Face Challenges Confidently

165 Fasken Land and Minerals, Ltd. v. Occidental Permian Ltd.

Wednesday, September 2nd, 2015

Richard F. Brown

Trenolone v. Cook Exploration Company, 166 S.W.3d 495 (Tex. App.—Texarkana 2005, no writ), examined the rights of the surface owner and the mineral lessee in an abandoned pipeline. In 1961, Cities Service acquired a pipeline right-of-way easement under what eventually became Trenolone’s residential neighborhood. The easement provided:
This right-of-way agreement may be assigned by GRANTEE, its successors and assigns, in whole or in part, vesting in any other person, firm or corporation any or all rights granted hereby, including the ownership of any facilities in place, together with full rights of ingress and egress for the maintenance, repair, operation, replacement and removal thereof.
Trident N.G.L. Inc., successor-in-interest to Cities Service, removed portions of the pipeline, capped the rest, and released the right-of-way in 1993. Cook, as the lessee under oil and gas leases covering the same land, claimed the right to transport gas through the pipeline. Trenolone, the surface owner, disputed Cook’s right to use the pipeline, ownership of the easement and ownership of the pipeline.
Cook asserted that, as the mineral lessee and thus the owner of the dominant estate, absent an express limitation, it had the right to use so much of the land, both surface and subsurface, as was reasonably necessary to enjoy the terms of the lease. The court agreed, but noted that whether the lease’s grant of the dominant estate carries the right to use a particular easement is a fact question. The surface owner has the burden of proof, but the surface owner may show that the use of the surface by the lessee is not reasonably necessary. Without directly citing any facts in this case as to whether or not this particular use was reasonably necessary, the court held that fact questions existed and reversed and remanded the trial court’s summary judgment for Cook.
Presumably the court was focused on the issues relevant to whether Cook could use this particular right-of-way and pipeline, rather than the broad question of whether the lessee could use a pipeline to transport gas. That is, could Cook use this pipeline across this easement to transport gas? Whether personal property (a pipeline in this case) has become part of the realty is dependent on the intent of the parties placing the property in the soil, which is a fact question. However, the issue in this case was determined as a matter of law because of the undisputed evidence represented by the terms of the easement itself. Cities Service had the right to remove the pipeline, and therefore it could not become a permanent accession to the freehold. Moreover, Trident actually did remove part of it. Therefore, the pipeline was conclusively personalty.
Title to abandoned personal property vests in the first person lawfully reducing it to possession. In this case, Cook started using the pipeline to transport gas in 1991, Trident formally released the right-of-way in 1993, and Cook continued using it after 1993. There was evidence that Trident informally abandoned the pipeline before Cook started using in 1991. The court held that the rule (“finders keepers”) on abandoned property means that a person must reduce it to lawful possession after the property has been abandoned, which is a fact question in this case.
Trenolone claimed that by Trident’s release of the right-of-way “to the property owners” in 1993, Trident intended that ownership of the pipeline and the easement would be in the surface owners. The court held that the issue was not Trident’s intent, but the intent of the parties to the original pipeline assignment. Based on the assignment, the court held that the easement, when released, did revert to the surface owner, but the land was still subject to the mineral owner’s reasonable use. Moreover, ownership of the easement does not resolve ownership of the pipeline, which is personalty, and which does not necessarily follow ownership of the easement. Therefore, the court remanded for a determination of the timing of the abandonment, the beginning of Cook’s use, and the reasonableness of that usage.
The case illustrates the lessee’s risk in assuming that lessee can use whatever the lessee finds on the premises, and that the ownership of abandoned property and the right to use it can become complex, particularly when the surface owner is not a lessor.