Hunting for Resolution: The Surface and Mineral Estates - Part I
Today marks the start of the 2020-2021 hunting season in Texas with the opening of dove season across most of the state. For many of us, this means returning to the same wheat fields and water tanks that we’ve hunted for years, if not for generations, to engage in an annual tradition that rivals Thanksgiving and Christmas (but maybe not deer season). There’s no doubt that hunting is a cultural mainstay in Texas, and a billion-dollar industry has grown around it in response. Regardless of whether the hunting is done on family land, a simple lease, or on a high-fenced commercial hunting ranch, it’s clear that Texans love to hunt and that there is a sizeable industry supporting it. That support can result in the infusion of dollars into areas of the state that otherwise would have few or no other means of bringing in money. In many cases, however, those same lands so conducive to hunting are situated above another cultural and economic mainstay in Texas—oil and gas. Add in the ubiquity of farming and ranching in Texas, and you’ve got high stakes and a recipe for conflict between various property interests and three industries with plenty of money to throw around.*
*Okay, so maybe not those of us in O&G right now.
I can already hear your lamentations, “if oil could just get back to $60 …”
The ties between oil and gas and hunting go back further than you may expect. Long before the shale revolution, the first meaningful production in Texas was obtained from vertical wells drilled into traditional oil and gas reservoirs, where the hydrocarbons could freely move within the reservoirs without regard to property lines. In typical attorney fashion, when first faced with disputes grappling with the nature of ownership of oil and gas as it sits in the ground, judges of the past took existing law governing the “ownership” of wild animals on private property—termed ferae naturae, where the wild animal is not legally owned until “captured”—and applied it to the fugacious nature of oil and gas in a reservoir. This legal fiction resulted in what we know today as the rule of capture, which dictates, in the most basic sense, that the first to get to the oil and gas owns it without regard to the rights of others.
There’s always that one hunting buddy who drinks too many coveys of quail.
Unsurprisingly, over time certain limitations on the rule of capture were established by the courts, by statute, and by regulation. Most, if not all, of these limitations were imposed in the interest of public policy and to prevent the tragedy of the commons intrinsic to shared resources like oil and gas in a reservoir. The end game was (and still is under the auspices of the Railroad Commission of Texas) to prevent waste and protect correlative rights, which should seem similar to hunting regulations like licensing, seasons, and bag limits. But what about the rights of the owner of the oil and gas to even get to the resource deep beneath the ground? When it comes to wild game, until the fictional killer worms in the Oscar-worthy 1990 classic Tremors turn up in real life, the “capture” of birds, deer, and the like is straightforward—animals cross the surface of a given parcel of land and hunters harvest said animals.
Shown: 2020 getting another bright idea.
Substances like oil and gas have the distinction of being thousands of feet below the surface and, as we’re all no doubt familiar with, it’s not uncommon for their ownership to be severed from the surface. What happens when the owner of the oil and gas wants to produce but the surface owner is already using the surface for some other use? How do you reconcile the rights of the surface owner with the rights of the oil and gas owner? What public policy should apply to this determination? In Texas, most courts answered, “the mineral estate is dominant—deal with it,” to the chagrin of surface owners everywhere. The status of “dominant estate” imbues the owners of oil and gas and their lessees with an implied right to use as much of the surface as is “reasonably necessary” to produce oil and gas. Objectively, it makes logical sense: What good is oil and gas in the ground if the owner has no opportunity to capture them?
It’s no secret that the line of cases addressing exploration of severed mineral interests are overwhelmingly favorable to the oil and gas owner and its lessees. But that favor is not without limitation, and Texas courts are still hearing cases on these issues today and almost assuredly will continue to do so for the foreseeable future. The practical reality is that having the legal right does not always translate into an ability to freely operate with a wholesale disregard of the surface estate or for the surface owner’s use of the property (unless you’re okay with being constantly sued and dealing with gun-toting farmers and ranchers). Liken it to The Dude’s line in The Big Lebowski: “You’re not wrong, Walter—you’re just an asshole.”
I’ve got HSO’s for days, folks. I also lawyer on the side.
Of course, that crassness can run both ways. There’s plenty of surface owners out there who are both wrong and assholes. Point being, the law may say one thing, but getting along (if at all possible) is better than having to hire an attorney to go to court. It’s expensive and there’s an overabundance of Walters in the legal profession.
It’s easy to forget that many of us are at some point surface owners or invitees of a surface owner when we’re out hunting. If you’re like my family and have dove hunted the same fields for decades, consider how you might feel if someone came along and wanted to operate on the surface in such a way that would, at best, temporarily impede your use or, at worst, ruin it forever. These feelings will only be stronger for those surface owners who have sunk considerable amounts of money into their surface use. Knowing where the conflicts are likely to arise is a skill that comes with experience. Getting out ahead of those likely conflicts with a surface use agreement and a strategic plan can prevent future headaches and costly litigation. As surface owners and oil and gas lessors become more sophisticated, the utility of a surface use agreement cannot be understated. Defining what each party can and can’t do, outlining a protocol for operations, and establishing when and in what amounts money should exchange hands can protect the operator as much or more than the obstinate surface owner.
Sophisticated is a relative term. This goes for oil and gas attorneys, too.
Over the coming weeks, we will be taking a look at surface use in Texas for oil and gas operations, beginning with the development of the relevant body of law and recent cases, then examining current trends and how the entry of new contenders—solar, wind, and water—has changed the game, and finally finishing up with a look at the utility and structure surface use agreements. This series will be weekly, with each new post made on Tuesdays.
Y’all stay safe out there and make sure you exercise your right under the rule of capture to its fullest extent—get your bag limits!!
