There are several issues that may arise under Texas law regarding the use of the surface by an operator. This edition of Practice Notes discusses several of them, but as usual, note that the matters that follow are based on certain assumptions, most of which involve the precise wording of the oil and gas lease or unit agreement under consideration. As a matter of caution then, a review of the lease or unit agreement is mandatory, to verify that the fact situation at hand conforms to those assumptions. Generally, although not always, printed form leases and unit agreements will have clauses similar to the ones described below, but those clauses may be modified by addenda or “riders” and hence, even if the lease is a printed form, it should be reviewed to ensure those addenda or riders do not otherwise limit the rights of the operator.
The Standard Lease Clause
While no standard form of lease exists, over the years, fairly typical provisions of leases have emerged.1 The reader is cautioned, however, that, unlike the Model Form Operating Agreement, no single form has reached wide-spread recognition as the preferred form, even though many forms in use claim to be “Producer’s 88” forms.
The typical granting clause of an oil and gas lease will be a variation on the following:
Lessor … does hereby grant, lease and let unto lessee the land covered hereby for the purposes and with the exclusive right of exploring, drilling, mining and operating for, producing and owning oil, gas, Sulphur and all other minerals, together with the right to make surveys on said land, lay pipe lines, establish and utilize facilities for surface or subsurface disposal of salt water, construct roads and bridges, dig canals, build tanks, power stations, telephone lines, employee houses and other structures on said land …2
If the lease contains that clause or a variation of that clause, then the lessee-operator generally is not legally required to pay damages for using the surface for the installation and maintenance of drilling pads, pipelines, tank batteries, roads, electrical lines or other equipment. This arises not only because the lease grants the lessee those rights, but also because “[t]he oil and gas lessee … [has] … the right to use so much of the premises and in such a manner as was reasonably necessary to comply with the terms of the lease and effectuate its purpose.”3 Furthermore, “[i]t is well settled that the oil and gas estate is the dominant estate in the sense that use of as much of the premises as is reasonably necessary to produce and remove the minerals is held to be impliedly authorized by the lease …”4
Thus, it has been said that in the absence of provisions in the lease agreement to the contrary, even though an oil and gas lessee does damage to the soil, trees, or crops, on the leasehold, if his operations are reasonable and incidental to the development of the leasehold, such damage is damnum absque injuria, and no recovery can be had by a surface occupier (however, it has also been said that if the lessee is wanton and negligent in his operations, or uses land not necessary for oil and gas development, a suit for damages on the part of the surface owner most certainly will lie).5
“In LeCroy v. Barney, [citation], the lessee was held not responsible in damages to the owner in constructing earthen tanks and in removing trees necessary and incidental in prospecting for oil and gas pursuant to the terms of a lease.”6 In Warren Petroleum Corporation v. Monzingo, the lessee conducted operations on the surface, and abandoned the lease after operations had ceased, leaving the slush pits unfilled, ruts made by the moving of heavy equipment and a gravel road across the property constructed by lessee to the drilling site. The Texas Supreme Court held that, as a matter of common law, unless the lessee was expressly negligent or an express provision in the lease establishes the duty, the lessee had no obligation to restore the premises, and the actions were permitted as being incident to the dominant estate.7
Under Texas law unless there is an express provision in the lease to the contrary, the oil and gas lessee may conduct most usual and customary operations on the lease, without the necessity to pay damages to a surface owner (and, by extension, any tenant of a surface owner) for the use of the land, so long as the use is reasonable and necessary, and, one should add, customary in the industry. Hence, while payments for “damages” or for using the surface may be common, they are not required to permit the use of the surface by the lessee-operator.
The Standard Unit Agreement
As in the case of oil and gas leases, while there is no “standard” unit agreement, over the years, the form of unit agreements in wide use in Texas contain variations on the following clause:
The unit operator … is hereby granted by both the operators and royalty owners, to the extent of their respective rights and interests, the right to use or permit the use of the surface of the land overlying the … Unit in any manner reasonably necessary in order to accomplish the purposes of this agreement, including, but not limited to, easements or rights-of-way over and across such land and the right of ingress and egress therein and therefrom for the purpose of laying, constructing, using, maintaining, operating, changing, repairing and removing pipe lines and other facilities …
The analysis regarding the rights of oil and gas lease operators is identical when applied to oil and gas unit operators, that is no damages are due to a surface owner (and, by extension, any tenant of a surface owner) so long as the use is reasonable and necessary.
Prior Instruments May Affect Rights
While the analysis set forth above is generally true, the title opinions which may exist regarding the lease should be reviewed, or any instrument in the chain of title which may have severed the surface from the minerals should be reviewed. Occasionally, specific language in instruments in the chain of title may dictate a different result. For example, in Landreth v. Melendez,8 while the surface owner ultimately lost his case when he asserted that the lessee-operator did not have the right to utilize a certain type of pump which interfered with the surface owner’s irrigation system, the Landreth case did indicate that if the instrument which severed the surface and minerals (whether by reservation or by grant) vested the surface owner with rights to grant easements or to otherwise limit the use of the surface regarding future lessees, the clear wording of that prior instrument will prevail. Hence, even if the lease is unambiguous and contains a clause similar to the one set forth above, if the mineral owner-lessor did not have the right to grant those rights, the lessee may not avail himself of them.
While the laying of pipelines or other actions are authorized, and generally without the payment of damages, the typical form of lease may provide for the payment of damages for growing crops. In Wohlford v. American Gas Production Company,9 in an unusual fact situation, a well was blown on the premises,
“..but, unknown to the lessee, some arsenic was blown out with the other matter and deposited on the surface of the land, causing damage to the land and grasses produced thereon. The court said that “it is conceded that this is the first known case of arsenic damage from a gas well”; and held the lessee not liable because “a party should not be held responsible for the consequences of an act which ought not reasonably to have been foreseen.” Here the court treated the alleged liability as based on tort and not on contractual provision.
In the same case the court held that the words “growing crops” in its “commonly recognized meaning does not include the natural products of the soil, such as native grasses used for grazing cattle.” The court called attention to the fact that “the idea of burying pipelines below plow depth and of paying for damage to growing crops are expressed in a single sentence,” and that “obviously the draftsman had in mind products of the soil which result from planting, cultivation and labor.”10
In Rohner v. Austral Oil Exploration Co.,11 the lease contained the clause: “The lessee shall be responsible for all damages to timber and growing crops of lessor caused by the lessee’s operations.” The lessor sued the lessee for damages to corn crop, watermelon crop, productivity of four acres of ground, a fence and for annoyance and mental anguish. Damages were allowed for the two crops, but as to the other three items, it was held that no damages were recoverable without proof of negligence of the lessee.12 So, Rohner may be taken as standing for the proposition that the only damages due are to the growing crop, and not the future use to which the land may be put, or for future crops which might be grown on the land or the portion which may not be available for cultivation. While Rohner is a Louisiana case, the reasoning in consonant with Texas law.13
“Native grasses” as pointed out in Wohlford, are not crops; however, no case was found which involved damages to grasses which may have been planted in replacement of native grass. But, in Gulf Oil Corp. v Whitaker14 the oil company allegedly conducted operations in a manner which led to the death of cattle, and the loss of grass because of how operations were conducted and using water without the rancher’s consent. The rancher attempted to recover damages for the extra costs involved in obtaining feed for cattle which did not receive water, loss of calf crops for subsequent years and other damages. The Fifth Circuit agreed with Gulf Oil that no damages were due to the rancher, except possibly regarding using more than half of the water out of a tank.
Frequently, negotiations are commenced with the surface owner, and sometimes, an offer to pay for damages, even though not required by the lease, is rejected by the surface owner, more often than not because the landowner regards the offer as too low. The question then arises if the operator lessee has, by opening negotiations, rendered itself liable for those payments by having made an offer.
This was answered in the negative in Enserch Explorationv. Gardner.15 The surface owners objected to a location picked by Enserch, which later procured an injunction and drilled the well. The surface owners sued, alleging that Enserch in had “agreed to fairly compensate” them for the damages and loss of use of their property. Evidence at the trial showed that Enserch had offered $6,000 for the location and the surface owners wanted more. The jury found there was an “implied contract” and awarded damages to the surface owner in the amount $18,000. The appellate court reversed, and rendered judgment that the surface owners would get nothing in damages.
Beneficiaries Of Lessee’s Rights
If the operator finds gas on the property and has the gas processed in a plant, can that operator then grant to the plant owner or the processor the right to lay a pipeline to the well and take the gas?
In Delhi v. Dixon,16 that question was answered in the affirmative. The operator took a lease from the owner of the mineral rights, pooled the tract covered by the lease with another tract and then conveyed to Delhi the right to lay a pipeline across the tract. The surface owner complained that the operator had no right to do so, and sought damages for the use thereof, but the Eastland court responded: “We hold that the mineral owner’s lessee can grant the gas purchaser an easement to lay a pipeline to transport gas from the well [on a production unit which includes the surface owner’s land] to the gas purchaser’s pipeline system.”17
The specific language approved by the Delhi court was:
To the extent that it may lawfully do so, Seller [Texas Oil] hereby assigns and grants to Buyer [Delhi Gas] an easement across Seller’s properties outlined on Exhibit “A” attached hereto for the purpose of installing, using, inspecting, repairing, operating, replacing, and removing Buyer’s pipelines, meters, and other equipment used or useful in the performance of this Agreement.18
Hence, a gas processing agreement which contains similar language (so long as the underlying lease grants those rights to the lessee operator) will permit the gas processor to lay a line to a well, and installing necessary meters and like equipment.
A like result obtained in the instance of Miller v. Crown Petroleum,19 in which the mineral owners in two adjoining tracts granted oil and gas leases to Crown Petroleum or its predecessors in title. Waterflood operations were instituted to enhance production, and Crown Central laid a saltwater line across the two leases. The surface owners, the Millers, complained because the leases did not specifically grant the right to conduct water flood operations. The court rejected that proposition, and stated “The leases expressly granted lessee the right to pool the two Miller tracts with other land and that production on the pooled acreage should be treated as if it were production from the land covered by leases on the Miller tracts.”20 Hence, the court concluded that since Crown Central had the right to produce oil and gas, and to undertake all reasonable actions to do so, it also had the right to lay salt water lines and to conduct water flood operations.
In those instances where the lessee-operator has the right to lay pipelines or conduct other operations, then it may grant those rights to its assignees.
The Surface Accommodation Doctrine
There are limitations on the lessee operator, however, which limitations are generally called the “Surface Accommodation Doctrine.”
That doctrine requires the operator, while having the dominant estate, to conduct its operations with due regard for the rights of the surface owner. In Getty Oil Company v. Jones,21 the Texas Supreme Court stated that “It is well settled that the oil and gas estate is the dominant estate in the sense that use of as much of the premises as is reasonably necessary to produce and remove the minerals is held to be impliedly authorized by the lease;” and added “but that the rights implied in favor of the mineral estate are to be exercised with due regard for the rights of the owner of the servient estate.”22 In Getty, the landowner had installed an irrigation system well before the time that Getty drilled its wells, and Getty set its pumps so it effectively precluded the landowner from using a center pivot irrigation system. The Texas Supreme Court found that to be deemed unreasonable and without due regard to the surface owner’s rights, and required that Getty set the pumps in a cellar or reach some other accommodation. The opposite result was reached in Landreth v. Melendez,23 in which the landowner demanded that a low-profile pump, or some other, expensive solution was required of the operator.
The case turned on the fact that in an earlier document in the chain of title, a severance of the minerals had taken place, and the party reserving the minerals had inserted the phrase that the owner of the minerals would have “ … the right ‘to take all usual, necessary and convenient means,’ as enumerated, to explore for, produce and remove the oil, gas and other minerals under the surface.”24 The court reasoned that the express reservation in a mineral deed, which retained the right to use “usual, necessary and convenient means” meant that
the mineral owners are under no obligation to accommodate the surface owners in the existing use made of the surface so long as the mineral owners use all usual, necessary and convenient means in conducting their operations.25
There, the use of a low-profile pump was considered not the be “usual, necessary or convenient” and the operator was excused from complying.
If an irrigation system is in place before the drilling of a well, or if a pipeline route may be altered at little cost, the courts may well invoke the Surface Accommodation Doctrine, but if the surface owner installs the irrigation system after the well has been drilled and pumps are set, the surface owner may find the argument regarding Surface Accommodation to be difficult to maintain.
Frequently, the situation arises where multiple surface owners may own undivided interests in the land. When there is a need for an easement, the question may arise how many are necessary to grant the right? If less than 100% of the owners will grant the easement, can the operator-lessee then proceed?
Technically, the owners of the surface are co-tenants in the land, and, in that capacity, each co-tenant may create burdens upon the land, but with the concomitant duty to account to their other co-tenants for any payments received. For example, in Gulf, C. & S. F. Ry. Co.v. Brandenburg,26 a husband devised his community property share to his wife for her lifetime, and she owed her own community share absolutely. She gave an easement to the railroad, and afterwards, the remote owners of the surface sued to recover the land, alleging that grantor wife could not have granted an easement regarding the entirety, because she had only a life estate in an undivided half of the property and a fee estate in the other half. The court held that a grantor conveying a permanent easement, or a title had only an undivided interest, the grantee taking possession could assert only the rights of a tenant in common, and hence became a tenant in common with the other parties.
The legal risk involved is that tenants in common may, upon certain circumstances, demand that the land be partitioned among them; the holder of easement rights only, and probably as a party to the suit, might not prevail if the land is partitioned in a legal proceeding. However, the likelihood of a suit in partition is probably remote, and, even if it should be brought, it is uncertain whether the court would order the abandonment of the easement as part of the remedies.
While the analysis may provide that less than 100% may grant the easement, there is no minimum percentage. Many operator-lessees automatically attempt to secure over 50%, but there is, legally, no requirement for any minimum.
@Theodore R. Borrego, 2022. Comments and questions: (713) 840-8250 or e-mail to email@example.com
This information is provided as a courtesy, and it is not intended as legal advice. Factual circumstances may differ from your particular situation, and while you are free to copy and to reproduce this information, please be aware that it is a statement of general legal principles and is not intended to be used as specific legal advice.
- Moses, The Evolution and Development of the Oil and Gas Lease, 2 Inst. On Oil & Gas L. & Tax’n 1 (1951); E. Kuntz, The Law of Oil And Gas, § 18.1 (1964).
- Pound Printing & Stationery, Producers 88 (7‑69) — Paid Up.
- Warren Petroleum Corporation v. Monzingo, 157 Tex. 479; 304 SW 2d 362 at 363; 65 A.L.R.2d 1352; 7 Oil & Gas Rep. 1108 (Tex. 1957), citing Warren Petroleum Co. v. Martin, 153 Tex. 465, 271 S.W. 2d 410, 3 Oil & Gas Rep. 1565 (Tex. 1957); Meyer v. Cox, 252 S.W. 2d 207, writ ref., 1 Oil & Gas Rep. 1810 (Tex.Civ.App. — 1952). See also, Brown v. Lundell, 162 Tex. 84; 344 S.W. 2d 863, 865, 14 Oil & Gas Rep. 611 (Tex 1961); and generally, Annotation, What Constitutes Reasonably Necessary Use Of The Surface Of The Leasehold By A Mineral Owner, Lessee, Or Driller Under An Oil And Gas Lease Or Drilling Contract, 53 A.L.R.3d 16 and Annotation, Construction Of Oil And Gas Lease Provision Giving Lessee Free Use Of Water From Lessor’s Land, 23 A.L.R.3d 1434.
- Getty Oil Company, v. Jones, 470 SW 2d 618 at 621; 53 A.L.R.3d 1; 39 Oil & Gas Rep. 657 (Tex. 1971).
- 53 A.L.R.3d 16, citing Lambert, “Surface Rights of the Oil and Gas Lessee,” 11 Okla. L. Rev. 373, 381 (1958).
- Warren Petroleum 304 SW 2d 362 at 363.
- Warren Petroleum 304 SW 2d 362 at 363.
- 948 SW 2d 76; 137 Oil & Gas Rep. 170 (Tex.Civ.App. – Amarillo, 1997), reh. over.
- 218 F.2d 213 (5th Cir. 1955), 4 Oil & Gas Rep. 448.
- 218 F.2d 213, 215. The case is also cited in E. Brown, The Law Of Oil and Gas Leases, 2d Ed . §10.04
- 104 So. 2d 253; 9 Oil & Gas Rep. 1116 (La. App. 1958). The quoted clause appears at 104 So. 2d 253, 254. The court also observed that under Louisiana law, at least, “we do not believe that plaintiff is entitled to the award given by the lower court for damage to the land actually used for the pit and drilling operation.” 104 So. 2d 253, 256.
- 104 So. 2d 253, 258.
- See note 9, supra.
- 257 F,2d 157 (5th Cir. 1958), 9 Oil & Gas Rep. 543. In this particular case, the rancher was a tenant, having obtained a grazing lease. The court held that made no difference, and that the defendant oil company “…did not have to obtain permission from plaintiffs to enter upon and make use of the lands under their oil and gas leases. 257 F2d 157, 159.
- 836 SW 2d 739 (Tex.Civ.App. — Eastland, 1992), 120 Oil & Gas Rep. 367.
- 737 SW 2d 96 (Tex.Civ.App .—Eastland, 1987), 99 Oil & Gas Rep. 606.
- 737 SW 2d 96, 98.
- 737 SW 2d 96, 97.
- [iv] 309 SW 2d 876 (Tex.Civ.App .—Eastland, 1958); 8 Oil & Gas Rep. 1279 (writ ref’d, n.r.e.)
- 309 SW 2d 876, 878.
- Getty Oil Company, v. Jones, 470 SW 2d 618 at 621); 53 A.L.R.3d 1; 39 Oil & Gas Rep. 657 (Tex. 1971))
- Getty Oil Company, v. Jones, 470 SW 2d 618, 621); 53 A.L.R.3d 1; 39 Oil & Gas Rep. 657 (Tex. 1971). See also note 4.
- 948 SW 2d 76; 137 Oil & Gas Rep. 170 (Tex.Civ.App. – Amarillo, 1997), reh. over.
- 948 SW 2d 76, 81.
- 948 SW 2d 76, 81.
- 167 SW 170 (Tex.Civ.App. — Texarkana, 1914).