A Cattle Rancher v. An Oil Company – The Accommodation Doctrine

**This article is not a substitute for the advice of an attorney.**

A recent Texas Supreme Court decision pitted a cattle rancher against an oil company, and has shed additional light on the legal principal in oil and gas law known as the accommodation doctrine.

Background on Merriman v. XTO. 

Homer Merriman owns the surface estate of a 40 acre tract of land in Limestone County.  On this land, he built his home, barn, and corrals, which he uses about once a year to work cattle.  Mr. Merriman also leases several other tracts of land that he uses in his cattle operation.  XTO Energy, Inc. has a lease for the property’s mineral estate.  XTO contacted Mr. Merriman about drilling a gas well on his property, but Mr. Merriman told XTO that the well would interfere with his cattle operation.  XTO drilled the well despite Mr. Merriman’s objections.  Mr. Merriman filed suit seeking an injunction that would require XTO to remove the well.  Mr. Merriman argued that XTO failed to accommodate his existing use of the surface estate to work cattle, which exceeded its rights as a mineral lessee and constituting trespass.

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What is the accommodation doctrine?

Generally, a party who holds a mineral right (like XTO in this case) also automatically has the implied right to use the surface of the land as reasonably necessary to extract minerals.  The accommodation doctrine protects the right of surface owners by requiring a mineral owner to accommodate the surface owner’s existing use of the land if possible to do so.  So, or example, an oil company may be permitted to create a road in order to access a well on someone’s property, but they likely are not permitted to make 5 roads through a corn field that would harm the surface owner’s farming activity.

In order for a surface owner to claim that a lessee failed to accommodate an existing use of the surface, he must prove that:  (1)  The mineral owner’s actions “precludes or substantially impairs the existing use”; (2) “There is no reasonable alternative method available to the surface owner by which the existing use can be continued”; and (3) There are reasonable alternatives available to the mineral lessee that will allow the discovery of minerals while also allowing the surface owner to continue his existing uses.

The Texas Supreme Court’s Decision. 

The Texas Supreme Court sided with XTO and dismissed Mr. Merriman’s case.  Their reasoning, however, is important and may actually prove beneficial to landowners in future cases.

First, XTO argued that Mr. Merriman did not prove that there was no reasonable alternative for him to run his cattle operation, because he leased other properties.  Essentially, XTO argued that the accommodation test required proof that no other alternatives were available anywhere, not just on the particular property at issue.  The Court adopted the more confined test, and held that Mr. Merriman was not required to prove that he could not have run his existing cattle operation on other portions of his leased land.

Why is this important for landowners?  It is much easier to prove that an oil company’s drilling a well makes it impossible to run cattle on the particular property that the well is on, but would be much harder to ever prove that there was no alternative property on which the operation could be run.  The standard adopted by the Court, which looks at the particular property at issue, is more favorable for landowners.

Second, XTO argued that even if Mr. Merriman could not run cattle on the property, he did not prove that he could conduct no alternative agricultural operation.  Mr. Merriman argued that the test was not whether he could run another type of operation, but whether he could continue running his specific cattle operation.  The Court agreed with Mr. Merriman.  The court held that rather than looking at agricultural uses generally, the test requires that it look at whether the specific use (like Mr. Merriman’s cattle operation) could be continued.

Why is this important for landowners?  Again, this is a more favorable test for landowners.  It would be much more difficult that one could not conduct any agricultural operation on the property where the well was drilled.  Mr. Merriman would have to show that he could not run cattle, but also that he could not, for example, plant pecan trees or raise goats or plant cotton on the property before he could succeed on his claim.  This would have been an onerous burden for a landowner to win a case against the oil company.  The Court’s decision on this item is favorable for agriculture.

Lastly, despite these two helpful interpretations by the Court, Mr. Merriman was unable to succeed on his claim against XTO based on the facts of his case.  Mr. Merriman did not prove that there was no alternative method for working cattle elsewhere on the tract of land.  He did not prove that he could not construct new pens or use temporary pens for working the cattle.   In fact, when questioned about building new pens on the same land in a different area, Mr. Merriman testified that it would be “easier” not to have to build new pens and that using the existing corrals “works best for me.”  The mere fact that making an operational change is an inconvenience or would be expensive is not sufficient to meet the accommodation test requirements.  Thus, Mr. Merriman’s case was denied and XTO gets to keep its well.

So what is the bottom line?  The accommodation doctrine looks narrowly at how a mineral owner’s use of the surface estate impacts the surface owner’s:  (1) Use the same property at issue; and (2) Ability to conduct the specific agricultural activity in which he is engaged.  Even with these favorable tests, however, a landowner must prove that the mineral owner’s intrusion on his land causes there to be no reasonable alternative for the surface owner to conduct his activity on the land, not just that it makes doing so more expensive or less convenient.  This remains a difficult burden to meet, and one which Mr. Merriman could not overcome.

[Read the full opinion here.]

 

7 Responses to A Cattle Rancher v. An Oil Company – The Accommodation Doctrine

  1. Bob says:

    The XTO case is very instructive, but doesn’t quite fit what I need at the moment.
    I’m interested in any cases involving oil field or transmission line operations were large, heavy vehicles cause deep imprints in perennial grassland, particularly native rangeland. A typical situation would be industrial vehicles operating where the surface was wet, causing extensive surface soil displacement. Imprints are 2-6″ deep, mostly the tires were not spinning, so the vegetation is basically intact.
    The landowner feels vandalized and wants punitive damages, although vegetational productivity and future use use of affected land may not be limited much at all.
    Thanks!

  2. Pingback: Surface Owners Rights May be Limited When Minerals Leased

  3. Daniel says:

    Is there a minimum acreage where an oil company can drill in Texas? I have 10 acres of land with a small house and plans to build a bigger house on the back half in a few years. If they decide to drill, It would pretty much ruin my small hay production plans as well as my future dream house plans and would be forced to move.
    And since I do live in the country, I have a nice little gun range setup in the back not bothering anyone. Would they pretty much kick me off my land or arrest me?
    I’d understand if I had 100 acres, but 10 acres is a little tight…

    Thanks,
    Daniel.

  4. tdowell says:

    Daniel–Thank you for your comment. There is a state-wide spacing rule in Texas that requires wells to be drilled a certain distance from each other and from property lines. However, individual production fields may have different spacing rules. You can find the state-wide rule here (Rule 37): http://info.sos.state.tx.us/pls/pub/readtac$ext.TacPage?sl=R&app=9&p_dir=&p_rloc=&p_tloc=&p_ploc=&pg=1&ti=16&ch=3&rl=37

    Something to think about if the minerals have not yet been leased is that during negotiations, you could request that the mineral lessee (the oil company) agree to waive surface operations on your 10 acres. Sometimes they will agree to this when dealing with a small landowner whose land will likely be pooled with a larger tract. That would allow you to lease the minerals and still ensure that your surface uses would remain unchanged. The oil company is certainly under no obligation to do so, but it is something you could negotiate for. Here is an article that briefly discusses surface waivers: http://www.bizjournals.com/houston/stories/2007/09/10/focus4.html?page=all

    Again, thank you for reading and for your comment!

  5. kyle Scott says:

    I am negotiating with landowners that have mineral lease contracts and or due for re-assignment.
    We want to lease the surface so will we have complications or need to answer to the mineral owners to lease the surface for “other agricultural purposes?”

  6. tdowell says:

    Kyle, thank you for your comment. I am certain that the specific details of your question may make a difference, as is usually the case, and it may be in your best interest to seek advice from an attorney in order to specifically analyze your situation. In general, it is certainly possible for a landowner to lease the surface of land to someone for ag purposes while there is a mineral lease in place. That said, it is important for the lessee (you) to realize that the mineral lessee has the implied right to use the surface of the estate as reasonably necessary to produce the minerals. This means that the mineral lessee may be able to, for example, put a drilling pad in the middle of a field, or can construct roads or pipelines, or can drill injection wells, if doing so is reasonable use and done in a non-negligent manner. As a lessee, you may want to seek to protect yourself in the lease agreement with the landlord to ensure that you are protected in the event that the oil company does begin producing and it causes a problem for your agriculture purposes. This can be accomplished in a variety of ways–requiring that the landlord obtain a surface use agreement from the oil company with favorable terms for you as lessee, by providing a clause in the lease that upon production beginning you may terminate the lease at your discretion, that if production impacts your operation a decreased amount of rent may be paid, etc.

  7. Pingback: Surface Owners Beware!

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