On October 29, 2014, the San Antonio Court of Appeals issued its decision in Lightning Oil Co. v. Anadarko, holding that Lightning Oil was not entitled to a temporary injunction enjoining Anadarko from drilling through Lightning Oil’s leasehold estate from an off-lease location to reach the minerals under Anadarko’s Lease. Anadarko, which owned a lease on the Chapparal Wildlife Management area, was prohibited from drilling on the surface of the wildlife management area, and received permission from the surface owner of Lightning Oil’s lease tract to drill horizontal wells from a surface location on the Lightning lease tract.
Lightning Oil argued in the trial court that Anadarko’s wells would potentially harm its mineral estate and development plans. At the temporary injunction hearing, the court heard evidence from Lightning Oil witnesses that a casing failure could harm the ground water on the Lightning Oil lease tract, and that Anadarko’s drilling would interfere with Lightning Oil’s own drilling program. The main issue at the trial court was whether Anadarko’s wells, which would pass through Lightning’s leasehold estate, was a trespass. The trial court denied Lightning Oil’s request for a temporary injunction.
The San Antonio Court of Appeals upheld the trial court’s ruling, finding that Lightning Oil had failed to prove that Anadarko’s wells presented imminent, irreparable harm. The court found that Lightning Oil’s evidence was speculative, and that there was no evidence that Lightning could not be compensated in money damages for any harm caused by Anadarko’s drilling. The court did not address the issue of whether Anadarko’s wells, by passing through Lightning Oil’s leasehold estate, presented a compensable trespass.
This case is an important development for operators forced to access minerals through off-lease drilling locations, in that it may prove difficult to enjoin off-lease drilling in light of the court’s ruling. Whether off-lease drilling is a trespass will likely be decided in subsequent opinions.
To view opinion click here.