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Merriman v. XTO Energy – Supreme Court’s Latest on Accommodation Doctrine

Last Friday, the Texas Supreme Court affirmed judgment in favor of XTO in its battle with Homer Merriman over whether XTO’s well should have been moved so as to accommodate his cattle-working operation.

I wrote about this case when the Supreme Court decided to hear it. Mr. Merriman owns 40 acres in Limestone County. When he bought the land, the seller reserved the mineral estate and the land was then subject to an oil and gas lease. Merriman built his home on the land. Although he works full-time as a pharmacist, Merriman also runs cattle. He leases land in Limestone County for grazing, and once a year he uses his 40 acres to round up and work his cattle, with portable pens that are assembled for the operation and then taken down. The rest of the year he grazes cattle on the 40 acres, where he also lives.

In 2007, XTO Energy approached Mr. Merriman and told him it intended to drill a well on his tract. Merriman objected to the proposed well location, arguing that it would prevent him from using the 40 acres for his cattle working operations. XTO discussed with Merriman moving the location to the southwest corner of his tract, where Merriman said it would be acceptable, but XTO ultimately decided not to accommodate Merriman’s request. Merriman then sued XTO seeking an injunction to prevent the drilling of the well at its chosen location. Despite the suit, XTO drilled the well. The trial court granted summary judgment for XTO, and the Waco Court of Appeals affirmed, holding that Merriman “has alternative uses of his land that are not impracticable or unreasonable. Merriman further has alternative methods of conducting his cattle operation [on other lands] that are not impracticable or unreasonable.”

The Supreme Court’s opinion concluded that the court of appeals reached the right result, but it disagreed with that court’s reasoning. It first re-stated the accommodation doctrine:

To obtain relief on a claim that the mineral lessee has failed to accommodate an existing use of the surface, the surface owner has the burden to prove that (1) the lessee’s use completely precludes or substantially impairs the existing use, and (2) there is no reasonable alternative method available to the surface owner by which the existing use can be continued. 

If the surface owner carries that burden, he must further prove that given the particular circumstances, there are alternative reasonable, customary, and industry-accepted methods available to the lessee which will allow recovery of the minerals and also allow the surface owner to continue the existing use. … [A] surface owner’s burden to prove that his existing use cannot be maintained by some reasonable alternative method is not met by evidence that the alternative method is merely more inconvenient or less economically beneficial than the existing method. … Rather, the surface owner has the burden to prove that the inconvenience or financial burden of continuing the existing use by the alternative method is so great as to make the alternative method unreasonable.

The court of appeals had said that Merriman could have conducted his cattle-working operations on other lands nearby that he leased for cattle operations, which was a “reasonable alternative” under the accommodation doctrine. The Supreme Court disagreed. It said that “the court of appeals improperly considered the land leased by Merriman in detrmining whether he produced evidence that he had no reasonable alternatives to continue his cattle operations.” The question was whether he had a reasonable alternative on the 40-acre tract.

The court of appeals also said that Merriman could have used his 40 acres for other agricultural uses. The Supreme Court said that this was not the test. Rather, the test was whether Merriman had any “reasonable alternatives for conducting his cattle operations on the tract, not whether he produced evidence that he had no reasonable alternatives for general agricultural uses.”

Finally, the Supreme Court considered whether Merriman “met his burden to produce evidence that he did not have any reasonable alternatives for continuing his cattle operation, including [roundup, sorting, working and loading of the cattle] on the tract.” It held that he did not. Merriman’s evidence “did not explain why corrals and pens could not be constructed and used somewhere else on the tract; and if they reasonably could be, then his existing use was not precluded.” Merely because his existing use of the tract made working his cattle “easier,” or “works the best” for him, or was more expensive, was not enough. The Court said that Merriman’s evidence was

evidence only that XTO’s well precludes or substantially impairs the use of his existing corrals and pens, creates an inconvenience to him, and will result in some amount of additional expense and reduced profitability because to continue his cattle operation he will have to build new corrals or conduct his operations in more phases. Evidence that the mineral lessee’s operations result in inconvenience and some unquantified amount of additional expense to the surface owner does not rise to the level of evidence that the surface owner has no reasonable alternative method to maintain the existing use.

Thus, Merriman did not produce evidence sufficient to raise a material fact issue as to part of the initial element on which he had the burden of proof: that he had no reasonable alternative means of maintaining his cattle operations on the 40-acre tract.

The Court’s requirement that the landowner prove that he has “no reasonable alternative” to continue his existing use is a difficult burden to meet. But Mr. Merriman did not present a very convincing case that he could not have conducted his cattle operations on the tract because of XTO’s well.

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