Surface Use and the Surface User Easement

 

An oil company cannot drill a well for oil and gas without going on somebody’s surface estate.  Likewise, an oil company cannot transport oil or gas from a well to a market without crossing somebody's surface estate.

The surface estate is what remains after the mineral estate is taken from the fee simple estate. [For a more thorough discussion of the definition of the surface estate, see Walker, The Evolving Dominance Of The Surface Estate, 34th Annual Inst. On Oil and Gas Law and Taxation, 123 (1983).] According to the generally accepted notion in oil and gas law, the surface estate is subservient to the mineral estate, which is the dominant estate. 1 H. WILLIAMS & C. MEYERS, OIL AND GAS LAW, 218 (1989).  Furthermore, the owner of the mineral estate has a development easement allowing the reasonable use of the surface estate for the purposes of recovering oil and gas underlying that surface tract or lands within the same drilling and producing unit. 1 H. WILLIAMS, supra; 6 W. SUMMERS, THE LAW OF OIL AND GAS 652 (1962); see Gulf Oil Corp. v. Deese, 153 So.2d 614 (Ala. 1963).  In almost all disputes over the extent of the implied development easement incident to the mineral estate, the determining inquiry is whether the use is a reasonable use for the purposes of recovering oil and gas from the tract overlying the mineral estate.  This seems to be a simple formula for planning. In Alabama, juries decide what is reasonable, and the penalty for unreasonableness is trespass, which carries punitive damages. Hickox v. Vester Morgan, Inc., 439 So.2d 95 (Ala. 1983).

The mineral estate may construct roads across the overlying surface to give access to drill sites on that land. 1 H. WILLIAMS, supra, at 218.7; Gulf Oil Corp. v. Walton, 317 S.W.2d 260 (Tex.Civ.App.– El Paso 1958, no writ).   If the road is part of a network serving wells off the premises, the use may exceed what is reasonably necessary to serve the mineral estate underlying the surface premises.  1 H. WILLIAMS, supra, at 218.8, citing Denver Producing and Refining Co. v. Meeker, 188 P.2d 858 (Okla. 1948); see also, Tutwiler v. Etheredge, 231 So.2d 93 (Ala. 1970) (hard minerals case).

As a practical matter, many individual lessors want roads. Oil company roads are usually designed and constructed to handle repeated transportation of heavy industrial equipment. More often than not, lease roads improve rural property in Alabama by providing good access to interior parts of previously timbered lands. Therefore, the oil and gas operator frequently faces problems of excluding unwanted use of the lease road rather than land owner complaints about exceeding the development easement.

Corporate lessors, such as timber companies, generally have different concerns over roads. These concerns include deterioration of private bridges and paved roads resulting from the transportation of heaving drilling equipment. They usually address these problems in their leases.

If the operator needs access across property for the benefit of operations on other lands so as to require a conveyance of an access easement that is in addition to the implied development easement in the oil and gas lease, a separate easement deed will be necessary.

The mineral owner may construct the drill site for the oil and gas well on the surface tract. 1 H. WILLIAMS, supra, at 218.7; Gulf Oil Corp. v. Deese, supra.  The drill site may be for a drilling and production unit covering only the surface tract or the surface tract and other lands. Gulf Oil Corp. v. Deese, supra.

Where mineral operations will substantially interfere with a pre-existing surface use and the operator has reasonable alternatives available, the mineral operator must accommodate the surface uses.   Getty Oil Co. v. Jones, 470 S.W.2d 618 (Tex. 1970).  This is known as the accommodation doctrine.

The surface owner probably owns subsurface water, whether salt water or fresh water. See 1 H. WILLIAMS, supra, at §§218.6 & 219.6. Nevertheless, the implied development easement entitles the mineral owner to use as much water as is reasonably necessary to develop the premises.  1 H. WILLIAMS, supra, citing Russell v. Texas Co., 238 F.2d 636 (9th Cir., 1956), cert. denied, 354 U.S. 938 (1957).  The implied development easement does not allow the free use of water for field wide water flood operations that obviously benefit other lands. See 1 H. WILLIAMS, supra, at §218.8.

There is a good argument that no expressed subsurface salt water disposal easement is necessary for the disposal of salt water fluids produced during the drilling or operation of a well on the same land where salt water well is to be located. If the salt water disposal is reasonably necessary to recover the oil or gas from that land, the use of the surface for salt water disposal purposes is like the use of the surface for the drill site, for access, or for crude gathering tanks. Consistent with this concept, lease forms in use in Alabama in the 1950’s and 1960’s did not contain specific grants of salt water disposal easements.  For example, see Hederman Bros. Alabama Producers 88-D9803 (Revised 2-4-49) With Pooling Provision; Gill Ptg. & Sta. Co., Mobile, Producers 88 (Rev.) -- 8-51 -- D25154 With 640 Acre Pooling Provision, Alabama Form; Exxon and Chevron lease forms in use in the Big Escambia Creek Field; Gill Ptg. & Sta. Co., Mobile, 1-18-66.   Most current popular lease forms now contain specific grants of salt water disposal easements. For example, two fairly recent Hederman Brothers forms [Hederman Brothers Producers 88 (9/70) -- With Pooling Provision Mississippi, Alabama, Florida; Producers 88 (SP 5-79) -- With Pooling Provision Mississippi, Alabama, Florida] contain the following language in the leasing clause of the lease: “the right to . . . establish and utilize facilities for . . . subsurface disposal of salt water.”

The salt water easement contained in the modern oil and gas lease forms may not fit the normal salt water disposal well situation. Many salt water disposal wells inject salt water from several wells. Thus, the disposal operation frequently is for the benefit of other tracts of land that are not part of the lease for the disposal site or for the drilling and production unit for that site. At least one court has construed the expressed salt water disposal covenant in an oil and gas lease to be for the benefit of only the tract where the disposal well is located. Gill v. McCollum,  311 N.E.2d 741 (Ill.App. 1974). The court reasoned that the primary purpose of an oil and gas lease is to obtain production from the land described in the lease. Consequently, the salt water injection must have some relation to that primary purpose.        

Whether the mineral estate or the surface estate controls salt water disposal is an interesting question. Clearly the surface estate controls the physical use of the surface for access, construction of the well site (or conversion of an abandoned oil or gas well site), utility lines to the well site, water lines to the well site, operation of the well, and maintenance. Thus in any event, the consent of the surface owner must be obtained for a salt water disposal well.  Again, if the salt water disposal is reasonably necessary for the development of the tract where the well is located, the surface owner's consent is implied in the mineral estate's development easement.

Copyright 2011 by Edward G, Hawkins. All rights reserved.