Texas Supreme Court Clarifies Surface-Estate and Mineral-Estate Rights

On May 19, the Supreme Court of Texas issued its opinion in Lightning Oil Co. v. Anadarko E&P Onshore, LLC, No. 15-0190, 2017 WL 2200343 (Tex. 2017). In a unanimous opinion by Justice Johnson, the Court resolved a dispute about whether the right to grant permission to drill through the subsurface belongs to the surface-estate owner or the mineral-estate owner.Anadarko signed a mineral lease covering lands located in a wildlife conservation area. The lease required Anadarko to use drilling locations outside the wildlife conservation area “when prudent and feasible.” To comply with this term of the lease, Anadarko approached the owner of the Briscoe Ranch, which adjoins the wildlife conservation area. The mineral estate under the Briscoe Ranch had been severed from the surface estate. The Briscoe Ranch, Inc. owns the surface estate and the minerals are leased to Lightning Oil. Anadarko signed an agreement with Briscoe Ranch, Inc. (the surface-estate owner) to build a drilling site on the Briscoe Ranch and drill five horizontal wells to reach the minerals in the wildlife conservation area. Although the wellbores would pass through mineral formations owned by Lightning, Anadarko disclaims any intention to produce any minerals from Lightning’s leasehold. Lightning objected to the agreement between Anadarko and Briscoe Ranch, Inc., and sued Anadarko for trespass and tortious interference with contract.The Supreme Court noted that while Anadarko’s activities on the Briscoe Ranch might present some risk to Lightning’s rights, those rights could be protected (i) by the Railroad Commission’s rules regarding placement of wells and (ii) by the accommodation doctrine and the fact that Anadarko’s rights (because they are derived from the surface-estate owner) would be subject to Lightning’s rights as the owner of the dominant mineral estate.The Court then considered whether Lightning could make a claim based on the  fact that some quantum of Lightning’s minerals embedded in the subsurface materials were removed during drilling. The Court held that Lightning’s rights must be balanced against state policy of encouraging maximum recovery of minerals. In the balancing, the Court concluded that Lightning’s loss of some minerals through the drilling process was not a sufficient injury to support a claim for trespass. The Court also rejected Lightning’s claim for tortious interference with its lease, because nothing Anadarko planned to do interfered with Lightning’s contractual rights. Rich PhillipsThompson & Knight LLP