Property rights & surface protection

property rights

Land use laws

Citizens in gas-rich Western states have become increasingly concerned with the need for a cooperative process to exist between mineral estate owners and surface estate owners, especially as domestic energy production and financial speculation over natural gas reserves intensify. Evolving homeowner protection legislation embodies two central components:

  1. entry requirements for operators
  2. addressing surface damage.

This process, bolstered by various state regulations on land use, would aid homeowners in managing the risks associated with mineral development on their property. Among these concerns are the depletion or degradation of water sources above and underground, grazing areas, and real estate value. Legislation pertains to properties where the ownership is split: one party owns rights to the surface and one party owns rights to the minerals (read the Mineral Rights post for more about “split estates”). Prior to current homeowner protection laws instigated at the federal and state levels, the Mineral Leasing Act of 1920 reigned supreme: oil and gas exploration, access, and drilling could not be restricted by surface owners. Accessing valuable mineral deposits was an economic and security imperative for the U.S government.

Federal surface protection laws

In 2007, Congress passed the Onshore Order #1, which is fairly minimalistic but does require “good faith efforts” on the part of oil & gas companies to:

  1. reach a surface access agreement with the homeowner and to notify the BLM (Bureau of Land Management) about whether or not an agreement is reached,
  2. notify the homeowner about their intent to drill prior to entry, and
  3. provide the homeowner with a document detailing the surface use and operations plan (called SUFO)

before permission to drill is granted. But the Onshore Order only applies to drilling operations on federal land and states have long had their own laws regarding homeowner protection.

Accommodation Doctrine

Mineral rights have perpetually held sway over surface rights. But in the 1970s, a series of conflicts between the agricultural sector and the oil & gas industry prompted state-level discussions that would require some mineral owners to use reasonable alternative mining methods – regardless of cost – if they were suggested by the surface owner. Where (for example) pipelines were obstructing farming machinery from plowing at acceptable levels, state courts moved to favor agricultural activities alongside mining.  A product first of Texas legal doctrine in 1971 (the particular case dubbed Getty Oil vs. Jones), “accommodation” has been adopted in multiple states to establish some protections for surface rights owners. The doctrine simply states that:

the mineral owner must accommodate the surface owner’s existing use of the land if the mineral owner has reasonable alternatives…But the accommodation doctrine allows the mineral owner to move forward with drilling operations on the empty land even if the action impedes the surface owner’s plan for future development. The accommodation doctrine only protects existing uses. (Houston Business Journal)

Prior to this doctrine, surface owners would have to meet a rather high burden of proving that a mineral developer’s activity was excessive, unreasonable, and a major hindrance to existing surface uses (called the “reasonably necessary” doctrine). The Accommodation Doctrine was primarily a judicial phenomenon, decided upon in a case-by-case basis in courts and subject to wide interpretation. Nonetheless, it did provide the first protections framework for surface owners whose land uses predating oil & gas development came into conflict with subsurface mineral uses.

Surface Damage Acts

oil pipeline SDAs came about to address any damages caused to property by the mineral owner, but also contain laws on oil & gas entry negotiation and mandate that surface owners are notified of mineral development plans. Incorporated as recently as the late 1980s or early 1990s, Surface Damage Acts have been adopted in 10 states: North Dakota, Oklahoma, Montana, South Dakota, West Virginia, Tennessee, Illinois, Indiana, Kentucky, Wyoming, Colorado, and New Mexico. SDAs often parallel existing accommodation doctrines and federal procedures required of companies before they receive a permit to carry out mineral extraction. Wyoming’s “Surface Owner’s Accommodation Act” of 2004 is a kind of hybrid between the two:

The rationale for incorporating the federal procedures for APD was that oil and gas operators were already familiar with those procedures and any state requirements should be as similar as possible to avoid unnecessary complications. (LegisWeb)

SDAs vary little between each state and generally include: compensation for damages caused by the mineral owner, providing a channel for communication and conflict resolution for mineral and surface owners, and the need for entry negotiations (which are usually not required until after drilling has begun). In some states, including Texas, surface owners can also secure a “surface waiver” from a mineral owner, whereby the mineral owner waives their rights to use all or a portion of the property’s surface for mineral development. Mineral estate owners have capitalized on this and have extracted compensation in return for the waiver.

Surface protection & fracking

fracking residential area The imbalance of power between the mineral estate owner and the surface estate owner still exists – for better or for worse. To correct for this imbalance and allow surface owners to address grievances, all the while still prioritizing regional and national energy development concerns, recent legislation has been passed at the state and federal level. The potential risks to property, health, and the environment associated with the increase in hydraulic fracturing may necessarily bring more homeowners or surface rights owners into lawsuits and conflicts with mineral rights owners, thus rendering an update of surface rights protections inevitable. A federal review of current policies regarding energy resource development and state-based accommodation doctrines was underway in the Energy Policy Act of 2005, though the government seems intent to cede more and more regulatory ground to states. Concerned homeowners should be sure to follow local legislation, as it will often include more safeties and provisions than the baseline federal protections.

Other references:

Watson, Rebecca W. (2008). “State surface owner protection laws: tales of preemption, federalism, and a changing west,” chapter 13A in Surface Use for Mineral Development in the New West.

Wenzel, Michelle A. (1993). “The model surface use and mineral development accommodation act: easy easements for mining interests,” The American University Law Review, 42: 607-681.

 

 

1 comment… add one

  • Ingrid Adams January 29, 2014, 5:17 pm

    I inherited 10 plus acres near Fowlerton in Texas and want to know more about Mineral Rights since they are drilling for Oil since last year.

    Reply

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