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Lyle v. Midway Solar, LLC, No. 08-19-00216-CV, 2020 Tex. App. LEXIS 10385 (Tex. App.—El Paso Dec. 30, 2020, no pet. h.) primarily held that the claim by the mineral owners to enforce the accommodation doctrine on a solar company was not ripe.  The conflict pertained to a 315-acre tract of land, known as Section 14.  The appellants, aligned as the “Lyles,” owned an undivided 27.5% of the minerals rights underlying Section 14, and had no current plans to lease their minerals or to otherwise develop their minerals.  The deed which severed the surface and minerals was executed in 1948 and reserved the minerals to the grantors.  The Lyles succeeded to some portion of the grantors’ interest.  The 1948 Deed stated the following: “Grantors further reserve unto themselves, their heirs and assigns, the right to such use of the surface estate in the lands above described as may be usual, necessary or convenient in the use and enjoyment of the oil, gas, and general mineral estate hereinabove reserved.”

Drgac owned all of the surface of Section 14, and owned none of the minerals.  Drgac leased the south half of Section 14, and some enjoining sections to Midway Solar, LLC to build a solar farm.  As appellees, we refer to them collectively as “Midway.”  The leases were amended to include “designated drill site tracts,” located on the north 80 acres and the south 17 acres of Section 14, which are parcels of land that were left undeveloped for the benefit of any present or future oil and gas operator.  It appears these tracts could be used to drill horizontally through Section 14.  The Lyles had no input as to the locations of the designated drill site tracts.  Midway developed 215 acres with solar panels between the designated drill site tracts.  Midway acquired surface waiver agreements from mineral owners on adjacent land, which created several issues that are not addressed in this article.  However, the Lyles did not execute a surface waiver for Section 14.  The Lyles filed suit claiming Midway had (1) breached the terms of the 1948 Deed by denying them reasonable access to their minerals by covering 70% of the surface with solar panels and transmission lines, and (2) alleging trespass on the Lyles’ mineral estate by their actions.  The Lyles sought damages for the alleged trespass and breach of contract, contending that the construction of the solar facility had “destroyed and/or greatly diminished the value” of their mineral estate.  The trial court ruled in favor of Midway on summary judgment.  The main issue on appeal is whether the accommodation doctrine applies.

*Picture of Section 14 provided in the case.

Analysis of the Court

The court restated the fundamentals of the accommodation doctrine, which is used to balance the competing interests of the surface and mineral owners.  The mineral estate is considered the dominant estate and can use the surface as reasonably necessary to extract the minerals.  The surface owner can use the accommodation doctrine to protect its pre-existing use of the surface, but it carries the burden to prove three elements.  The surface owner must “show that (1) the mineral owner’s use of the surface completely precludes or substantially impairs the surface owner’s existing use, and (2) there is no reasonable alternative method available to the surface owner by which the existing use can be continued.” Midway, 2020 Tex. App. LEXIS 10385 at *19 (citing Merriman v. XTO Energy, Inc., 407 S.W.3d 244, 249 (Tex. 2013)).  The third element is that “the surface owner must ‘further prove that given the particular circumstances, there are alternative reasonable, customary, and industry-accepted methods available to the [mineral owner] which will allow recovery of the minerals and also allow the surface owner to continue the existing use.’”  Midway, 2020 Tex. App. LEXIS 10385 at *19 (quoting Merriman, 407 S.W.3d at 249).  If the surface owner can carry their burden, the accommodation doctrine may require the adoption of that alternative method by the mineral owner and its lessee.  However, if there is only one means of surface use by which to produce the minerals, then the mineral owner has the right to pursue that use, regardless of surface damage.  Because the accommodation doctrine deals with specific property rights, and parties to a deed are free to contract as they see fit, the express provisions of a deed will control over the courts using the accommodation doctrine to balance the rights.

The Lyles initially contended that the use of the term “usual” in the 1948 Deed expressly reserved the right to drill vertically, which would preclude their need to use the accommodation doctrine.  The argument was that the usual manner of drilling for oil and gas in 1948 when the deed was drafted was through vertical wells, so its intent was to allow for vertical wells, instead of horizontal.  However, the court found that “usual” is no more precise than “necessary” or “convenient,” which have already been found to lack precision, so the 1948 Deed does not preclude the application of the accommodation doctrine.

Alternatively, the Lyles argued that if the accommodation doctrine applies, the final decision in Tarrant County Water Control & Improvement Dist. No. One v. Haupt, Inc., 854 S.W.2d 909 (Tex. 1993) is controlling.  In Haupt, the surface owner created a reservoir on the surface that covered all but 12 acres of the tract.  The oil and gas producer was able to drill vertically through the reservoir, because the surface owner was unable to provide sufficient evidence that showed horizontal drilling, in that case, was a reasonable alternative.

Midway, on the other hand, argued that its solar farm might only potentially interfere with the development of the minerals at some unknown point in the future, and until it actually does interfere, the Lyles do not have the right to use or control use of the surface.  It relied on Lightning Oil Co. v. Anadarko E&P Onshore, LLC, 520 S.W.3d 39 (Tex. 2017).  In Lightning, Anadarko obtained a lease that only allowed for off-site horizontal drilling.  Therefore, Anadarko obtained a lease from the surface owner of an adjacent tract and drilled from the surface of the adjacent tract.  However, Lightning was the lessee of the adjacent tracts’ minerals.  It brought trespass claims and sought to enjoin Anadarko from drilling through the subsurface of the adjacent tract.  Part of Lightning’s argument was that Anadarko could potentially disrupt  Lightning’s future development of the adjacent tract.  Lightning thought it should have the right to prevent any surface or subsurface use that might later interfere with its plans.  However, the Court ruled in favor of Anadarko, because a decision in favor of Lightning “would render the mineral estate absolutely dominant and significantly alter the balance achieved through the flexible nature of the accommodation doctrine.”  Midway 2020 Tex. App. LEXIS 10385 at *31 (quoting Lightning, 520 S.W.3d at 52).

The court here, found neither case directly on point, but ruled in favor of Midway, because Midway does not owe a duty to the Lyles until the Lyles seek to develop their minerals.  Further, the court opined that there were too many unknown variables associated with potential future mineral development that would make determining current damages to a mineral owner impossible and illogical, especially since the minerals may never be developed.  “We therefore conclude that any trespass or breach of contract claim is premature until such time as the Lyles actually seek to develop their mineral estate.”

Significance of the Case

The significance of this case is that it adds to the long history of common law developed in Texas pertaining to the accommodation doctrine.  This case provided some indication as to when the accommodation doctrine begins to apply.  However, the court failed to give any more details as to the exact moment the accommodation doctrine would apply. For example, what actions would constitute a mineral owner “seeking” to develop their minerals?  Is it after an oil and gas lease is signed, or can it occur before a lease is signed?

As the development of solar energy increases, more conflicts will arise between surface and mineral owners.  Obtaining surface waivers from the mineral owner continues to be the most effective way for a solar farm to protect its investment.  Preparing designated drill site tracts, similar to the ones in this case, is likely a good way to influence hesitant mineral owners to waive parts of their surface rights.  It is yet to be determined if creating designated drill site tracts without surface waivers is enough to accommodate the mineral owner’s future development via the accommodation doctrine.  However, that may be unlikely to work, because of the well-developed law that the mineral estate is the dominant estate in Texas.  It is notable that the case began with the court recognizing that “Texas is a leader in energy” and that “its public policy favors adding renewable energy sources into the State’s energy portfolio.”  The court is undeniably foreshadowing an increase in these types of disputes, but is it also suggesting a change in policy?


Authors

Lauren K. King

John M. Byrom

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McCarn & Weir, P.C. is comprised of attorneys and professional staff highly experienced in transactions and litigation involving the Energy, Real Estate, Corporate, Banking and Finance industries. Our firm has multiple attorneys Board Certified in Oil, Gas and Mineral Law by the Texas Board of Legal Specialization, along with attorneys licensed in Texas, Oklahoma, New Mexico, North Dakota, and California. Our goal is to provide high quality and cost-effective legal services, while maintaining the flexibility to adapt to the ever-changing needs of the industries we represent.


 

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