Accommodation Between Surface Development and Oil and Gas Drilling
| Publication year | 1995 |
| Pages | 1323 |
1995, June, Pg. 1323. Accommodation Between Surface Development and Oil and Gas Drilling
Much has been written concerning the rights of mineral owners and lessees to use the surface to explore for and produce oil and gas.(fn1) As long as oil and gas drilling occurred on agricultural surface, the primary question has been the amount payable to surface owners for damages caused by oil and gas development. The circumstances in which such payments are required in Colorado were defined to some extent by the seminal case of Frankfort Oil Company v. Abrams,(fn2) which continues to control.
A recent increase in oil and gas drilling in Colorado, together with surface development spawned by rapid population growth, has given rise to two new and more difficult questions. The new questions involve the extent to which the mineral owner's surface use must accommodate development by the surface owner, and the surface owner's development must accommodate surface use by the mineral owner. This article explores these two questions.
Before exploring the reciprocal obligations of surface and mineral owners, it is important to understand the separate rights that each holds in the proverbial "bundle of sticks."(fn3) A fee simple owner holds the greatest estate one can have in real property.(fn4) It owns the surface and, subject to the flight of aircraft, the space above the surface.(fn5) It also owns the underlying minerals and the right to explore for and produce them.(fn6)
The fee owner may create a separate mineral estate by granting to another, or reserving to itself, all or certain of the minerals.(fn7) Whether created by grant or reservation, the mineral estate impliedly carries with it a right to use "so much of the surface as may be reasonably necessary for operation."(fn8) This surface right of the mineral owner has been characterized as an easement or a "right of access."(fn9) Other than ownership of the minerals and rights of surface access for their extraction, the fee owner retains all other rights in the property.(fn10)
The mineral or fee simple owner also may retain ownership of the minerals but lease to another the exclusive right to explore for and produce them. In that case, the oil and gas lessee will acquire the rights of surface access expressly set forth in or reasonably implied by the lease. Unless distinction is required, this article refers to both mineral owners and lessees as "mineral owners."
Because rights of surface access for the mineral owner are in the nature of an easement, they are considered "dominant," and the rights of the surface owner are considered "servient." The rights of surface access of the mineral owner will actually be superior to those of the surface owner in the event of irreconcilable conflict.(fn11) Absent unreasonable or negligent use, requirements of a lease or agreement, or statutory provision, no payment is due the surface owner for damages resulting from the mineral owner's exercise of its right of access.(fn12)
Although its easement for surface access is considered to be dominant in Colorado, the mineral owner must take into consideration the surface owner's uses of the surface. This consideration is (1) usually required by the terms of the lease, (2) mandated by regulation and (3) inherent in the common law relationship between the parties.(fn13)
Oil and gas leases typically provide at least some protection for surface owners. Leases must be carefully scrutinized as a first step in determining the surface rights of the parties. A common form requires that wells be set back from the house and barn "now on" the property and that flow lines be buried below plow depth upon request.(fn14) Leases of the Colorado State Land Board may be more stringent in requiring setbacks from any buildings or "improvements,"(fn15) and notification of surface owners prior to entry. Where the surface owner is also the lessor, it is not uncommon for leases to contain negotiated riders setting forth unique limitations on surface access and use.(fn16)
In recent years, the Colorado Oil and Gas Conservation Commission ("Commission") has enacted rules to protect the interests of surface owners. Where the surface owner is not a party to the oil and gas lease, a bond to protect it from unreasonable crop losses or land damages must be posted.(fn17) Setbacks for wells and tank batteries from occupied structures, roads and surface property lines have been established.(fn18) Surface owners may apply to the Commission for designation of "high density areas" in which increased setbacks will be required.(fn19) Field-specific rules for portions of the Denver-Julesburg Basin require good faith negotiation with surface owners and the giving of notice prior to entry.(fn20)
Through their zoning powers, many local governments in Colorado also regulate surface use by oil and gas developers. The form of these ordinances and resolutions varies widely between jurisdictions and must be carefully scrutinized. Reliance on local regulations to force accommodation by mineral owners is not without risk because local regulations that conflict in operation with Commission rules are preempted and invalid.(fn21)
Although leases and regulations require setbacks, notice and even consultation, they do not otherwise require "accommodation" of surface interests. Colorado courts have not been called on to determine expressly whether, and the extent to which, the very relationship between the mineral and surface estates requires such accommodation.(fn22) They have only held that the amount of land used,(fn23) and perhaps the manner of use, must be "reasonable."(fn24)
Even though Colorado courts have not expressly embraced the concept of accommodation between surface and mineral owners, it would appear to be an inherent part of their legal relationship. In Chartiers Block Coal Co. v. Mellon, one of the earliest surface rights cases, a Pennsylvania court held that the mineral owner's reasonable right of access to the surface must be "exercised with due regard to the owners of the surface."(fn25) Another early surface damage case went so far as to impose a duty on the mineral owner to use the surface "in the manner least injurious to his grantor ... although it was not the most convenient."(fn26)
These cases suggest that the concept of "due regard" for the interests of the surface owner has long been a part of U.S. jurisprudence. An examination of modern surface rights cases reveals that this accommodation principle is adopted far more often than it is rejected.(fn27)
Nonetheless, the clearest articulations of the principle are often viewed as a curiosity and characterized as a new and separate "doctrine" of accommodation, due regard or alternative means.(fn28) States are often grouped as to whether or not they have adopted the doctrine.(fn29) However, if accommodation is an inherent part of surface-mineral owner relationship, the relevant inquiry is not whether a state has or has not adopted the doctrine, but the extent to which its courts will require accommodation under the circumstances.
To continue reading
Request your trial