Drilling? Know Your Rights Below And Above

Mary Crawford Energy

A recent court opinion from West Virginia’s Supreme Court has provided another reminder to operators that, when drilling for minerals below neighboring tracts, a surface agreement is their safest bet to avoid disputes with surface owners. The West Virginia Supreme Court of Appeals recently ruled on EQT Production Co. v. Crowder et al., a case related to mineral owners’ surface rights. At issue was whether a lessee has an implied right to use the surface of a tract in any way reasonable and necessary to the development of minerals underlying the tract.

The issue arose from a century-old lease that allows Defendant EQT Production Company (“EQT”) to drill oil and gas wells beneath Plaintiffs Margot Beth Crowder and David Wentz’s estate. Between 1901 and 1995, nine conventional vertical wells were drilled on the property. By June of 2014, EQT had drilled nine horizontal wells on the plaintiffs property with 9.7 miles of horizontal wellbore. 62.5% of these wellbores extended under neighboring properties. Plaintiffs brought suit to challenge EQT’s use of their surface estate to drill horizontal wells that extend under neighboring properties arguing that EQT’s use constituted trespass on their surface tracts.

The circuit court found that EQT had no express or implied right to enter or use Plaintiffs’ surface lands to drill into and produce gas from neighboring mineral tracts and awarded Plaintiffs $190,000 in damages. The circuit court explained that EQT had the implied right to use the plaintiffs’ surface lands “for well pads, roads, and pipelines to drill into, and produce gas from, but only from the mineral tract” underlying the plaintiffs’ lands.

The West Virginia Supreme Court affirmed the lower court’s decision reiterating that a mineral owner or lessee “has an implied right to use the surface of a tract in any way reasonable and necessary to the development of minerals underlying the tract.” This right does afford mineral owners and lessees the ability to use the surface to benefit mining or drilling operations on other lands, absent an express agreement.

A similar issue related to mineral owners or lessees’ surface rights arose in Texas in Lightning Oil Company v. Anadarko E&P Onshore, LLC. While the issue in the West Virginia case was whether surface rights could be used to reach minerals that are not underlying the surface tract, the issue in Lighting Oil was whether a mineral lessee could set up a surface site on a tract of land neighboring the tract covered by the oil and gas lease.

In this case, Lightning Oil was the lessee of the mineral rights under the Briscoe Ranch. Subsequent to Lightning Oil leasing the mineral rights, Anadarko entered into an agreement with Briscoe Ranch to drill from a surface sight on the Briscoe Ranch into a neighboring tract. Lightning Oil sued Anadarko for trespass and tortious interference with a contract.

The court found that “an unauthorized interference with the place where the minerals are located constitutes a trespass as to the mineral estate only if the interference infringes on the mineral lessee’s ability to exercise its rights.” The rationale behind the holding was that “the loss of minerals Lightning Oil will suffer by a well being drilled through its mineral estate is not a sufficient injury to support a claim for trespass.”

Considering both decisions, the practical solution for mineral owners and lessees would be to obtain subsurface easements from surface owners or enter into a surface use agreement with the surface owners. The West Virginia Supreme Court of Appeals suggested this to mineral owners, stating that “should the mineral owner or lessee want to utilize the surface to access minerals under neighboring land, they can certainly reach a separate agreement with the surface owner.