CHAPTER 6 LOCAL REGULATION OF OIL AND GAS OPERATIONS: THE TEXAS EXPERIENCE
| Jurisdiction | United States |
(Nov 2004)
LOCAL REGULATION OF OIL AND GAS OPERATIONS: THE TEXAS EXPERIENCE
Hughes Luce LLP
Dallas, Texas
Dorothy G. Palumbo
Senior Assistant City Attorney
City of Denton
Sarah Fullenwider
Assistant City Attorney
City of Fort Worth
Julie Smith
Executive Director, Development & Environmental Services
Town of Flower Mound
Martin Garza is a senior associate at Hughes Luce, LLP and a member of the firm's Real Estate and Land Use groups. His land use practice assists clients addressing property rights issues, platting and zoning matters and municipal regulation of gas well development. Martin received his law degree and MBA from the University of Texas at Austin in 1996 and his Bachelor of Arts from Harvard College in 1987.
Dorothy Palumbo serves as the Senior Assistant City Attorney and Legislative Coordinator for the City of Denton. Prior to that she was an Assistant General Counsel for the Texas Municipal League. She has served as Assistant City Attorney for the Cities of Garland, Midland and Abilene. She received her law degree from South Texas College of Law in Houston, her Master's degree in Education from Arizona State University, and her Bachelor of Education degree from the University of Oklahoma. She has presented papers at educational seminars on issues of land use, employment, code enforcement and liability. At TML, she was a program coordinator and speaker for the Texas Municipal Leadership Institute program to train newly elected city officials and conducted numerous city official training sessions on all areas of municipal law. Ms. Palumbo is also responsible for the City of Denton's Legislative Strategy. She has represented cities in federal and state court and has represented various city boards and commissions in administrative matters. Her areas of specialty include Land Use, Legislation, Municipal Utility Law, Civil Rights, Tort Claims and Employment.
Sarah Fullenwider serves as an Assistant City Attorney for the City of Fort Worth in the areas of zoning and land use. She received her law degree in 1989 from Wake Forest University School of Law and is admitted to practice law in North Caroline and Texas.
Julie Smith left Texas in 1980 to chance life beyond the borders, graduating from Ohio Wesleyan University in 1984 with a dual B.A. degree in Political Science & Economic Philosophy. Despite parental admonitions that neither major was marketable, Julie managed to find employment in her home state at the General Land Office in the environmental resources division. Seeking further environmental expertise and a student's schedule, Ms. Smith left the Land Office to pursue environmental law. Raising hopes of long-term self-sufficiency, her parents were thrilled when she received her J.D. in 1989 from the University of Maryland Law School. Julie served four years as Assistant Counsel for Pennsylvania in litigation cases involving coal mining and water protection. Though living at the office has its moments, motherhood soon forced a change in Julie's professional course. Seeking both a reliable babysitter (Grandma) and more reasonable hours, in 1994 Julie returned to Texas and her hometown to work as the Environmental Compliance Manager for the City of Denton. Her responsibilities included managing and coordinating citywide environmental compliance, programs, and procedures. Julie managed the development of the "Greenbelt," a ten-mile hike-bike-equestrian trail along the Elm Fork River corridor, between lakes Ray Roberts and Lewisville, and also the Clear Creek Natural Heritage Center, a 2,600-acre restoration project, including the construction of wetlands and reforestation of bottomland hardwood habitat. Both projects involved multiple partners including the City of Dallas, the Texas Parks and Wildlife Department, and the Corps of Engineers, when Julie is not driving her son to soccer games, soccer tournaments, soccer indoor practice, soccer outdoor practice, soccer running camps, soccer skills sessions, or soccer hot dog sales, she works as the Executive Director of Development and Environmental Services for the Town of Flower Mound. Her Department includes Planning Services, Building Inspections, Environmental Health Services/Code Enforcement, Economic Development, and Environmental Resources. The Department manages all aspects of development in the Town. As the Department's mission statement indicates, the "department, recognizing the connection between the community's built and natural environment and the health of the community's citizens, provides efficient, professional assistance to ensure responsible development practices that shall respect the natural landscape -- prairies, Cross Timbers, bottomland hardwoods, floodplains -- and all life that it supports." Not quite willing to entirely give up the academic lifestyle, Julie teaches graduate level Environmental Law and Environmental Policy classes as an Adjunct Professor in the Department of Geography at the University of North Texas.
Introduction
This paper discussion focuses more on the practicalities and problems in the interaction between oil and gas developers and municipal regulators more than it does the legal issues. However, some of the legal issues are presented for a better understanding of the "bargaining position" of the parties and the legislative and enforcement powers of the municipality. In Texas the mineral estate is dominant over the surface estate. 1 The grant of the mineral lease gives the mineral lessee the implied right to use as much of the surface as is reasonably necessary for the exploration and development of the minerals. The surface owner's consent is not required for this right to be exercised. The mineral lessee is liable for surface damages only in limited situations.
I. Mineral Agreement Grant Ownership Rights
Minerals in their natural state are classified as real property under Texas law. 2 Minerals, which prior to severance have been produced, are personal property. 3 Generally, minerals, which have been produced but then reinjected into the ground for storage purposes are personal property. Leases are normally a defeasible fee conveyance, not a true lease.
Mineral leases are not mere rental agreements as the name implies. Instead, they are actually deeds granting limited ownership rights to mineral lessees for as long as the lease continues. Mineral lessees can use as much of the surface as is reasonably necessary for mineral exploration and production. This privilege springs from the executed mineral lease. Independent permission from the surface owner is not necessary. No responsibility exists for restoring the surface or for paying surface damages. Liability arises only when the lessee goes beyond what is reasonably necessary or negligently injures the surface.
II. What Constitutes Reasonable Use.
The surface easement of a mineral owner extends to whatever may be reasonably necessary to the proper enjoyment of the mineral estate. 4 Texas courts have ruled that the following activities constitute reasonable use:
• To conduct geophysical explorations on the surface, such as seismic tests. 5
• To select the best possible well sites. 6
• To enter and leave the well sites and other facilities on the lease property. 7
• To construct, maintain and use roads, bridges, canals and other passageways necessary to transport materials, personnel and equipment to and from the well sites and to other facilities. 8
• To use caliche found on the leased premises to construct roads and passageways.
• To install and use pipelines to transport hydrocarbons and waste products to points within or off the leased premises. 9
• To house employees working the leased premises. 10
• To install necessary storage tanks, slush pits, structures, machinery and other appliances. 11
• To use any water, either fresh or saline, found above or below the surface for use in drilling and waterflood operations. 12
III. Activities that do Not Constitute Negligence.
Texas courts have ruled that the following activities do not constitute negligence:
• Failing to restore the surface when operations cease. 13
• Failing to fence the area of operations to restrict grazing livestock from any harmful substances existing thereon.
• Completely draining underground aquifers serving as the sole source of the surface owner's domestic and agricultural water supply.
• Causing subsidence because of drilling or extraction methods stemming from known commercial processes.
The Texas Supreme Court has ruled, however, that subsidence caused by the negligent or excessive withdrawal of ground water will create liability. Several Texas appellate cases have found the mineral lessee negligent for polluting fresh water with salt water.
IV. Accommodation of the Estates Doctrine.
The precedent was rendered by the Texas Supreme Court in the 1971 decision of Getty Oil Co. v. Jones. The court recognized the reasonably necessary doctrine but held that use still may be unreasonable when a reasonable alternative exists. The surface owner is entitled to an accommodation of estates if the mineral lessee has a reasonable alternative that would serve the public policy of mineral development while also permitting use of the surface for productive agriculture.
V. Surface Use Agreements.
In Texas, the mineral lessee has the implied right to use the surface estate for exploring and producing minerals. Such mineral rights are superior to the right of the surface owner to the extent that they are reasonably necessary for the development of the mineral property. Surface owners may pursue the following where they clearly own no rights to the minerals:
• Contact the mineral lessee in an attempt to work out a land-use agreement.
• Contact the mineral owner and work out a land-use agreement or a comprehensive surface-use...
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