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Lightning Oil Co. v. Anadarko E&P Onshore, LLC

Supreme Court of Texas

May 19, 2017

Lightning Oil Company, Petitioner,
v.
Anadarko E&P Onshore, LLC f/k/a Anadarko E&P Company, LP, Respondent

         On Petition for Review from the Court of Appeals for the Fourth District of Texas

          Argued March 21, 2017

          OPINION

          Phil Johnson Justice.

         This case concerns whose permission is necessary for an oil and gas operator to drill through a mineral estate it does not own to reach minerals under an adjacent tract of land.

         Anadarko E&P Onshore, LLC, entered into an oil and gas lease that restricted its use of the surface estate and required it to drill from off-site locations "when prudent and feasible." As a result, Anadarko planned to locate well sites on the surface of adjacent tracts and use horizontal drilling to produce minerals from its lease. Briscoe Ranch, Inc., owned an adjacent surface estate and agreed that Anadarko could drill from the surface of the Ranch. Lightning Oil Co., lessee of the minerals underlying the Ranch, was not a party to the agreement. Lightning sought to enjoin Anadarko from drilling on the Ranch, claiming that Lightning's consent was necessary before Anadarko could drill through the Ranch's subsurface covered by its mineral lease.

         The district court dismissed the claim. The court of appeals affirmed.

         We also affirm.

         I. Background

         The Cutlass mineral lease encompasses the mineral estate underlying part of the Briscoe Ranch in Dimmit and LaSalle Counties. The minerals were severed from the surface estate some time ago and are owned by the Hurd Family, while Briscoe Ranch, Inc., (Briscoe) owns the surface. Lightning leased the minerals from the Hurds in 2009 and has three producing wells located on the Ranch.

         The Chaparral Wildlife Management Area, a wildlife conservation area the Texas Parks and Wildlife Department (TPWD) controls, is adjacent to the Ranch. The State of Texas owns the surface of the Chaparral and some of the minerals beneath it and Anadarko leases those minerals.

         The lease includes numerous restrictions on drilling activities on the surface, such as the requirement that

Drilling locations will be established off the Chaparral . . . when prudent and feasible. Any drilling site locations on the [Chaparral] must be planned and authorized by [TPWD's Chaparral area] manager.

         To access the minerals under the Chaparral, Anadarko entered into an agreement with the Ranch owners and developed a plan to locate at least one drilling site on the Ranch, then drill five wells from that site. The wellbores will start vertically, then "kick-off" horizontally. They will pass through portions of Lightning's mineral-bearing formations. Anadarko disclaims any intention to perforate in or produce minerals from Lightning's leasehold, and intends to comply with all applicable field rules in its operations. Anadarko says that it currently plans to build one site on the Ranch with five wells. Lightning disputes that, and contends Anadarko intends to drill sixty-five wells. But it is undisputed that all of the well sites-however many there may be-will be on the Ranch and close to the property line between the Chaparral and the Ranch.

         Lightning objected to the first drilling location Anadarko staked out, so Anadarko offered to move its well site. Lightning, however, made it clear that it would object to Anadarko's drilling from any site on the Ranch, and sued Anadarko for trespass on Lightning's mineral estate and tortious interference with contract for interfering with its mineral lease. It also sought a temporary restraining order and an injunction prohibiting Anadarko from drilling on the Ranch. Shortly after Lightning sued, Anadarko and the Ranch owners entered into a Surface Use and Subsurface Easement Agreement (Agreement) that specifically authorized Anadarko to locate wells on the surface, drill through the subsurface, and use the wells to produce minerals from beneath the Chaparral.

         Both Lightning and Anadarko filed traditional and no-evidence motions for summary judgment. By their traditional motions, each sought partial summary judgment as to Lightning's claim for trespass on its mineral estate, claims for injunctive relief, and whether the Ranch owners could authorize Anadarko's subsurface activities absent Lightning's consent. Additionally, Anadarko challenged Lightning's tortious interference claim. In Lightning's no-evidence motion, it asserted Anadarko had no evidence to prove its affirmative justification defense to Lightning's claim for tortious interference with its lease. Anadarko's no-evidence motion also challenged Lightning's trespass and tortious interference claims.

         The trial court granted Anadarko's motion for partial summary judgment, denied Lightning's motions, and pursuant to a Rule 11 agreement, severed those rulings so they could be appealed. The court did not specify the reasons for its rulings. The court of appeals affirmed. 480 S.W.3d 628, 630 (Tex. App.-San Antonio 2015). It concluded that "the surface estate owner controls the earth beneath the surface estate" and "may grant Anadarko permission to site a well on its ranch, drill down through the earth within the boundaries of the Cutlass Lease, and directionally alter its wellbore into the [Chaparral]." Id. at 635-36. The court explained that "absent the grant of a right to control the subterranean structures in which the oil and gas molecules are held, " the mineral estate owner does not control the subsurface mass and is only entitled to "a fair chance to recover the oil and gas" from its mineral estate. Id. at 635 (quoting Coastal Oil & Gas Corp. v. Garza Energy Tr., 268 S.W.3d 1, 15 (Tex. 2008)). It concluded that Lightning had no right to exclude Anadarko from the land masses encompassed by the Cutlass Lease. Id. at 636. The court determined that its conclusion necessarily meant that Anadarko prevailed on its justification defense to Lightning's tortious interference with contract claim because Anadarko was acting within its legal rights based on the Agreement. Id. at 637-38.

         In this Court, Lightning argues that the court of appeals misapplied longstanding Texas law and relied on inapposite cases to reach its conclusion. It contends Texas law firmly establishes that the dominant mineral estate has the right to exclude those seeking to pass through it and to hold otherwise will transform the absolute ownership rights of a mineral owner or lessee in oil and gas in place into a mere license to hunt for the minerals. Lightning also argues that the court of appeals' decision greatly expands the accommodation doctrine by requiring a mineral lessee to accommodate surface uses that benefit an adjacent mineral estate. Additionally, Lightning claims that the court of appeals ignored express language in the original conveyance severing the mineral estate, which reserved to the subsurface owner the right to lease the subsurface. In light of all this, Lightning claims that the Ranch owners could not transfer to Anadarko the right to drill through Lightning's mineral estate because the Ranch owners did not possess that right. Lightning concludes Anadarko was not acting under a legal right, so it could not have established its justification defense, and Lightning was entitled to injunctive relief because Anadarko's anticipated activities on the Ranch will cause irreparable harm to Lightning's mineral estate and its lease rights.

         Anadarko responds that the court of appeals correctly concluded it needed nothing more than the Ranch owners' permission to legally drill.[1] Anadarko points to authority suggesting the surface estate owner-not the mineral estate owner-controls the matrix of earth underlying the surface. This, in concert with the legal justifications underlying the rule of capture, Anadarko maintains, means Lightning does not own specific oil and gas molecules, and thus its bundle of rights as mineral lessee does not include the right to exclude pass-through drilling. Although Lightning criticizes the court of appeals' discussion of the accommodation doctrine, Anadarko discounts the court's discussion as irrelevant to the outcome, and which in any event is not an expansion of the doctrine. Finally, Anadarko argues it has established its justification defense because it has the Ranch owners' permission to enter the subsurface, which is the only permission required under the law. Anadarko prays that we affirm the judgment of the court of appeals.

         II. Standard of Review

         We review grants of summary judgment de novo. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). When a trial court does not specify the grounds it relied upon in making its determination, reviewing courts must affirm summary judgment if any of the grounds asserted are meritorious. State v. Ninety Thousand Two Hundred Thirty-Five Dollars & No Cents in U.S. Currency, 390 S.W.3d 289, 292 (Tex. 2013). "When both parties move for summary judgment and the trial court grants one motion and denies the other, we review all the summary judgment evidence, determine ...


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