Texas Supreme Court Takes Flexible Approach to Subsurface Rights

The Texas Supreme Court, in Lightning Oil v. Anadarko, determined that Anadarko’s drilling would not be a trespass, even though the drilling would penetrate Lightning Oil’s mineral leasehold.

A surface owner allowed Anadarko, an energy company, to install a horizontal well.  Anadarko did not own the minerals below this surface tract; the well was to extract hydrocarbons from under an adjacent property.

Lightning Oil had acquired a lease for the minerals below the surface where Anadarko planned to initiate drilling.  Lightning Oil sued, arguing that the drilling would first pass through the formation that it had leased, and thus be a trespass.    The Court held that concepts of accommodation and flexibility prevailed over Lightning Oil’s demand for a strict application of the doctrine of trespass.

Surface Trespass and Subsurface Trespass Are Different

Traditional Texas law holds that every unauthorized entry upon land of another is a trespass, even if no damage is done or injury is slight.  The parties did not dispute that Anadarko’s plan included penetrating Lightning Oil’s mineral leasehold, and that some quantities of hydrocarbons would be lost due to Anadarko’s drilling.  Also, the drilling would leave structures in place that could impede Lightning Oil’s ability to extract hydrocarbons from its property.  Lightning Oil demanded a court order prohibiting Anadarko from drilling through the formation, based on a strict application of traditional trespass law.

Anadarko persuasively argued that the actual hydrocarbon loss to Lightning Oil, while not zero, will be minimal, and that the Texas Railroad Commission (“TRC”), which regulates energy development in Texas, approved Anadarko’s plan.  Also, Anadarko’s plan allowed it to avoid surface disruption on a wildlife conservation area controlled by the Texas Parks & Wildlife Department.  In this context, the Court rejected Lightning Oil’s demand for strict application of traditional trespass law.

More “Balancing” as to Subsurface Rights

In reaching its decision, the Court balanced the small amount of hydrocarbons that Lightning Oil will lose with the benefit of this TRC approved plan.  In light of this balancing, the Court determined that Anadarko’s drilling would not constitute a trespass.

The Court took a more flexible approach to subsurface property rights.  Had Lightning Oil owned the surface rights, little or no “balancing” would have been part of the trespass analysis.

Trends in Texas Law

This decision and other recent decisions from this Court (See my previous Alert discussing the accommodation doctrine in a groundwater lease case), indicate these Texas law trends:

  • Continued strict application of trespass law to surface land rights
  • Flexible approach to subsurface rights, with balancing of surface interests, state-wide interests, and long term economic development interests
  • Continued evolution of the accommodation doctrine to facilitate effective long term value for surface owners, servitude holders, and resource companies.
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