Wednesday, July 3, 2019

Shale Law in the Spotlight – West Virginia Supreme Court Rules that Surface Landowners Are Not Substantially Burdened by Off-Site Horizontal Drilling Activities

Written by Chloe Marie – Research Specialist

Within the last 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 a prior article, we addressed 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 this 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: Robert L. Andrews, et al. v. Antero Resources Corporation and Hall Drilling, LLC, Docket No. 17-0126

Antero Resources Corp. (Antero) is the owner of several horizontal Marcellus shale wells located on six well pads in the Cherry Camp area of Harrison County, West Virginia. Antero holds the rights to explore for or exploit the underlying mineral estate through severance deeds dating back to the early 1900s. A 1905 deed granted the mineral owner “the right to drill, bore and operate for [oil and gas]” while a 1903 deed retained for the mineral estate owner “all the oil and gas underlying the land herein conveyed together with the privilege of operating for and marketing same.” Antero contracted with Hall Drilling, LLC, for the construction of well pads and roads, well drilling, and the operation of wells and gathering lines.

The plaintiff property owners – Robert and Deborah Andrews, Rodney Ashcroft, and Greg McWilliams – are surface owners of severed estates that are burdened by Antero’s mineral estate ownership.  Five of the six well pads owned by Antero are located within the close vicinity of the property owners’ properties, but the wells are not located on them. The property owners filed a complaint in 2013 before the Circuit Court of Harrison County (docket 13-C-434-3) arguing that “the activities of Antero and Hall in relation to their development of the Marcellus shale have caused the Property Owners to lose the use and enjoyment of their properties due to the annoyance, inconvenience, and discomfort caused by excessive heavy equipment and truck traffic, diesel fumes and other emissions from the trucks, gas, fumes and odors, vibrations, noise, lights, and dust” and therefore alleged claims for “private temporary continuing abatable nuisance and negligence” against the companies.

In November 2014, the court transferred the property owners’ claims to the Mass Litigation Panel of West Virginia as their case was assigned to the “Harrison County Cherry Camp Trial Group.” Antero and Hall filed separate motions for summary judgment following discovery, and the property owners later withdrew their negligence claims, recognizing that there was no damage to property; however, their claims for nuisance remained pending.

On October 11, 2016, the Panel granted summary judgment in favor of Antero and Hall after it found that there were no disputed issues of material fact and that Antero and Hall had the implied rights to use the property owners’ surface estates to develop the mineral estate underlying them. The Panel “declined to apply principles of nuisance law, and instead ruled on the summary judgment motions based upon Antero’s contractual and property rights” and came to the conclusion that “the activities complained of were reasonably necessary to the production of the mineral estate and did not exceed the fairly necessary use thereof or invade the rights of the surface owner[.]”

The property owners filed a motion to alter or amend the Panel judgment pursuant to W. Va. R. Civ. P. 59(e), but the Panel denied such request on January 11, 2017. Consequently, the property owners filed an appeal with the Supreme Court of Appeals of West Virginia.

According to the property owners, “a mineral owner does not have the right to extract natural gas using methods that were uncontemplated when the operative severance deeds were executed, where those uncontemplated methods are not necessary to the extraction of the minerals and substantially burden the surface.” In this regard, the property owners relied on a variety of cases where the court did not allow certain uses of surface estates utilizing advanced technology where such advances could not have been reasonably anticipated by the parties at the time the severance deeds were executed. Antero and Hall countered that the severance deeds give Antero the implied easement to use the property owners’ surface lands “to the extent reasonable and necessary to develop its mineral household.”

The Supreme Court did not accept the property owners’ interpretation of prior case law and determined that the property owners did not correctly understand the significance of these cases. The court noted that “in this line of cases, [this] Court considered various deeds that did not expressly grant the mineral owner a right to destroy the surface, and rejected methods of removing minerals that caused such destruction when they did not exist at the time of the execution of the deed and could not possibly have been within the contemplation of the parties to the severance deed.”

Interestingly, the court noted that the property owners in the case at hand likely would have anticipated a burden on the surface estate through vertical drilling, which was considered the traditional drilling practice at the time the deeds were executed. Through the use of the advanced technology – horizontal drilling – the potential burden on the surface estate actually can be minimized. The court recognized that horizontal drilling is the optimal means for developing the Marcellus shale “because it requires fewer well than vertical drilling and thereby generally minimizes the disruption to nearby surface estates.” Thus, the court agreed with the Panel’s observation that “the burden on the surface estates created by horizontal drilling that is taking place .42 mile to 1 mile away from the subject property is not materially different from the burden that would be endured from the placement of traditional vertical wells directly on Property Owners’ land, along with the construction of an associated well pad, lease road, and pipeline for each well, which is within Antero’s rights.”

Furthermore, the court explained that, in the cases relied upon by the property owners, the use of the surface by the mineral owner resulted in such destruction and loss of the surface that was entirely incompatible with any use the surface owner might have expected as a future surface use. The court also pointed out, in the case at hand, the property owners did not establish any damage or destruction to their surface estates. Consequently, the Supreme Court found that the property owners failed to prove any burdens on their surface estates of having to deal with Antero’s off-site horizontal drilling activities.

The Supreme Court then proceeded to address a two-prong test laid out in Buffalo Mining Co. v. Martin, 165 W. Va. 10, 267 S.E.2d 721 (1980), to determine the balance of rights between the surface owner and mineral owner in relation to implied uses of the surface estate. First, the proposed activity must be reasonably necessary, and second, it must not cause a substantial burden upon the surface owner.  The court held that the property owners did not satisfy the first prong because the property owners did not offer adequate evidence “to establish … what is reasonable and necessary to develop the underlying minerals, other than self-serving assertions that [Antero’s] activities … are excessive.” As to the second prong regarding the burden upon the surface owner, the court stated that “[t]he concept of what amounts to a substantial burden to a surface owner does not lend itself to a precise definition. Instead it requires an examination of uses of the surface that have either been reserved by a severance deed or otherwise implied from the circumstances presented, and further examination of how that use of the surface is impacted by the mineral owner.” In this case, the court found that the property owners did not demonstrate a substantial burden to their surface estates, mainly due to the fact that the horizontal wells were not located on their properties and caused no damages to their surface estates.

Consequently, on June 10, 2019, the West Virginia Supreme Court of Appeals affirmed the Panel’s prior decision granting summary judgment in favor of Antero and Hall.


Additional Resources:

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

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