In Citizens for Clean Air & Clean Water in Brazoria County et al v. United States Department of Transportation et al., several environmental groups challenged the DOT’s approval of a license for commercial construction and operation of the Sea Port Oil Terminal, alleging violations of the Deepwater Port Act and the National Environmental Policy Act. The suit asked that the Court vacate approval of the license and remand to the agency for a more robust analysis of the project’s environmental impact. The Fifth Circuit Court denied the request.

I will spare you a deep dive into federal law on the subject – of which there is a lot – but rather will give a look at how this federal court treated a challenge to approval of an Environmental Impact Statement for a controversial oil project.

The project

SPOT will be the largest deepwater terminal of its kind anywhere and would load as many as 365 “very large crude carriers” (“VLCC’s”) each year. It will be located 27 nautical miles offshore Brazoria County, Texas, and connect to existing land-based oil facilities through subsea and onshore pipelines and replace a constant parade of lightering ships that otherwise transport oil from facilities on the coast to the deep water where the VLCC’s dock. Enterprise Products is the operator of the facility.

The DOT approved SPOT’s license after hearings, numerous public comments, and input from other agencies.

The claims

The groups challenged the 1000+ page Environmental Impact Statement prepared by the DOT, warning of severe and lasting global consequences from the port, including emissions of harmful pollutants, threatening the marine environment, discharging hazardous substances, noise pollution, habitat destruction, property devaluation, and bringing the endangered Rice’s whale closer to extinction.

The charges were that the agencies applied a flawed alternative analysis and grossly underestimated SPOT’s environmental impacts concerning a host of foreseeable consequences, including oil spills, harmful impacts on animals, catastrophic pipeline ruptures and diminished air quality. The charge was that the agencies failed to conduct an appropriate level of review in its EIS and failed to follow statutory provisions.

Plaintiffs had standing

The court first found that the petitioners identified concrete interests that would be impaired by the agencies’ allegedly inadequate environmental review. For example, they had a cognizable interest in their desire to use or observe animal species even if for purely aesthetic purposes. They had standing to bring the suit.

The claims and the EIS

Courts review an EIS under the rule of reason and “must not substitute its judgment for that of the agency.” An arbitrary or capricious action “is one that relies on improper factors, fails to consider key information, offers a decision that the record does not support, or lacks plausibility.”

The Court discussed in detail (see the opinion) the alleged deficiencies in the EIS: oil spill risks (which must be “reasonably foreseable”), impacts on protected species (this is not the Rice’s whale’s habitat), air quality analyses, and analyses of alternatives (which must be technically and economically feasible). The Court concluded that the agency’s decision was rational and based on consideration of the relevant factors and should be upheld. The NEPA was enacted to “create and maintain conditions under which man and nature can exist in productive harmony.” But, “… Despite these ambitious goals the NEPA does not mandate environmentally friendly results; it imposes procedural requirements that the government considers the environmental impact of [its] proposals and actions.”  

The court closed by saying that although petitioners may disagree with the decision it was, at the very least, informed. Because the NEPA and DCA require nothing more, the petition was denied.

Ideology, not people

You can respect efforts by these groups against projects that they believe are detrimental to the environment. But a theme in the suit was that the project will induce new production for export that would not otherwise occur, which means that SPOT will exponentially multiply oil consumption and demand by decreasing transportation costs. This implacable and misanthropic ideology, untethered to reality, is without concern for communities and economies around the world that need abundant, reliable and affordable energy to reach (for most of the world) or maintain (as in yours, mine, and theirs) the lifestyle that these environmentalists seem to take for granted.

Your musical interlude

…but wait, there’s more!

Scheming to find the most remote and inaccessible county in Texas (my vote is Yoakum but there is no paucity of candidates) in which to dish out Texas home-town justice to an out-of-state defendant? Consider Bauer and Braxton Minerals II v. Braxton Minerals III.

THE TAKEAWAY

Before paying your filing fee, be very sure the honorable court of your choice has subject matter jurisdiction. Texas courts have no jurisdiction to adjudicate title to real property, such as mineral interests, located in other jurisdictions. On the other hand, If a Texas court has personal jurisdiction over the parties it may enforce personal or contractual obligations that indirectly involve real property in another state. Simple to navigate? It’s not.

THE FACTS

Braxton Minerals III (BM3) sued Bauer and Braxton Minerals II (BM2) in Tarrant County (certainly not remote, no offense intended) alleging that BM2 and Bauer failed to comply with representations and contractual obligations to transfer oil gas interests to BM3 in West Virginia. There were five causes of action and a request or declaratory and injunctive relief. Bauer and BM2 counterclaimed asserting four causes of action, including a declaratory judgment, and seeking damages.

The trial court entered judgment for BM3. On appeal Bauer and BM2 challenged the court’s jurisdiction. The court of appeals reversed and dismissed BM3’s suit for want of subject matter jurisdiction. The court dismissed Bauer and BM2’s counterclaim for the same reason.

THE REASONING

To determine the extent to which title and possession are involved in a suit and thereby implicate jurisdiction, the court looks at the nature of the suit, the injury complained of, the relief sought, and the evidence. If ownership of foreign-jurisdiction real property is more than incidental or collateral to the claims and measure of recovery, the court lacks jurisdiction.

Said another way, if the gravamen of the suit is the determination of the parties’ existing property interests located in another state, Texas courts have no jurisdiction. It doesn’t matter how the parties dress up their claims.

The core of BM3’s allegations revolved around its claim of ownership of the mineral interests, not only as to correction of deeds and specific performance, but also for recovery of improperly paid royalties and protection of royalties in the future. The gravamen of the suit was to obtain title to real property in a foreign jurisdiction and recover damages flowing from interference with those interests. Seeking a declaration of rights under a letter agreement to recover an interest in real property was subject to the Texas mandatory venue statute.

THE COUNTERCLAIM AND THE MANDATORY VENUE STATUTE

In Texas an action for recovery of an estate or interest in property must be brought in the county in which the property is located. In ruling on the Bauer and BM2’s counterclaims the court referred to the Texas mandatory venue statute. The parties did not brief the topic and the court did not find cases on jurisdiction that addressed the counterclaims.

The court looked at the gist of the pleadings, not just labels the parties placed on their theories of recovery. In order to recover damages in the fraud counterclaim Bauer and BM2 had to prove their rightful ownership of the mineral interests. This would justify application of the mandatory venue statute. The test under that statute is similar for the jurisdiction question. The gravamen of the counterclaim was to determine ownership of interests in real property in a foreign jurisdiction. The trial court did not have subject matter jurisdiction over the counterclaim.

Your musical interlude.

What to do with a Texas pipeline easement that doesn’t define the width? In Premcor Pipeline Company v. Wingate they fought about it.

The dispute began when Premcor wanted to run a pig through one of two pipelines on Premcor’s 1954 pipeline easement. In doing so it would need access across the property of Wingate, successor to the easement grantor. Wingate objected and sued for trespass, alleging that Premcor’s right is limited to the circumference of the actual pipelines in place (six and nine inches), and seeking injunctive relief preventing Premcor’s access to the property.  

Injunction hearing testimony was too voluminous and contradictory to recite here, as are the ins and outs of the right to injunctive relief. The trial court granted a declaratory judgment and permanent injunction for Wingate, defining the width of the easement as 20 feet.

Premcor appealed, asserting that the trial court erred by relying on parol evidence, by declaring the easement to have a fixed width of 20 feet, and imposing a permanent injunction prohibiting Premcor from using more land than the 20-foot width.

Reversed and remanded

The court of appeals reasoned that failure to define the width of a pipeline easement does not render the instrument ambiguous; thus the trial court erred in admitting parol evidence that contradicted, varied or added to the terms. The court’s job was to interpret the easement as matter of law.  

The Texas Supreme Court has recognized the existence of general easements that do not require a fixed width. Thus, courts are reluctant to write fixed widths into easements when the parties never agreed to a particular width.

Texas courts generally hold that a grant of general easement implies a grant of unlimited, reasonable use such as is reasonably necessary and convenient and as little burdensome as possible to the servient owner.

The trial court also erred in declaring that the easements are fixed to a permanent 20-foot width. Wingate purchased the properties knowing they were encumbered by the easements which he knew did not specify width. The easements granted Premcor the right to “to do whatever may be requisite for the enjoyment of the rights herein granted” including the right of ingress and egress. Wingate had notice of Premcor’s right of ingress and egress.

Wingate is not without recourse because Premcor must utilize the land in a reasonable manner only to the extent that it is reasonably necessary and is as little burdensome as possible to the servient owner.

Expert fees were not recoverable

Incidentally, the court reversed trial court’s award of expert fees to Wingate, concluding that costs of experts are incidental expenses in preparation for trial and not recoverable. The case was remanded for the trial court to determine what property Premcor would be entitled to use for the project in question.

Sounds like it’s time to call it a day at the courthouse.

Dickie Betts, RIP.

You had your Allman Brothers Dickie

and your other Dickie.

In ETC Tiger Pipeline LLC v. DT Midstream Inc. et al. it was not as exclusive as the servitude owner wanted it to be.   

Pursuant to a Servitude Of Use For Pipeline, ETC operates a 42-inch, high pressure, high volume natural gas pipeline in DeSoto Parish, Louisiana, that runs from Panola County, Texas, to Richland Parish (east of DeSoto). ETC rejected DTM’s request to be allowed to route a smaller pipeline across ETC’s servitude beneath and perpendicular to ETC’s pipeline. The stated reason was that DTM could not fulfill ETC’s necessary safety and operational requirements.

ETC sought a TRO, alleged that DTM’s actions exposed ETC to immediate and ongoing damages, infringed upon its servitude rights, and constituted trespass, and that its exclusive servitude does not allow any other pipelines to cross the ETC servitude.

DTM responded that at the location in question it planned to cross four different pipelines, including ETCs. The DTM pipeline would run approximately 19 feet below the largest pipeline and 25 feet below the ETC pipeline. DTM had a servitude from the landowner and cleared the crossing with other pipeline operators. DTM claimed it would suffer $18 million in damages and potential loss of its anchor shipper if the project could not be completed. 

Testimony came from several witnesses (10 by my count) covering issues and topics too numerous to discuss here. The trial court granted ETCs preliminary injunction and denied DTMs, preventing DTM from constructing its pipeline. The trial court saw ETCs exclusive servitude as granting the right to prevent DTM’s crossing. DTM appealed.

The court of appeal’s reasoning

The court of appeal reversed, first concluding that ETC had a personal servitude of right of use conferring in favor of a person a specified use of an estate less than full enjoyment. It was not a predial servitude.  

The court observed that the Civil Code anticipates multiple servitudes burdening a servient estate and states that servitudes should be interpreted in favor of the servient estate, which in this case was the owner of the land.

“Exclusive”? No.

ETC argued that its servitude grants the right to use of an unlimited depth and right to prevent other pipelines from crossing under ETCs pipeline. The court did not agree. The one-time use of the word “exclusive” does not mean that ETCs servitude includes all depths and that ETC can subjectively block the crossing of another pipeline. The word “exclusive” does not convey any intent to specifically retain an exclusive depth when the servitude is silent as to depth. The depth was made certain at the time the pipeline was completed. Once that happened, the depth became defined. The servitude granted a broad array of rights inherent in a pipeline servitude, but once the pipeline was completed ETC’s rights are limited to operating and maintenance activities.

The servitude grants ETC the right to lay only one pipeline. A depth separation provision means that the servitude anticipates the possibility of future underground crossings. ETC was not granted the right to prohibit underground crossings; it only prevents any use that may unreasonably damage, injure or interfere with ETC’s use.

The trial court found that safety was not an issue. ETC did not prove that safety was an actual concern and that DTM could not meet ETCs requirements for crossing under its pipeline.

The court saw the record as reflecting that ETC’s concern was to gain a “commercial” benefit from the crossing.

LagniappeHow will this decision be applied?

While this dispute is between dueling gas pipelines; with increasing competition among pipeline, solar, wind and other servitudes, expect this ruling to have wider implications. 

Your musical interlude

Co-author Gunner West

Itching to sue the government for taking your property? Treme v. St. John the Baptist Parish Council is a reminder that you must have a property interest subject to being taken in order to have standing to sue for a regulatory taking.

Louisiana law recognizes that leases are property interests, and any “substantial interference” with such rights may constitute a taking within the meaning of the state and federal constitutions. But there is the pesky question of standing to sue.

The facts

Treme and his partners (or joint venturers, or not; that was an unanswered question) entered into a mineral lease with Montegut to mine clay from property in St, Bernard Parish to be used in a Lake Pontchartrain flood control project. The lease’s primary term was for three years “from the date Lessee procures approval to commence operations from local, state, and federal authorities, as needed”.  

In order to mine for clay the property had to be rezoned to “rural”. After neighbors complained, Treme et al’s several applications to rezone the property were denied. Treme et al sued the Parish and the Parish Council alleging that denial of the applications was a regulatory taking without compensation in violation of state and federal constitutions and that the denials violated the due process an equal protection clauses of the 14th Amendment. The United States Fifth Circuit affirmed a district court summary judgment for the Parish and the Council dismissing the suit. 

The suspensive condition

Both courts held that under Louisiana law, the lease’s habendum clause constituted a suspensive condition that was required to be fulfilled for primary term of lease to begin. Under Louisiana law, a suspensive condition prevents enforcement of an obligation until the uncertain event occurs. Think “condition precedent” in the common law. Consider a top lease that becomes effective if and when the existing lease expires or terminated.

Treme failed to satisfy the suspensive condition, and therefore the Treme-Montegut lease terminated automatically. Treme had no property interest that was taken from them. Even if the Council prevented the lessees from fulfilling the condition, this did not mean that the condition could be considered fulfilled based on fault of a party. Treme had no standing to sue.

A difference between the district and appellate courts’ rulings was the appellate court dismissed without prejudice, giving the plaintiffs another opportunity if something were to change (what that would be, we don’t know).

Your musical interlude

Recent Texas royalty cases seem to feature litigants on the fixed royalty side trying, more often than not in vain, to escape the clutches of Van Dyke v. Navigator and Hysaw v. Dawkins. See those decisions for the history of how the Supreme Court got to where it is. (Regardless of which side you’re on, recall the admonition that each instrument must be examined according to its own language; arbitrary rules of construction are history.)

Which brings us to Powder River Mineral Partners v. Cimarex Energy et al.  A 1947 Royalty Deed from Chapman to May contained these operative provisions:  

  • Chapman conveyed “ … an undivided … 3/16 of oil, gas and other minerals …” in 120 acres in Reeves County.
  • The intention was that Grantee receive a “3/16 royalty interest … which interest shall not be chargeable with any production costs or expense.”
  • “In the event that the above land should be loaned for the mining of oil, gas and other minerals, Grantees shall be entitled to receive under this conveyance … 3/16th of 1/8th of all the oil, gas or other minerals produced therefrom under such lease.”

The land is under lease to Cimarex for a 25% royalty. The May successors argued that Cimarex should be paying 3/16th of the 1/4 lease royalty, not the 3/128 (3/16 of 1/8) they were being paid.  This post focuses on the Chapman successors’ failed effort to avoid Van Dyke and Hysaw.

The Chapman successors (winners at the trial court, losers on appeal) argued that Hysaw’s presumption against a mathematical approach to deed interpretation should not be applied for two reasons:

  • There is no expressly defined date when the 1/8 confusion would have been effectively cleared up. Would, for example, a 1960 instrument with double fractions present the same presumption that would apply to a similar instrument in the 1920s. The Supreme Court in Hysaw was confronted with a will from the same year as the Chapman-May Deed.
  • A 1942 article by Professor A. W. Walker, Jr. explained when double fractions were used what such words meant. The court rejected this characterization of Prof. Walker’s article for two reasons. First, the article more pointedly discussed oil payments which are form of bonus payment belonging to the executive right owner. Second, an excerpt of the article advocated for the use of a single fraction, not a double fraction, when the intent is to create a fixed royalty interest.

Other unsuccessful arguments invoked the language of the Deed itself:

  • The granting clause in the Deed did not use a double fraction. Rejected, said the court; the broad language in the grant could not be harmonized with the double fraction found in the second paragraph if the intent of the double fraction were only to convey a fixed 3/128 royalty.
  • The Van Dyke presumption is rebutted because that instrument was a conveyance of the minerals with a royalty reservation whereas the Chapman-May Deed conveyed a royalty interest. That distinction made no difference to the court.
  • The royalty conveyance was effective only in the event the subject property was leased. The court disagreed. The Deed conveyed an interest in all future royalties that was effective upon execution.
  • The double fraction language itself rebutted the presumption because the double fraction unequivocally conveyed a fixed royalty. But Hysaw and Van Dyke stand for the completely opposite outcome. This argument was denied as being circular.

Not discussed in this post is the court’s discussion of why the Deed conveyed a royalty interest and not a mineral interest.

Your musical interlude, just in time for Easter.

Coauthor Gunner West *

“Every unnecessary law helps fashion the noose we will ultimately be hung by.”
― A.E. Samaan

If you deny the administrative state’s need to dominate the most mundane aspects of your everyday life, consider Louisiana, et al  v. U.S. Department of Energy. It’s more gradual than the noose but just as inevitable. They’ve come for the washers and dryers. Are the gas stoves next?

The Repeal Rule

The DOE in 2020 released Final Rules creating classes of clothes washers and dryers and dishwashers with short cycle times. This was in response to a petition by the Competitive Enterprise Institute to relieve those machines from burdensome regulations that impeded performance.

On the day of his inauguration President Biden ordered the DOE to repeal the appliance classes created by the 2020 rules.

Standing

Louisiana and 10 other states sued to invalidate the so-called “Repeal Rule”. In response to the DOE’s challenge to the states’ standing, the states were able to show an injury in fact that was fairly traceable to the defendant’s action and was likely to be redressed by a favorable decision.

The injury? The states lost the opportunity to purchase products precluded by the regulation, which constituted an injury in fact. Market participants are injured when their product choices are constrained by regulation. The states had lost the opportunity to purchase faster and more efficacious appliances.

Arbitrary and capricious

The Repeal Rule was arbitrary and capricious for two reasons. First, the agency failed to articulate a rational connection between the facts it found and the decision it made. Then, the agency’s reasoning failed to account for relevant factors or events, which was a clear error of judgment. In short, the DOE did it because it could.

An agency is not precluded from revising policy, but changes require careful comparison of the agency’s statements to ensure that the agency has recognized the change, reasoned through it without factual or legal error, and balanced all relevant interests affected by the change.

In the Repeal Rule the DOE stated that its energy conservation program must promote water conservation and regulate water use, but the court did not see how the DOE believed it had statutory authority to regulate water use in dishwashers and washing machines. An agency has no power to act unless and until Congress confers power upon it. The DOE’s assertion of regulatory jurisdiction over water usage in these appliances was not in accordance with law and exceeded its statutory authority.

The regulations did the opposite of what they intended

Even if the DOE could consider the appliances, the DOE did not dispute that the 2020 efficiency standards were likely to make Americans use more energy and more water for the simple reason that, said the court, purportedly energy-efficient appliances don’t work. In 2020 the DOE said that efficiency standards increased dishwasher cycle time from around one hour to around 2 1/2 hours. In 2011 the DOE said that handwashing that would be required because of the inefficiencies in the regulated appliances uses 350% more water and 104% more energy than machine washing.

Conclusory statements are not enough

The DOE supported its position with conclusory statements that did not constitute adequate agency consideration of important aspects of the problem. The DOE failed to account for relevant data and articulate a satisfactory explanation for its action, including a rational connection between facts found and the choice made. 

The DOE’s belief in 2022 that the 2020 rules violated the EPCA was an insufficient reason to justify the Repeal Rule and DOE failed to consider alternatives. That was arbitrary and capricious.

Your musical interlude.

* Gunner is a soon-to-graduate student at South Texas College of Law and soon-to-be associate at Gray Reed.

This post is a summary of a more detailed Client Alert prepared by Gray Reed’s labor and employment practice group.

Recall our recent post on the Department of Labor’s new “Economic Realities Test” for classifying specialized contractors and consultants as either employees or independent contractors. The new rules make the compliance minefield much riskier. The DOL has now provided guidance on how it will apply the Test.

The prior post discussed the six factors to assess if a worker is economically dependent on the company (an employee) or truly in business for themselves (a contractor).

The most critical clarifications from the DOL involve analyzing:

  • the nature of the investments made,
  • the degree of control exerted, and
  • whether the worker’s skills involve entrepreneurial initiative.

Investments: The DOL will look at qualitative similarity rather than just dollar amounts. For example, a company man providing his own specialized tools and equipment could be viewed as making a similar investment in the company, even if the company’s investment is higher.

Degree of Control:  The DOL acknowledges operators, material and equipment providers, landmen and others may need to exert certain control to comply with industry regulations without making the worker more likely to be classified as an employee. But exceeding what regulations require, such as excessive monitoring or approval processes, could signal an employment relationship.

Skill and Initiative: The DOL focuses on whether contractors market their skills to different businesses. An expert deployed to work solely for one company wouldn’t indicate contracting, while those marketing their skills more broadly would.

Ultimately: The test analyzes overall economic dependence. Contractors must be truly in business for themselves rather than relying on and being controlled by one company as their main revenue source.

Employer: Take a close look at your contractor relationships and honestly assess their entrepreneurial independence. Are they building their own business and client base, or are they economically reliant on the company?

Worker: You should do the same.

Your musical interlude

Frontier Drilling, LLC v. XTO Energy, Inc. has the indicia of an inequitable result, but as I remind my wife every time she objects to what she deems to be an outrageous jury verdict, we don’t know all the facts and the court’s gotta follow the law, so let’s not judge.

The facts

Drilling contractor Frontier and operator XTO were parties to a drilling contract that was amended several times by negotiations via oral and/or email communications and then written agreements memorializing the discussions.  Frontier’s Rig 27 was moved to a site where a certain blowout preventer was required. Frontier offered to install the BOP in exchange for a one-year contract extension. XTO emailed Frontier, “ … XTO will need the 10000 BOP stack immediately. Can we just do an amendment on the stack and another separate amendment later?”

Frontier said yes and sent the amendment to be executed. The contract stated that XTO’s execution would serve as the amendment. Having not received the XTO-signed copy, Frontier emailed XTO, stating that they are in the process of taking the BOP to the rig and asked for the signed agreement. XTO responded, “Please consider this email as authorization to execute the swap … Management is traveling and is in the process of approval.”  Six months later XTO said it would not execute the amendment and would not pay the costs associated with the installation.

Frontier sued. XTO asserted that the parties never reached an agreement and in any event, such an agreement would violate the Statute of Frauds. XTO’s motion for summary judgment was granted and the case was dismissed.

The SOF applies to any agreement in which performance cannot be completed within one year. The court said it did not have to decide if the parties reached an agreement because if they did, the SOF would render the agreement unenforceable. The agreement would be effective in February 2020 and it would not be completed until December 2021. The SOF applied and barred enforcability.

Was the contract signed?

The parties disputed whether the agreement was signed by the person to be charged. XTO’s “Please consider this email as authorization … ” email did not satisfy the signature requirement. Under the Texas Uniform Electronic Transactions Act, if a law requires a signature an electronic signature satisfies the law if the transaction is between parties who have both agreed to conduct the transaction by electronic means.

Whether the parties had such an agreement is determined from in the context and surrounding circumstances, including the parties’ conduct. The court concluded that every prior contract and amendment consisted of a written agreement signed by both parties. Their conduct did not demonstrate an agreement to conduct transactions via email. In fact, it demonstrated the opposite.

Performance?

Performance can constitute an exception to the SOF. Under the full performance exception, the SOF does not apply “where one party has fully performed under the contract and the only thing remaining is performance by the other party.” Although Frontier installed the BOP, it did not provide Rig 27 for XTO’s use through December 2021. Frontier did not fully perform.

The partial performance exception allows for equitable enforcement of a contract that otherwise fails to comply with the SOF when the contract is partially performed and denial of enforcement would amount to virtual fraud. But the partial performance must be unequivocally referable to the agreement and corroborative of the fact that a contract actually was made. Frontier’s installation was not unequivocally referable to the alleged agreement because Frontier had previously installed a BOP on a different rig free of charge.

That the court was “sympathetic to Frontier’s predicament” didn’t alter the result.  

Your musical interlude

Landowner and mineral owner (that includes you, lessee): Under ETC Texas Pipeline, Ltd. v. Ageron Energy, LLC, your right to sue for damages for tort or trespass could pass into history before you even know you have a claim. Here’s why:

Under the legal-injury rule (more on that later), a property claim based on trespass or tort accrues even if the claimant:

  1. Does not yet know a legal injury occurred,
  2. Has not yet experienced or gained knowledge of the full extent of the injury,
  3. Does not yet know the specific cause of the injury or the party responsible,
  4. Later suffers additional injuries. or
  5. Has not yet suffered or cannot yet ascertain any or all of the resulting damages.

The background

In 2012 mineral lessee Swift and landowners the Quintanilla Ranch and the Dickinson Ranch sued Regency Field Services (now ETC) for tort and trespass in connection with Regency’s H2S disposal well. See our previous posts for a history of that case.

The Supreme Court ruling reversing the

Court of Appeals ruling

The new dispute

In 2021 Ageron obtained a permit to drill an Eagle Ford Shale well on mineral leases on the Dickinson Ranch. The well was located near ETC’s H2S disposal well. Ageron’s permit application included a 40-page H2S contingency plan.

Despite extensive safety precautions, H2S ate through Ageron’s drill pipe, severing it at 61 feet into ETC’s injection zone in the Wilcox formation. The well was abandoned and Ageron’s leases expired. Ageron sued ETC for negligence, nuisance, and trespass, assessing its damages at $197 million.

ETC moved to dismiss based on Ageron’s lack of standing, arguing that the H2S claims accrued in 2012 to the Dickinson Ranch owners. The trial court denied the motion. The court of appeals reversed and dismissed Ageron’s suit.

The legal-injury rule.

For a court to have subject matter jurisdiction over a case the plaintiff must have standing to sue.  The right to sue belongs to the person who owns the land when the injury occurs and does not pass to a subsequent owner without an express assignment.

A claim for trespass to a mineral lessee’s rights accrues when unauthorized conduct first invades or interferes with the claimant’s legal rights. Hence, the admonition at the beginning of this post.  This results in accrual of not only claims arising from this injurious event but also all other claims the owner might have had arising from the same allegedly wrongful conduct, whether ripe or not.

The single-action rule

A trespass or tort committed against an undivided estate involves only a single, indivisible action for all co-owners. If Jeffrey Dickinson’s present and future mineral interest claims arising from the injection operation accrued no later than November 2012, when his cows died from escaping H2S similar claims of all other Dickinson Ranch owners, including the Dickinson lessor on whose tract Ageron’s well sat, also accrued then.

Ageron did not have standing as a mineral lessee because it did not have assigned claims from a prior landowner or lessee.

Note: The court declined to decide whether a mineral-development claim accrues only after a drilling attempt fails. Regardless, Argeron’s claim failed because of the single-action rule.

The dissent

The dissent reasoned that, per the Supreme Court in Lightning Oil, an unauthorized interference with the place where the minerals are located is a trespass as to the mineral estate only if it infringes on the mineral lessee’s ability to exercise its rights.

Argeron’s petition should be construed as intending a “trespass on the case” for its claimed injury to its right to develop the leasehold. As pleaded, Ageron’s injury is concrete and particularized, not hypothetical.

The Dickinson family’s claims in the prior suit were different from Ageron’s, and any claim the Dickinsons would have had for injury to their right to develop their minerals would be premature. The Dickinson family’s pleading failed to allege any such injury.

Relying on the single-action rule requires future operators to bring causes of action when damages are impossibly speculative and premature. The majority’s conclusion conflates a surface owner’s trespass-to-possessory-rights cause of action with a trespass cause of action belonging to a mineral lessee who sustains an injury while developing its mineral interests.

Your musical interlude.