The Fourth Court of Appeals recently held that surface owners control the matrix of the underlying earth; thus, a surface owner can give permission to drill through the subsurface to an adjacent lease. In Lightning Oil Co. v. Anadarko E&P Onshore, No. 04-14-00903-CV, 2014 Tex. App. Lexis 8673 (Aug. 19, 2015), Anadarko leased the mineral estate under the Chaparral Wildlife Management Area (CWMA), and entered into a Surface Use and Subsurface Easement Agreement (Agreement) with the adjacent surface estate owners. The Agreement allowed Anadarko to place a drilling rig on the surface and to drill through the earth to form wells that open and bottom in the CWMA. Lightning held a mineral lease on the adjacent estate, and upon learning of Anadarko’s plan, sought an injunction. Following discovery, both Anadarko and Lightning moved for summary judgment on the claims of trespass and tortious interference with a contract. The trial court granted Anadarko’s motion for summary judgment, denied Lightning’s motion for summary judgment, and severed the remaining issues. Lightning appealed to the Fourth Court of Appeals.
Lightning argued that the surface owner’s permission to drill was not enough and declared its right to exclude others from drilling as the leaseholder of the mineral estate. Lightning also emphasized that it should not have to trust Anadarko to refrain from performing seismic surveys as it drilled through the subterranean structures to reach the CWMA. Lightning asserted claims for trespass and tortious interference with a contract. Anadarko, in turned, argued that the surface owners controlled the subterranean structures; thus, their permission is all that is needed to drill through Lightning’s mineral estate and claims of trespass and tortious interference must fail as a matter of law.
The court agreed with Anadarko and found that there was no evidence of an essential element of trespass, the right to exclude others from the earth surrounding the oil and gas for which Lightning has an exclusive right to explore, develop, operate, produce, own, market, treat, and transport according to its mineral lease. A mineral “‘lessee’s interest is a separate, real interest, amount[ing] to a defeasible title in fee to the oil and gas in the ground.’” Yet, the court held that the mineral lessee does not own the earth in which the mineral estate is contained. “The surface estate owner controls the earth beneath the surface estate.” The mineral estate only includes the minerals and does not give the mineral owner ownership of the earth surrounding those substances. Additionally, a conveyance of the mineral rights does not convey the entirety of the subsurface. Consequently, the surface estate owner owns all non-mineral molecules of the land. Texas precedent established that the mineral interest owner may not exclude others from drilling through its estate.
According to the court of appeals’ decision, there was also no evidence that Anadarko would conduct a seismographic survey which could constitute a trespass under Texas law. Moreover, Lightning offered no evidence that Anadarko has bottomed or opened a well within Lightning’s lease. Absent proof of these actions and without the right to exclude Anadarko from drilling through Lightning’s mineral estate, Lightning’s claim of trespass failed.
Lightning’s claim of tortious interference with a contract similarly failed. Anadarko established an affirmative defense of justification. A defendant is justified in his actions when he (1) acts within his own legal rights or (2) has a good faith claim to a colorable legal right, even if the claim ultimately fails. Here, the court ruled that Anadarko was within its own legal right granted by the surface estate owners to drill through the earth within in the boundaries of Lightning’s mineral lease to its mineral estate on the CWMA.
This decision has a significant impact on the practice of horizontal well drilling. It is common for operators to drill multiple horizontal wells from one drill pad. Lightning Oil Co. establishes the permission needed to drill from off-lease well pads.