Wednesday, June 26, 2019

Shale Law in the Spotlight – West Virginia Supreme Court Rules that Owner of Severed Mineral Estate Cannot Use Surface Estate to Develop Minerals from Neighboring Properties


Written by Chloe Marie – Research Specialist

In the current month, the West Virginia Supreme Court has decided two cases that impact the relationship between surface owners and mineral owners in split-estate situations.  In this article, we will address EQT Production Co. v. Crowder, 2019 WL 2414728 (W. Va. June 5, 2019), where the court ruled on the ability of a split-estate mineral owner to use the surface estate for the development of adjacent properties.  In our next article, we will address Andrews v. Antero Resources Corp., 2019 WL 2494598 (W. Va. June 10, 2019), where the court ruled on the related issue of a split-estate mineral owner’s right to access the minerals through horizontal drilling from an adjacent parcel.

Case Summary: EQT Production Company v. Margot Beth Crowder, et al., Docket No. 17-0968

Mr. Wentz and Ms. Crowder (Plaintiffs) own the surface estate to a portion of the 351-acre Carr Tract located in Doddridge County, West Virginia. EQT Production Company (EQT) holds a 1901 oil and gas lease over the Carr Tract allowing it to drill wells to extract oil and gas from beneath Plaintiffs’ surface estate. In 2012, EQT sought permits for the drilling of horizontal wells on Plaintiffs’ surface estate to extract Marcellus Shale gas from underneath neighboring properties. Plaintiffs’ attorney wrote in June 2012 to EQT advising the company that it had rights to use Plaintiffs’ surface lands only “as are reasonably necessary to extract the severed minerals from beneath the Carr tract …” and that it did “not have the right to burden, damage and otherwise occupy the Crowder/Wentz property for the purpose of extracting minerals from other mineral tracts.” In February 2013, nonetheless, EQT entered upon Plaintiffs’ surface estate without their permission and started building the necessary infrastructure for the extraction of shale gas.

Plaintiffs filed a complaint before the Circuit Court of Doddridge County, West Virginia, challenging EQT’s use of their surface estate to drill horizontal wells for the purpose of extracting shale gas from beneath neighboring properties. Interestingly, even though Plaintiffs recognized that EQT had the right to enter and reasonably use their surface lands under the 1901 lease to extract from the mineral estate beneath their surface lands, they argued that EQT trespassed on their surface estate because they “did not have the right to enter on, burden, damage, or otherwise occupy Plaintiffs’ surface” to the extent that such entry was to extract shale gas from other neighboring mineral tracts.

Plaintiffs filed a motion for partial summary judgment on the basis that there was no genuine dispute about the fact that EQT did enter their surface lands without proper authorization for the purpose of drilling for and producing shale gas from neighboring mineral estates. In response, EQT filed a separate motion for summary judgment arguing that “horizontal drilling is reasonable and necessary to the production of natural gas in the shale formations under the Carr Tract; accordingly, it was reasonable and necessary to extend that drilling under neighboring properties to produce natural gas from beneath those properties.”

On February 19, 2016, the Circuit Court of Doddridge County decided in favor of Plaintiffs, holding that EQT indeed trespassed on their lands after considering that EQT had an implied right to use Plaintiffs’ surface estate to build access roads, well site infrastructure, and pipelines for the production of natural gas, but only from the mineral tract underlying the Plaintiffs’ surface estate. The Circuit Court further stated that “EQT had no express or implied right to enter or use the plaintiffs’ surface lands to drill into and produce gas from neighboring mineral tracts.” A jury awarded Plaintiffs damages in the amount of $190,000.00 on September 26, 2017.

EQT filed an appeal with the Supreme Court of Appeals of West Virginia to challenge the Circuit Court’s order in favor of Plaintiffs and the jury’s damage award. In its appeal, EQT maintained that there was substantial evidence to show that drilling into neighboring mineral tracts from the Plaintiffs’ surface estate was “reasonably necessary, and that the plaintiffs failed to rebut that evidence.” EQT further argued that the real issue was whether a mineral owner and/or a lessee using the surface of a tract to extract both the minerals below the surface and the minerals under neighboring tracts was “reasonably necessary.” According to Plaintiffs, however, this was not a valid question “because EQT had no right to develop those minerals from the plaintiffs’ surface lands in the first place.”

On June 5, 2019, the West Virginia Supreme Court affirmed the Circuit Court’s order as well as the jury’s award of damages. The Supreme Court emphasized that the severance of a mineral estate from a surface estate provides the owner of the mineral estate with an implied easement to go onto the surface and use it for the exploration and development of the underlying minerals because otherwise there would not be much point to the ownership of the mineral estate. The court, however, further noted that such right was “limited only to uses of the surface that are demonstrably reasonable, necessary, and which can be exercised without substantial burden on the surface owner.” As a result, the Supreme Court weighed whether EQT had exceeded its implied rights at the expense of Plaintiffs’ rights as surface estate owners.

In deciding this case, the Supreme Court never addressed the specific question of law raised by the parties. Rather, it declared that “precedent from this Court has repeatedly noted that a mineral owner does not have an implied right to use the overlying surface lands to benefit mining or drilling on other property.” In addition, the count found that a review of other jurisdictions indicated that “the contemporary position is that the mineral owner is not entitled to use the surface for the benefit of other mineral ventures without express permission.” Furthermore, the court relied upon scholars who also have reached a similar conclusion and found common law to establish “a rather strict general rule that in the absence of contractual permission, the holder of the minerals underlying a tract of land will not be permitted to use the surface thereof in aid of mining operations on adjacent, adjoining, or other tracts of land.” Consequently, the court held that a mineral owner and/or lessee cannot use the surface of a tract to benefit mining or drilling operations in order to access minerals underlying other lands without an express agreement from the surface owner permitting those operations on his or her land.

Applying that law to the present case, the court concluded that, pursuant to the 1901 mineral lease, “EQT only had a right to conduct operations on the plaintiffs’ surface lands to explore for and extract oil and gas from beneath the Carr Tract. EQT had neither an express agreement with the plaintiffs … nor an implicit right to use the plaintiffs’ surface lands to benefit its drilling operations on neighboring lands.” At the end of its ruling, the court added that this “opinion merely restates a bright-line rule founded long ago in the common law that surface owners and mineral owners can easily navigate.”

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This material is based upon work supported by the National Agricultural Library, Agricultural Research Service, U.S. Department of Agriculture.

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