Difficulties with Sharing: A Proposal to Define the Voluntary Unit and Protect the Rights of Surface Co-Owners and Mineral Servitude Holders in Louisiana

• Author: W. Drew Burnham
• Position: J.D./D.C.L., 2015, Louisiana State University, Paul M. Hebert Law Center.
• Pages: 475-509

Difficulties with Sharing: A Proposal to Define the

Voluntary Unit and Protect the Rights of Surface Co-

Owners and Mineral Servitude Holders in Louisiana

INTRODUCTION

“It’s always more fun to share with everyone.”

1

This sentiment,

although nice in a children’s song, does not always hold true in the

real world. Because co-ownership is frequently inconvenient,

Louisiana avoids friction between co-owners by allowing them to

divide the co-owned thing into separately owned portions or sell

the thing and divide the proceeds.

2

However, these options to

partition the co-owned thing may not always be ideal or available,

such as when the co-owned thing is burdened by a separately

owned right that cannot be partitioned.

3

Accordingly, difficulties

with sharing may leave squabbling co-owners without a suitable

remedy and potentially clueless as to their rights as co-owners.

Consider the following co-ownership scenario in a mineral law

context.

On January 1, 1997, Farmer Joe created a mineral servitude by

selling the mineral rights on his 1,000-acre tract of land in DeSoto

Parish to Big City Bob.

4

This mineral servitude vests Bob with the

right to explore for minerals on the burdened land.

5

Bob’s

servitude will expire, and his mineral rights will revert back to Joe,

if Bob does not use the servitude within ten years of its creation.

6

Copyright 2014, by W. DREW BURNHAM.

1. JACK JOHNSON, The Sharing Song, on SING-A-LONGS AND LULLABIES

FOR THE FILM CURIOUS GEORGE (Brushfire Records 2006).

2. See LA. CIV. CODE art. 807 (2012).

3. See, e.g., LA. REV. STAT. ANN. § 31:65 (2000); LA. CIV. CODE art. 747

(2012) (discussing servitudes in general); see infra Part I.C.

4. See LA. REV. STAT. ANN. § 31:16 (2000); see also Frost-Johnson

Lumber Co. v. Salling’s Heirs, 91 So. 207, 245 (La. 1922).

5. See LA. REV. STAT. ANN. § 31:21 (2000) (“A mineral servitude is the

right of enjoyment of land belonging to another for the purpose of exploring for

and producing minerals and reducing them to possession and ownership.”).

6. See id. § 31:27(1) (listing “prescription resulting from nonuse for ten

years” as a method of extinguishing a mineral servitude); see also id. § 31:29

(“The prescription of nonuse running against a mineral servitude is interrupted

by good faith operations for the discovery and production of minerals.”); id. §

31:29 cmt. (noting that dry holes may constitute good faith operations); id. §

31:44 (stating that the adoption of operations by another may interrupt

prescription); id. § 31:33 (defining unit operations that can affect prescription on

the servitude); id. § 31:36 (stating that production on the tract will interrupt

prescription on the servitude); id. § 31:54 (declaring that a proper

acknowledgment will interrupt prescription on a servitude).

476 LOUISIANA LAW REVIEW [Vol. 75

Farmer Joe passes away in 1999, leaving his ten children in

equal co-ownership of the tract of land burdened by Bob’s

servitude.

7

One of those children, Mike, purchases all but one of

his siblings’ interests in the property, leaving his sister, Kate, as a

co-owner of 10% of the property.

8

In 2006, an oil and gas

prospector, Black Gold Drilling, enters the picture. Wanting to

exploit the up-and-coming Haynesville Shale in northwest

Louisiana quickly and cheaply, Black Gold seeks to form a

voluntary unit that would include Mike’s interests. Such a unit is a

contractual agreement by which a group of mineral rights owners,

land owners, and other parties agree to participate in the costs and

revenue of mineral exploration in a defined area.

9

Bob, the mineral servitude owner, and Mike, the 90% co-owner

of the surface, sign onto the voluntary unit. Bob sees his

involvement in the voluntary unit as an opportunity to share in

revenue, interrupt the running of prescription against his servitude,

and avoid the expense of drilling individually on his servitude

tract. Mike sees the voluntary unitization as an opportunity to

receive some compensation for his consent.

10

If Mike did not

consent, Bob may individually drill on his servitude, in which case

Mike would not recover any compensation and would go through

the inconvenience of having a well drilled on the surface of his

property. On the other hand, Kate, the 10% owner of the surface,

thinks that prescription will fully accrue against Bob’s servitude

before any drilling occurs that would interrupt prescription; thus,

Kate refuses to consent to the voluntary unit, expecting that the

mineral rights will revert back to her surface ownership.

11

In December 2006, Black Gold, as the operator of the

voluntary unit, drills a producing well on land outside the surface

7. See LA. CIV. CODE art. 880 (2012).

8. See id.

9. Patrick S. Ottinger, Conventional Unitization in Louisiana, 49 ANN.

INST. ON MIN. L. 21, 23 (2002) [hereinafter Ottinger, Conventional Unitization]

(“Unitization is the allocation of designated acreage to a well for purposes of

development, cost-sharing and allocation of production.”). As opposed to

compulsory unitization, conventional unitization is a contractual pooling of

ownership rights in a defined area for purposes of production in that area. Id. at

42. A unit agreement is a contract agreed to between the consenting parties to be

affected by the unitization and the agreement forms a voluntary unit. Id. at 42–

45.

10. Id.

11. See LA. REV. STAT. ANN. § 31:65 (2000). As a co-owner, Kate may

partition the land that she co-owns with Mike, but such a partition will not affect

the servitude burdening her property. The servitude will remain intact. See infra

Part I.C.

2014] COMMENT 477

owned by Kate and Mike but within the unit area.

12

As a result of

such drilling, prescription running on a mineral right in the unit

will generally be interrupted.

13

The prescription that accrued

against Bob’s servitude since 1997 appears to be interrupted by

Black Gold’s drilling.

14

However, on January 2, 2007, Kate claims

that Bob’s servitude has expired, and that the mineral rights have

reverted back to the surface owners. Kate asserts that unit

production did not interrupt prescription on Bob’s mineral

servitude because her consent to the voluntary unit agreement was

necessary for the unit to have affected her interests.

15

Neither the Mineral Code nor Louisiana jurisprudence furnishes

a definitive answer to the question of whether prescription is

interrupted and, if so, to what extent prescription is interrupted on

the non-drill site tract by a voluntary unit to which the surface co-

owner did not consent. This gap poses significant problems for oil

and gas operators, surface co-owners, and owners of mineral rights.

Uncertainty surrounding the formation and effect of voluntary units

makes this relatively cheap and quick method of unitization too

unpredictable for widespread use by operators, causing them to opt

for the more expensive and time-consuming process of seeking a

compulsory unitization.

16

Misunderstandings of how non-consenting

surface co-owners are affected by voluntary unitizations may

produce flaws in chains of title regarding mineral rights and leases.

12. Production from a unit well on a tract burdened by a servitude will

cause prescription accruing against the servitude to be interrupted. See LA. REV.

STAT. ANN. § 31:37 (2000). If the well is off-tract, the prescription will only

occur for that portion of the burdened land that is included in the unit. Id. The

same rule exists for mineral royalties. Id. § 31:89. For exceptions to this general

rule, see discussion infra Part I.D.

13. See LA. REV. STAT. ANN. § 31:37 (2000); id. § 31:89.

14. See id. § 31:29.

15. See Alexander v. Holt, 116 So. 2d 532, 536–37 (La. Ct. App. 1959)

(stating that inclusion of servitude acreage in a conventional unitization by the

servitude owners was not effective to interrupt prescription without landowner

consent because the servitude owner was powerless to extend the life of the

servitude without the clear consent of the landowner burdened by the servitude);

see also John M. McCollam, A Primer for the Practice of Mineral Law Under

the New Louisiana Mineral Code, 50 TUL. L. REV. 732, 775 (1976).

16. Ottinger, Conventional Unitization, supra note 9, at 25–26. Compulsory

unitization is accomplished through applications to, hearings with, and a

favorable order from the Louisiana Office of Conservation. Even if “fast

tracked” to avoid imminent lease expirations and mineral right prescription, this

process takes no less than 70 days. Id. at 25 n.23. Significant costs are associated

with preparing and filing applications for compulsory unit orders with the Office

of Conservation, costs that may be substantially less if a conventional unit route

is selected. Id. at 26.