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Texas Supreme Court Holds Permission Not Needed to Drill Through Mineral Estate to Reach Adjoining Tract

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On May 19, 2017, the Texas Supreme Court delivered its opinion in the case of Lightning Oil Company v. Anadarko E&P Onshore, LLC, finding a lessee’s right in the mineral estate did not include the right to preclude a surface owner or an adjacent lessee’s activities that are not intended to capture the lessee’s minerals, but rather are intended only to traverse, or bore through, the formations in which the lessee’s minerals are located. 

Anadarko E&P Onshore, LLC, entered into an oil and gas agreement with the State of Texas restricting surface use and requiring drilling from off-site locations “when prudent and feasible.”  Thus, Anadarko entered into an Agreement to allow it to horizontally drill from an adjacent surface estate owned by Briscoe Ranch, Inc. to produce minerals from Anadarko’s lease (“Briscoe Agreement”).  The minerals underlying Briscoe’s surface estate were leased to Lightning Oil Co. (“Lightning”).  Lightning was not a party to the Briscoe Agreement and sought to enjoin Anadarko from drilling on the ranch.  Lightning brought suit for trespass and tortious interference claiming Anadarko needed its consent to drill through the ranch’s subsurface covered by Lightning’s mineral lease.  The district court dismissed the claim via summary judgment and the court of appeals affirmed.   

In examining mineral owner versus surface owner rights, the Court opined that “an unauthorized interference with the place where the minerals are located constitutes a trespass as to the mineral estate only if the interference infringes on the mineral lessee’s ability to exercise its right.”  (p. 14).  Lightning’s mere speculation that Anadarko’s drilling activities would interfere with Lightning’s future right to develop its minerals was insufficient evidence of “imminent, irreparable harm” necessary for injunctive relief   (Id.)  Additionally, the Court opined that the accommodation doctrine applied to provide a “sound and workable basis for resolving conflict.”  (p. 15).

Although it was undisputed that Anadarko would be interfering with a small amount of minerals owned by Lightning, the Court held that “the loss of minerals Lightning will suffer by a well being drilled through its mineral estate is not sufficient injury to support a claim for trespass.”  (p. 17-18).  The Court further pointed out that off-lease drilling arrangements often provide the most efficient means of fully exploiting minerals through horizontal drilling.

The Court also dismissed the tortious interference with contract claim because Anadarko had the justifiable right to drill pursuant to the terms of the Briscoe Agreement; therefore, Anadarko’s exercise of its own contractual rights could not serve as the basis for a claim for tortious interference with Lightning’s mineral lease contract.

For questions about this decision and how it affects your business, contact one of the authors of this alert.  

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