plaintiff, choosing instead to pump in water from an adjacent property, a neighbor of the plaintiff.
After learning that the defendant was importing his neighbor’s water, the plaintiff filed suit in his individual capacity and as trustee against the defendant for breach of contract, claiming an employee of the defendant had orally agreed to continue the same arrangement the plaintiff had enjoyed with Comstock. He also sought to permanently enjoin the defendant from using his neighbor’s water and sought cancellation of the State’s oil and gas lease. The defendant filed three motions for summary judgment that collectively challenged all of the plaintiff’s claims. In response, the plaintiff filed an amended petition asserting that the defendant had violated the “accommodation doctrine” by not purchasing his water, thus rendering his well and frac pit useless and unnecessarily causing damage to his property. The trial court granted the defendant’s motions for summary judgment in their entirety. The plaintiff appealed.
The appellate court determined that the plaintiff’s accommodation doctrine arguments appeared to rest on his proposition that because a frac pit was built on his land for use by the former lessee, it unified the use of the land with the oil and gas operations, and when the defendant chose not buy his water it substantially interfered with his existing use of the land as a source of water for drilling operations. Thus, the substantial interference complained of was that the frac pit was no longer profitable because the defendant is not using it to supply water for its operations. The appellate court held that categorizing a refusal to buy goods produced from the land as interference with the land for purposes of the accommodation doctrine would stretch the doctrine beyond recognition. Therefore, because the defendant’s use did not impair the plaintiff’s existing surface use in any way, except in the sense that not buying the water had precluded the plaintiff from realizing potential revenue from selling its water to the defendant, the inconvenience to the surface estate was not evidence that the owner had no reasonable alternative to maintain the existing use. Lastly, the court determined that if it were to hold for the plaintiff on these facts they would, in effect, be holding that all mineral lessees must use and purchase water from the surface owner under the accommodation doctrine if his water is available for use. Accordingly, the appellate court affirmed.
The accommodation doctrine is not designed to substitute for common sense reasonableness when the dominant estate owner has two clear options for doing something that involve the same cost. If one option is more disruptive to the surface owner, inherent limits of reasonable use dictate use of the less disruptive option. The recent Texas case is just another illustration of how courts wrestle with the application of the doctrine.