On May 19, 2017, the Texas Supreme Court issued a unanimous opinion in Lightning Oil Company v. Anadarko E&P Onshore, deciding that Anadarko did not commit an actionable trespass by drilling through Lightning’s mineral estate with the consent of the surface owner on Lightning’s tract in order to reach Anadarko’s mineral estate located beneath an adjacent tract.
Anadarko leases a mineral estate that lies beneath a state-managed wildlife conservation area in south Texas. That lease restricts drilling activities on the surface. To access its minerals, Anadarko contracted with the surface owner of an adjacent tract, Briscoe Ranch, to drill several wells from the surface of Briscoe Ranch’s property that would travel horizontally under the lease line and produce from Anadarko’s mineral estate. Before crossing into Anadarko’s mineral estate, the wells would pass through but not produce from the mineral estate below Briscoe Ranch’s property, which is leased by Lightning.
Lightning sued Anadarko for trespass and sought an injunction prohibiting drilling through its mineral estate. The trial court granted summary judgment for Anadarko. The court of appeals affirmed, holding that Lightning failed to establish that it had the right to exclude Anadarko from its surface estate. The Supreme Court affirmed judgment for Anadarko.
The Court rejected Lightning’s argument that the mineral estate lessee “should have the right to prevent any surface or subsurface use that might later interfere with its plans.” The Court confirmed longstanding law that the mineral estate is dominant, i.e., the mineral estate has the right to use as much of the surface as is reasonably necessary to produce and remove the minerals. But the Court noted that these rights are not absolute; in many ways, the rights of the surface owner are more extensive. In essence, the Court concluded that horizontal drilling activities permitted by the surface owner could constitute a subsurface trespass only if they actually and demonstrably interfere with a mineral owner’s ability to develop its estate.
The Court held that Lightning’s speculation about potential interference with its operations was insufficient to support injunctive relief, which requires proof of imminent, irreparable harm. The Court further acknowledged that the challenged drilling will inevitably remove a small amount of minerals from Lightning’s lease, but after balancing the interests involved, held that such loss is not a sufficient injury to support a trespass claim. In light of the longstanding policy to maximize production and minimize waste, the Court concluded that there is “no doubt” that Lightning’s interest is “outweighed by the interests of the industry as a whole and society in maximizing oil and gas recovery.”
This is an important decision for several reasons for E&P companies considering or currently engaged in off-lease drilling. The decision clarifies uncertainty regarding whose permission is needed for this common practice. For E&P companies seeking to prevent neighboring lessees from drilling through their mineral estates, the decision shows the importance of having development plans in place. The Court left open the possibility that an actionable trespass might occur where the adjacent mineral interest owner can show actual, demonstrable interference with its ability to develop its estate.
In addition, the Court’s focus on the nature of the mineral estate could result in changes in the way minerals are severed from the surface estate. A party wishing to retain both the minerals and the “mass” or “matrix” of earth surrounding the molecules should do so with clear language of reservation. Should that occur, it may be possible for the mineral interest owner to convey all rights with regard to the minerals and the surrounding earth to a mineral lessee wishing to prevent adjacent operators from drilling through its mineral estate.