Oil Play: Surface
versus mineral
Mineral owners call the shots
Texas Agriculture
(April
2005)
Texas Farm Bureau
By Lana Robinson, Field Editor
With record high fuel prices and the Middle East turmoil, interest in oil and gas exploration is up. A host of companies competing for leases in the Barnett Shale, particularly, means that many landowners are dealing with drillers and producers for the very first time. Mineral owners have been excited about the opportunities for generous bonus money and the potential for income-producing wells on their properties. Most informational meetings have been directed towards landowners who own all or part of their minerals. But what about the surface owners who do not own the minerals under their land? What are their rights under Texas law? Inquiring minds want to know.
It is important to note that in Texas, the mineral estate is a separate interest in land that can be severed from the surface estate. The severance generally occurs in one of two ways: Either the landowner sells the minerals and retains the surface, or more commonly, the landowner sells the surface and retains the minerals. If the seller fails to reserve the minerals when selling the surface, the buyer automatically receives any mineral interest the grantor owned at the time of conveyance.
When the Wilsons purchased their 80-acre property a little over a year ago, they say they were told by the sellers that all the wells had been pumped dry. So it was a surprise when a day or so before deer season was to begin last fall, the Wilsons got a call from the oil company, or "lessee."
"They called us one day and were here the next," Wilson recalls.
Before oil companies may conduct exploratory tests for potential drill sites, they must secure permission from the mineral owner. If the land is under lease, the mineral lessee's consent is needed. The surface owners and surface tenants may be contacted to avoid conflicts, but their permission is not required by Texas law.
"I found out the hard way as surface owners, we have no rights," says Wilson. "The laws are on the side of the drilling company. I did find out that we are not alone. There are hundreds of others just like us. We lost about 40 trees, 75 years old or older. There has been damage to our coastal fields and the gates are left open so the cattle get out. There is no law saying the open mud pits and the pumps have to be fenced. A neighbor's calf got under a pump on their place and broke its neck. A tanker truck ran over a calf and killed it. The mental damage to me and my family is devastating. We can't get in to fertilize. They have plastic pipes laying everywhere and electric wires laying on top of the ground. The hay baler won't come in to bale our hay because of it. We counted on the income from the coastal, but the grass won't come back until next year. They drive over the whole place. I begged them not to drive on our grass, but was told `I leased it. I'll drive where I want to.' They put a lock on our property, and we couldn't get in. We learned things the hard way, and after five months it's still going on even though no oil was found. My husband and I even went to Austin in front of the Railroad Commission. They would not help. They said the laws are going to have to be changed before anything can be done."
It isn't just the safety of her livestock that worries Wilson, she claims the lives of her family have also been put at risk
"They damaged a pipeline that's just 20 feet from our house. When that happened, the pipeline company did step in and stopped them. Magellan Pipeline had to come and fix their own pipeline. They have helped us. What really was so bad is there is not a reckless endangerment law in Texas. It was just by the grace of God that we didn't get blown up," she says. "They have run over us. We had to borrow the money to take them to court. We did finally get them to move their entranceway down on the north fence line. They had been using our driveway. But instead of putting the entry along the fence, they bulldozed our pipe fence and knocked down our trees and pushed them off into our creek and stopped it up."
Wilson got 250 signatures on a landowner petition, along with pictures of damages and letters from other individuals, and presented them to local lawmakers. The Wilsons have also filed a lawsuit for damages against the drilling company with a tentative trial date set for June 2005.
"We thought we were moving up here where there was peace and quiet, and it's been the worst nightmare anyone could imagine. Trucks are going in and out of here night and day. We would never have bought the land or built a house here if we had known what we were getting into," she says.
Le Roy Gentry of Tolar has been a bit more fortunate. He doesn't own his mineral rights, but has a more conciliatory arrangement with the oil company that leased his property.
"My land has had one gas well on it that's been producing probably 23 or 24 years. I get along with the oil people. They do a pretty good job. They have certain rights-of-way. They have an assigned road. They can't just cut across my land. They fenced around the gas well, but those sites still take up a lot of land that we can't use, although we own it.
"When I originally bought the place, I had a pretty rough time with them," Gentry continues. "They had a big tank in my pasture, and they had let it rust out. It wasn't fenced. I have a big pond not too far from it. I was afraid the kids might get hurt. I kept after them, and they got in and got it moved. But down the road here, on one place, there are two big tanks—I don't know whose they were—that are deteriorating. They are just a hazard waiting to happen. I don't understand why the Railroad Commission or the EPA hasn't done something about it."
Gentry wonders about issues and situations that have arisen over the years.
"For example, when the company that owns the pipeline goes belly-up, bankrupt, like the one out here, what happens? Looks to me like that right of way should convert back to the landowner," he says, "but the company that has the land leased just keeps using it like it belongs to them. Also, when they want to do a seismic, they offer damages, but not near enough. I've seen what can happen. After all this rain, they've torn up some pastures and got stuck around here. Here again, what's the landowner's rights?"
In Texas the oil company only has to have the permission or consent from one owner of a fee simple undivided mineral interest in the property to run a seismograph over it. Most oil companies want at least one "substantive" mineral owner to consent, but it's not required.
"I've got another 23 acre tract. The owner just re-leased it. Years ago, it had a well, but it went bad and they plugged it. This Barnett Shale come along, and they're interested in it again. I don't even know who has it leased. Looks like being the landowner, I should be advised of who is coming and going on my property. There are a lot of things there that concern me, and a lot of other landowners. What about the surface owner? What are his rights?"
Unfortunately, civil suits are about the only recourse a surface owner has, and that may be unsuccessful. Whether or not the Wilsons, for example, prevail lies in how the courts interpret the phrase "reasonably necessary."
Judon Fambrough says mineral lessees can use as much of the surface as is "reasonably necessary" for mineral exploration and production. In his technical report entitled Minerals, Surface Rights, and Royalty Payments, Fambrough writes, "This privilege springs from the executed mineral lease. Independent permission from the surface owner is not necessary. No responsibility exists for restoring the surface or for paying surface damages. Liability arises only when the lessee (the oil company or other entity leasing the minerals) goes beyond what is reasonably necessary or negligently injures the surface."
The Texas Real Estate Center at Texas A&M has a number of publications to assist mineral and surface owners that can be downloaded from the TLMA site. <Go To Helpful Links>
Texas Farm Bureau member Thomas Menn, whose 56-acre farm lies in the Austin Chalk oil/gas fields of Lee, Fayette, and Washington counties, knows firsthand some of the shortcomings of mineral leases and pipeline rights-of-way agreements. If he had it to do over again, Menn says he would have more specific requirements in his lease. For one, he would make sure fencing material (wire type) and installations (post depth) met his standards instead of "cosmetic" fences. In hindsight, he would also insist that all pipeline posts are of a permanent material such as concrete or four-inch steel pipe filled with, and set in, concrete. In the alternative, he would get an agreement allowing for repair or replacement of any deteriorating fences.
"I have three different pipelines crossing my fences. The problem is that one or two of the pipelines are not being used and the wooden posts that were installed at one of these fence crossings have failed and one post even split lengthwise," says Menn.
Menn, an absentee landowner, now sees it would have been smart to require the posting of "no litter" signs, and have the lessee responsible for clean-up as long as the well produces.
Menn notes that a previous grazing leaser had lost two cows that drank from uncovered catch buckets where the salt water and crude oil trucks hook up to load the liquids. A clause requiring the operator to keep all drips containers covered and locked would put a stop to that, he says.
Because natural gas just out of the oil well can be deadly, if it contains high levels of hydrogen sulphide (H2S), Menn would have the operator notify him of planned maintenance, especially when Menn is working in an area near the well site.
Another common-sense provision, says Menn, would require that use of the access road be limited to service well(s) on the one property only, and that it be kept locked