October 14, 2015 Opinions.
by Robert Clore
Clore Appeals & Litigation Support [email protected]
1. Offsite Drilling in the Eagle Ford Shale and Rights of Surface and Mineral Estate Owners.
Lightning Oil Co. v. Anadarko E&P Onshore, LLC, No. 04-14-00903-CV (Tex. App.—San Antonio, Oct. 7, 2015, no pet. h.) (mem. op.). Author: Alvarez, J. Panel: Barnard, J., Alvarez, J., Pulliam, J. Originating Court: 365th District Court, Dimmit County, Texas. Trial Judge: Abascal III, J. This opinion from the 4th Court of Appeals concerns offsite drilling in the Eagle Ford Shale. The court issued this opinion and withdrew its August 19, 2015 opinion to clarify its holdings.
Lightning owns mineral leases in Dimmit County, Texas. The surface above Lightning’s mineral rights is owned by Briscoe Ranch, Inc.
Anadarko leased a mineral estate under the Chaparral Wildlife Management Area (”Chaparral” WMA), adjacent to the land owned by Briscoe Ranch. In order to reach its mineral lease without drilling on the Chaparral WMA, Anadarko secured a Surface Use and Subsurface Easement Agreement that allowed it to place drilling rigs on the surface estate owned by Briscoe Ranch to form wells that open and bottom in the Chaparral WMA.
Lightning sued Anadarko for trespass and tortious interference with contract to prevent Anadarko from siting a well on the land overlying Lightning’s mineral estate and from drilling through Lightning’s mineral estate to reach Anadarko’s adjacent mineral estate.
The parties filed competing motions for summary judgment and the trial court denied Lightning’s motion and granted Anadarko’s motion. Anandarko’s motion asserted that it established its justification defense as a matter of law and also that there was no evidence of at least one essential element of Lightning’s claims.
The court of appeals affirmed the trial court’s summary judgment order, holding that “the surface estate owner controls ‘the matrix of the underlying earth,’ and the summary judgment evidence conclusively proves the surface estate owner gave Anadarko permission to site and drill.”
The court of appeals noted that Lightning’s lease did not convey any right to control the subterranean structures in which any hydrocarbon molecules might be found, and Texas law does not automatically convey such a right in an oil and gas lease. Briscoe Ranch, as the surface estate owner, could grant Anadarko permission to site wells on the surface over Lightning’s minerals and drill to reach Anadarko’s adjacent mineral estate.
The court relied upon its opinion in Springer Ranch, Ltd. v. Jones, 421 S.W.3d 273, 282 (Tex. App.—San Antonio 2013, no pet.), where it “construe[d] the term ‘surface estate’ to mean the portions of the earth[] over which the surface estate owner holds dominion after a severance of the mineral estate.” In Springer, the court of appeals added that “ownership of the hydrocarbons does not give the mineral owner ownership of the earth surrounding those substances.” Id. at 283.
Additionally, in Dunn-McCampbell Royalty Interest, Inc. v. Nat’l Park Serv., 630 F.3d 431, 441 (5th Cir. 2011), the Fifth Circuit discussed that under Texas law, the surface owner and not the mineral estate owner “owns all non-mineral ‘molecules’ of the land, i.e., the mass that undergirds the surface of the [conveyed land].” Id. at 442. That is, “the conveyance of mineral rights ownership does not convey the entirety of the subsurface.” Id. at 441.
Finally, the Court discussed Humble Oil & Ref. Co. v. West, 508 S.W.2d 812, 815 (Tex. 1974), which clarified the nature of the surface estate. The Wests conveyed fee simple title to Humble Oil, while reserving royalties on the oil and gas produced from the land. The Court observed that the Wests no longer owned the underground reservoir because “the surface of the leased lands remaining as the property of the [surface estate owners] included the geological structures beneath the surface.” Id.
Because Lightning Oil was not granted the right to control the subterranean structures in which the oil and gas molecules are held, it did not control “the mass that undergirds the surface of the [conveyed land],” Dunn-McCampbell, 630 F.3d at 442. The court of appeals therefore upheld the trial court’s order granting Anadarko’s motion for summary judgment and denying Lightning’s motion.
In a footnote which did not appear in the court’s initial opinion, the court of appeals instructed that “Briscoe Ranch’s and Lightning’s uses of the surface estate are subject to the accommodation doctrine, see Merriman v. XTO Energy, Inc., 407 S.W.3d 244, 248–49 (Tex. 2013), and may also be governed by the Surface Use Agreement executed by Lightning and Briscoe Ranch. The agreement includes the following provision: ‘Lightning agrees to take all reasonable steps to prevent its operations from . . . [h]arming or damaging economic endeavors of [Briscoe Ranch] requiring use of the surface.’”
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2. Subject Matter Jurisdiction and Appeal from an Order Appointing an Appraisal Umpire. Texas Municipal League Joint Self-Ins. Fund v. Housing Authority of the City of Alice, No. 04-15-00069-CV, __ S.W.3d __ (Tex. App.—San Antonio, Oct. 14, 2015, no pet. h.). Author: Chapa, J. Panel: Martinez, J., Alvarez, J., Chapa, J. Originating Court: 79th District Court, Jim Wells County. Trial Judge: Sanchez, J. The 4th Court of Appeals dismissed this case for lack of subject matter jurisdiction in a suit in which the City of Alice Housing Authority sought and obtained an order appointing an appraisal umpire in an insurance dispute.
The Housing Authority filed an insurance claim with the Texas Municipal League Joint Self-Insurance Fund for hail and wind damages. The Fund issued a check for the covered damages, and the Housing Authority disputed the amount paid. The Housing Authority then made a written demand for appraisal pursuant to the property coverage document.
The Housing Authority filed suit by sending an “Application for Appointment of an Umpire” to the District Clerk of Jim Wells County. In the Application, the Housing Authority requested that the court select an umpire, but did not purport to state a cause of action against or seek relief from the Fund. It did not seek a declaratory judgment, and did not seek an order compelling the Fund to do or to refrain from doing anything. Rather, it simply requested that the court appoint an umpire.
The Fund filed a plea to the jurisdiction on the basis of governmental immunity. The trial court denied the plea to the jurisdiction and granted the Housing Authority’s application to appoint an umpire.
On appeal, the court declined to address the merits of the governmental immunity argument, instead holding there was no justiciable controversy in the lawsuit. In order for the trial court to have subject matter jurisdiction over a case, there must be a real, justiciable controversy between the parties that will be actually determined by the litigation. See Austin Nursing Center, Inc. v. Lovato, 171 S.W.3d 845, 849 (Tex. 2005); In re K.D.E., No. 01-04-00043-CV, 2004 WL 2618730, at *2 (Tex. App.—Houston [1st Dist.] Nov. 18, 2004, no pet.) (mem. op.); Paulsen v. Tex. Equal Access to Justice Found., 23 S.W.3d 42, 48 (Tex. App.—Austin 1999, pet. denied); Wallace v. Inv. Advisors, Inc., 960 S.W.2d 885, 888-89 (Tex. App.—Texarkana 1997, pet. denied).
Although the parties had disagreements, the application for appointment of an umpire did not state a cause of action against any defendant, and there was no controversy between the parties that would actually be determined by the litigation. In the absence of subject matter jurisdiction, the court of appeals vacated the order appointing umpire as void and dismissed the case.
The court qualified its holding by noting that the parties are free to request, outside the judicial system, that a judge to appoint an umpire as contemplated by the parties’ contract.
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