Texas Supreme Court Set to Hear Mineral Trespass Case
Feb. 20, 2017
Do Oil Companies Need Permission to Drill Leased Mineral Estates?
The Texas Supreme Court has agreed to hear a dispute to determine whether an oil producer can drill through a mineral lease without a lessee's permission. The case involves a dispute between Lightning Oil and E&P Onshore LLC, a subsidiary of Anadarko Petroleum Corp.
Anadarko intends to drill horizontally through property on which Lightning owns rights to oil and gas to reach a nearby oil and gas reserve. Lightning claims that the proposed drilling would trespass through its mineral estate, however, Anadarko argues that the mineral estate lies in the subsurface, and that it has obtained permission to drill from the surface owner.
Lightning is seeking to overturn a lower appellate court ruling in favor of Anadarko, claiming that decision ignored its legally valid mineral estate and effectively removed real property status from mineral estates. The company claims that Anadarko's well bores will cut through and destroy a portion of the subsurface and produce minerals from Lightning's estate. Ultimately, the remaining damage would impede Lightning's development of the mineral estate and therefore adversely impact its legal rights.
For its part, Anadarko argues that the nature of mineral and surface estates and the related rights has been settled by legal precedent, citing a 2008 Texas Supreme Court decision (Coastal Oil & Gas Corp. v. Garza). In short, Anadarko claims that the subsurface belongs to the surface owner, and that Lightning cannot claim trespass because it does not own the entire subsurface.
Oral arguments in the case are on the docket for March 21 at which time the high court will needs to decide whether Anadarko must obtain permission from Lightning to drill through its mineral lease. Whether or not the justices will rely on decision in the Coastal case remains to be seen. However, this case will have a far reaching impact on mineral estates in Texas, given the advances in horizontal drilling. In the meantime, if you are involved in a dispute over mineral rights, you should engage the services of an experienced oil, gas and energy attorney.