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Energy & the Law

When an Easement Isn’t What it Appears To Be

Posted in Land Titles

 Here is Something We Know

 A Texas mineral estate owner has an implied easement for reasonable use of the surface estate in developing and extracting the minerals below.

 And a Question

Can the mineral estate owner and his lessee use the easement to produce from a mineral estate that is pooled with the surface estate?

And the Answer

Don’t say yes just yet. Are you thinking that the primary legal consequence of pooling is that production from anywhere on the pooled unit is treated as if it has taken place on each tract in the unit?  And that the easement carries with it the right to use the surface of the tract to produce oil from beneath the surface of that tract regardless of whether oil is comingled with oil from other tracts? You are correct.

BUT, only (and this was the lessee’s/mineral owner’s undoing) if oil is being produced from the subject tract. In Key Operating and Equipment, Inc. v. Hegar, we are reminded that the mere pooling of one tract with another does not guarantee that there is actual production from both pooled tracts.

Contractually, as between a lessor and lessee production from one tract is treated as production from both. BUT, for the purpose of a surface easement there must be actual production from the tract burdened by the easement in order for the mineral owner’s easement to be valid.

The Facts

Hegar purchased the surface estate and 1/4th of the minerals in the Curbo tract, knowing that it was subject to oil and gas leases and that Key used a road on the tract to service wells on the adjoining Richardson tract.

Key had a lease on the Curbo tract, built a road across the tract (part of the larger Rosenbaum-Curbo tract) and in 1994 began using the road to operate wells on the Curbo and Richardson tracts.

The well on the Curbo tract ceased to produce in 2000 and the Rosenbaum-Curbo lease terminated.

The resourceful Key brothers then bought a 1/16th mineral interest in the Curbo tract and leased to Key Operating. They made 40-acre pooled unit—30 acres from the Richardson tract and 10 from Curbo, producing the pooled unit from wells on the Richardson tract, which it accessed using the road across the Curbo tract.

Hegar sued for trespass and for a permanent injunction against continued use of the road. Key argued it could use the road on Hegar’s Curbo tract to access wells on the Richardson tract by virtue of the pooling agreement.

Hegar became unhappy, saying that he couldn’t raise a family “… with a highway running through our property.” (which I recite only as an excuse to offer this musical interlude).

The Accommodation Doctrine

The court found that Key had the same implied easement for use of the Hegar surface estate that existed when it became a lessee of the Curbo tract minerals, and Hegar may not interfere with Key’s right to use the surface estate for the purposes of the easement. But the court invoked the accommodation doctrine to protect Hegar the surface owner from unreasonable use of the surface for Key’s operations.

How was this result accomplished?

It was the evidence. The court accepted testimony of Hegar’s expert that the oil produced from the well on the Richardson tract did not drain from an area beneath the Curbo tract. Incidentally, the expert testified “with reasonable certainty”. The law does not require an expert to testify emphatically that he is absolutely certain of his position.