Oil and Gas Lawyer Blog
The Texas Supreme Court has agreed to hear arguments in a case that could have important implications for landowners and oil and gas exploration companies: Merriman v. XTO Energy, No. 11-0494. Merriman’s attorneys are asking the Court to reverse the 10th Circuit Court of Appeals, at Waco, which they contend has consistently mis-interpreted the Supreme Court’s rulings on the accommodation doctrine.
The “accommodation doctrine” is a court-made doctrine relating to the mineral owner’s right to use the surface estate to drill for and produce minerals. The mineral estate is the “dominant estate,” meaning that the owner of the mineral estate has the right to use so much of the surface estate as is reasonably necessary for exploration and development of the minerals, without compensation to the surface owner for such use. (This includes the right to use groundwater for oil and gas operations, even though the groundwater belongs to the owner of the surface estate.) The Supreme Court has held that, notwithstanding the mineral owner’s right to use the surface, the mineral owner must under some circumstances “accommodate” the surface owner’s existing use of his land. The doctrine requires a balancing of the interests of the surface and mineral owner. In 1993, the Supreme Court said: “if the mineral owner has reasonable alternative uses of the surface, one of which permits the surface owner to continue to use the surface in the manner intended (especially when there is only one reasonable manner in which the surface may be used) and one of which would preclude that use by the surface owner, the mineral owner must use the alternative that allows continued use of the surface by the surface owner.” Tarrant County Water Control & Impr. Dist. No. 1 v. Haupt, Inc., 854 S.W.2d 909, 912 (Tex. 1993).
Homer Merriman, the plaintiff in this case, 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 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 southewest 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 that are not impracticable or unreasonable.”
(The well XTO drilled on Mr. Merriman’s tract, the Beachcomber Unit 2 – 11 Well, is a Cotton Valley well located on a 703-acre pooled unit. It was the 10th well drilled on the unit. There are now 18 wells on the unit, including a horizontal well, all producing from the Cotton Valley formation. The 2-11 Well has to date produced almost 1 billion cubic feet of gas.)
Merriman’s lawyers argue that the Waco Court of Appeals has held Meriman to too-high a burden of proof. They say that Merriman didn’t have to prove that he had no other possible uses of his land, but only that the mineral owner’s proposed use would prevent him from continuing his current use of the property and that XTO had an alternative location that would allow his use to continue.
The Supreme Court last wrote about the accommodation doctrine in 1993. Since then, horizontal drilling has been developed and drilling has moved into more urbanized areas. Conflicts between surface and mineral owners’ rights to use land have increased. Merriman’s attorneys urged the court to take up his case both to straighten out this and prior opinions of the Waco Court of Appeals on the subject and to provide more certainty as to the meaning and application of the accommodation doctrine. It will be interesting to see if the Court decides to give Merriman another chance to prove his case, more than five years after he filed it.