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Ag Law in the Field


Jul 27, 2017

Today, our topic is one of huge importance for Texas landowners and involves the rights of surface owners dealing with oil and gas production on their property.  Our guest is F. Parks Brown, an attorney with Uhl, Fitzsimons, Jewett & Burton, PLLC whose practice focuses on representing Texas land and mineral owners.  

Parks has a degree in Philosophy from Washington & Lee University and a law degree from St. Mary's University.  He spent several years working as a petroleum landman in New Mexico, giving him some great experience on both sides of the issues he works on today.  

We discuss the dominant estate rule in Texas, whereby if the mineral estate is dominant to the surface estate, granting the mineral owner or lessee the right to use as much of the surface estate as is reasonably necessary to produce oil and gas.  Importantly, this is an implied right, meaning that it applies to every property unless expressly deemed inapplicable by contract or agreement between the parties.  This right to use the surface can mean essentially anything to support oil and gas production including drilling pads, building roads, gathering lines, electric lines, processing facilities, disposal wells, frac ponds, etc.  Additionally, absent an agreement to do so, there is no obligation for that oil and gas company to make any payments for use or damages to the surface owner.

We also hit on the concept of joint ownership (called cotenancy) of mineral rights.  If a landowner owns a percentage of the mineral rights as a cotenant, any cotenant holding a portion of executive rights can enter into a lease.  If the other cotenants do not agree to lease their portion, the other cotenant can still execute a lease and the non-consenting cotenant essentially becomes a partner with the oil company and will receive a share in the profits made by that company.  It is important to consider the percentage of minerals that are owned to understand the amount of leverage one has to get certain terms in an oil and gas lease.  There can also be complex issues when it comes to the fiduciary-like duty owed by an executive owner to other non-participating royalty interest owners, which should be considered when reserving executive rights.

We then turn to legal protections for landowners.  First, we consider the Texas common law "accommodation doctrine" that sounds good in theory but has proven to be quite limited in scope.  To succeed, a landowner must show substantial interference with an existing surface use, a reasonable alternative way to produce for the oil and gas company on the same property, and that there is no reasonable alternative for the landowner to make the existing surface use.  Next, we look at statutory protections for surface owners in numerous states including OK, NM, ND, SD, MT, CO, WY, AK, KY, NC, TN, PA, and WV.  Unfortunately, we do not have this type of statute here in Texas.  Parks says that bills proposing this type of Act have been introduced since the 1970's, but he is hopeful that at some point, we will get this type of statutory protection in the Lone Star state.

Finally, Parks talks about some key terms for surface owners to consider seeking when negotiating an oil and gas lease or a surface use agreement, including a term stating that damages to property are not capped at the fair market value of the property, broad covering indemnification clauses, limiting surface impacts with a surface use corridors or entrance and exit requirements.  We also discuss times to get these agreements from the oil and gas company, including in the oil and gas lease, in a surface use agreement, or when the company needs something from the landowner.

Not surprisingly, when asked about a law he would like to see changed, Parks said he would like to see Texas adopt a surface damage statute to protect surface owners when oil and gas production occurs on their property.

As always, I wrap up the show asking Parks for a restaurant recommendation.  He stayed close to home in San Antonio and mentioned El Milagrito Cafe for barbacoa tacos.  He claims that one can still get a $6.00 lunch at this restaurant!

 

Contact information for Parks Brown

(Email) pbrown@ufjblaw.com

(Website) http://ufjblaw.com/f-parks-brown/ 

 

Links to information mentioned on the show

- Accommodation doctrine blog post

- Summary of the OK Surface Damage Act by Shannon Ferrell

- Presentation on surface rights by Joseph Fitzsimons