CHAPTER 3 CHANGING CONCEPTS IN THE DOMINANCE OF THE MINERAL ESTATE

• Jurisdiction: United States

Mineral Development and Land Use
(May 1995)
CHAPTER 3
CHANGING CONCEPTS IN THE DOMINANCE OF THE MINERAL ESTATE
John F. Welborn
Welborn Sullivan Meck & Tooley, P.C.
Denver, Colorado

I. Introduction

The conflict between surface and mineral development of land continues to rage in this country, especially in the West and in those parts of the West where many lands have prime mineral value as well as value for intense surface use. At the heart of this conflict is the concept of mineral dominance and the legal issues which that concept has spawned. This topic has been fertile ground for articles and papers for decades, and a wealth of legal analysis has already been published.¹ This conflict is not going away, however, and the writings on the topic demonstrate an increasing sense of urgency. This Special Institute is a sign of the times and an indication that there are no easy solutions to the problems which make this conflict so intense. This paper is about the various legislative and judicial approaches to finding those solutions. It is also about the role of cooperation, or more accurately "accommodation," between surface and mineral owners as this conflict evolves into a basic land use struggle.

The issues seem much more complicated now than they were in 1962 when Lowell Davis observed that many mineral lessees were paying the surface owner, even though they did not have to do so, in order "to preserve amicable relations with surface owners and

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users and to avoid multiplicity of actions."² He lamented that this custom "has unfortunately led to a wide-spread belief that a lessee must, as a matter of law, pay for any and all damages caused the surface of the land."³ Any landman who works in Colorado can attest that this belief is probably now more widespread than Mr. Davis could imagine.⁴

Even in 1955, however, Harold Healey was advocating cooperation between surface and mineral owners citing the code of the Rocky Mountain Oil and Gas Association as an example of recognition of the value of cooperation and good neighborliness.⁵ John Lacey referenced a similar code in his 1976 article,⁶ and the 1993 Code of Conduct of the Colorado Oil and Gas Association (COGA) moves from cooperation to accommodation by providing in part, that COGA members "[r]ecognize the unique character of each site and that our operations may need to be managed to accommodate competing land uses."

Maintaining a spirit of cooperation can be difficult, however, especially in the face of increasing competition for the surface of lands in highly mineralized areas. We could once take some solace from the fact that the Rocky Mountain Region is "mineral rich but sparsely settled;"⁷ the "sparsely settled" part, however, is increasingly less true today, and Paul Hultin, the author of that phrase, was perceptive in predicting trouble as surface uses intensify in mineralized areas.⁸

Prior to 1975, there were no comprehensive state statutes dealing with surface damages from mineral use; since then, however, the mineral industry has experienced a legislative and judicial redefinition of its traditional prerogative of going upon the surface of lands to explore for and develop the minerals. There are now at least eight states with comprehensive surface damage legislation.⁹ Other states have moved toward a judicial

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doctrine of requiring an accommodation of certain needs of the surface owner,¹⁰ and in Colorado, as can be seen from several papers at this Institute, what is occurring is closer to a revolution than a redefinition as surface owners, often together with local government, move through accommodation to what some might call surface dominance.

II. A Tradition of Mineral Dominance

U.S. common law and federal statutory law have long recognized the concept of a dominant mineral estate as good public policy. Though there have been recent changes,¹¹ the concept of the dominance of the mineral estate was originally built into the federal surface entry acts. Both the Stock Raising Homestead Act¹² and the Agricultural Entry Act of 1914,¹³ for instance, reserve the mineral estate to the U.S. and provide that the mineral locator/lessee owns the right of entry (thus precluding the surface owner from being entitled to injunctive relief to keep the mineral owner off), and both grant the mineral owner the right to occupy so much of the surface as may be required for all purposes reasonably incident to mining and removal of minerals. The U.S. Supreme Court confirmed public policy support for the concept of mineral dominance when it concluded that the Acts of 1914 and 1920 should be read together to divide oil and gas lands into surface and mineral estates, and to make the surface estate the servient estate, "which would be suggested by their physical relation and relative values."¹⁴ Thus, at least until recently, the federal mineral lessee's/locator's right of entry was beyond doubt, and its liability was limited to damaged agricultural improvements or crops, in the absence of negligence or some greater breach of duty.¹⁵

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Similarly, with respect to fee lands (private mineral and surface), U.S. courts have long recognized that a dominant mineral estate is good public policy.¹⁶ After much litigation in mineral producing states, a set of rules has evolved which can be summarized as follows:¹⁷

• The mineral owner owns the right to use so much of the surface as is reasonably necessary for exploration and development of the minerals.

• The mineral owner is liable for damage to the surface only if there is excessive surface use, negligent surface use or a violation of express contractual obligation, i.e., a lease provision.

• The mineral owner may be responsible for the creation of a nuisance, depending upon the definition of nuisance in the particular state where the lands are located.

• The surface owner may continue to use surface, but only to the extent that such use does not interfere with the legitimate and proper use of the surface by the mineral lessee or owner.

These rules remain a viable starting point in most states; however, legislative, judicial and administrative inroads on the standard of mineral dominance are occurring which make the mineral owner's job more one of diplomacy than one of cooperation and good communication.

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III. Changes In State Common Law

A. Texas, Utah and the Accommodation Doctrine

For many years, the common law of Texas has applied the so-called accommodation doctrine to surface/mineral conflicts.¹⁸ This doctrine is a judicial, non-statutory concept of requiring the mineral owner to act with prudence and to have due regard for the interests of the surface owner in exercising its right to use the surface to produce the minerals. The concept began in Texas with the Getty Oil case in which the Supreme Court of Texas recognized mineral dominance, but imposed on the mineral owner the obligation to accommodate use of the surface by the surface owner by pursuing alternative means of mineral recovery, if such means exist and if they are reasonable and practicable under the circumstances.¹⁹ If the obligation to pursue an alternate means of mineral recovery is not absolute, however; where there is only one means of surface use by which to produce the minerals, then the mineral owner may pursue that use regardless of surface damage.²⁰ The burden of proof is on the surface owner to prove that the mineral owner has reasonable alternatives and that any other use of the surface by the surface owner would be impracticable and unreasonable.²¹

The accommodation doctrine is also the law in Utah and has been since 1976 when the Supreme Court of Utah in the Flying Diamond case required the mineral owner to use an alternative means of access to the mineral site because the two basic requirements of the accommodation doctrine were met.²² First, the alternative access was reasonable and practical and, second, not to use the alternative would have rendered the plaintiff's surface unusable for agricultural purposes. The court held that "wherever there exist separate ownerships of interests in the same land, each should have the right to the use and enjoyment of his interest in the property to the highest degree possible not inconsistent with the rights of other."²³ This does not mean the mineral owner must use any possible

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alternative; it means only that the mineral owner is required to do that which is reasonable and practical "under the circumstances."²⁴

This accommodation doctrine is also the law in Arkansas²⁵ and New Mexico.²⁶ Wyoming has come close, but has not fully endorsed the doctrine,²⁷ and it was becoming the law in North Dakota before the adoption of its Surface Damage Act.²⁸

B. State Surface Damage Statutes

Since 1975, North Dakota, South Dakota, Montana, Kentucky, Tennessee, Illinois, West Virginia and Oklahoma have adopted surface damage acts in one form or another.²⁹ Texas has adopted a related statute but it is limited to mineral exploration and development in areas where the surface is being subdivided for residential development.³⁰

1. North Dakota Model

The North Dakota statute represented a change from the common law/public policy of favoring and facilitating mineral activity and became the model for statutes in Montana and South Dakota. Indeed, the North Dakota legislature found that oil and gas exploration and development "interferes with the use, agricultural or otherwise, of the surface" and that exercise of the policy "is necessary" to protect the "economic well-being" of the surface use.³¹

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This surface "economic well being" is protected by requiring the mineral owner to pay for items he probably thought he already owned at common law:

• The statute runs to the benefit of any surface owner — even one who has executed the document which gave the mineral owner his rights.³²

• The statute enlarges the traditional...