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The Common Law Of Surface Use To Develop Oil And Gas

David E. Pierce, Oil & Gas Agreements: Surface Use in the 21st Century (May 2017)

There are many excellent articles discussing the mineral owner's right to use the surface of land to develop the underlying oil and gas.1 Other speakers at this special institute will be focusing on the law of various producing states. This article identifies the common law principles governing split estates and evaluates how the law is likely to evolve. It also injects the Restatement (Third) of Property: Servitudes into the analysis. This Restatementhas already had a major impact on a number of property-related activities and I predict it will have an equally significant impact on the development of oil and gas. Despite the odd acknowledgment that the Restatement may not apply in all oil and gas development cases,2 it remains available, along with a well-developed body of easement law, to guide courts as they grapple with split estate issues. II. Split Estates in Land The genius and curse of American property law is the ability to create many different types of interests in land; the ability to splinter the bundle of sticks. When various interests coalesce they are referred to as "estates" in land.3 This article focuses on three estates in land: the "surface" estate, the "mineral" estate, and the estate of "subjacent support." It also focuses on the law of easements as applied to the surface and mineral estates. The common law of surface use for oil and gas development is a collection of cases that either apply or ignore easement law. The propensity of courts to ignore established easement law is a product of "oil and gas law" attempting to respond to the inherent friction caused by the split estate. The "split estate" occurs whenever a mineral estate is owned separate from the balance of rights in a tract of land. For example, O, owning §30 in fee simple absolute, conveys the oil and gas in §30 to A. This conveyance vests the oil and gas mineral estate in A with O owning the balance of rights in §30. Although O is referred to as the "surface estate" owner, O does not own all rights in the surface because A has the right to make reasonable use of the surface to develop its mineral estate. As a "mineral estate" owner, A does not own all the minerals. O owns those minerals in §30 that are not encompassed by the grant of the oil and gas to A. O also retains the right to subjacent support of its surface estate. When the owner of the complete bundle of sticks enters into an oil and gas lease, it also creates a split estate. In some states, like Texas, a possessory (corporeal) mineral estate is conveyed to the oil and gas "lessee" along with nonpossessory (incorporeal) easement rights to use the surface to develop the mineral estate.4 In other states, such as Kansas, a collection of