Face Challenges Confidently

619 Coyote Lake Ranch, LLC v. City of Lubbock 498 S.W.3d 53 (Tex. 2016)

Monday, June 19th, 2017

Richard F. Brown

The following is not a legal opinion. You should consult your attorney if the case may be of significance to you.

Coyote Lake Ranch, LLC v. City of Lubbock 498 S.W.3d 53 (Tex. 2016) (Accommodation doctrine extended to severed groundwater estates) held that the accommodation doctrine applies to resolve conflicts between a severed groundwater estate and the surface estate that are not governed by the express terms of the parties’ agreement. Coyote Lake Ranch (“Ranch”) is about 90 miles northwest of the City of Lubbock (“City”). In 1953, the owner of the Ranch executed a deed reserving some water rights but conveying most of its groundwater rights to the City. The deed included extensive provisions pertaining to the City’s use and development of the groundwater, such as the following:

. . . with the full and exclusive rights of ingress and egress in, over, and on said lands, so that the Grantee of said water rights may at any time and location drill water wells and test wells on said lands for the purpose of investigating, exploring producing, and getting access to percolating and underground water together with the rights to [construct certain facilities like pipe lines, power lines, and access roads, etc.] on, over and under said lands necessary or incidental to any of said operations together with . . . the rights to use all that part of said lands necessary or incidental to the taking of percolating and underground water and the production, treating and transmission of water therefrom . . . .

In 2012, the City proposed a plan for a total of 80 test and production wells, but was unable to reach an agreement with the owner of the Ranch. Undeterred, the City began mowing paths to potential drill sites on the Ranch citing the broad powers it obtained in the 1953 Deed. The Ranch owner contended that the City had breached the terms of the deed and that the City was obligated to comply with the accommodation doctrine. The City responded that there was no law holding that the accommodation doctrine applied to severed groundwater estates and that the City was authorized by its deed to proceed. The principal issue was whether the accommodation doctrine applies to severed groundwater estates.

The accommodation doctrine broadly provides that “[a]bsent an agreement to the contrary, an oil-and-gas lessee has an implied right to use the land as reasonably necessary to produce and remove the minerals but must exercise that right with due regard for the landowner’s rights.” Getty Oil Co. specifically held:

[W]here there is an existing use by the surface owner which would otherwise be precluded or impaired, and where under the established practices in the industry there are alternatives available to the lessee whereby the minerals can be recovered, the rules of reasonable usage of the surface may require the adoption of an alternative by the lessee.

Because the accommodation doctrine is only applicable if there is no agreement between the parties, the court first analyzed the rights the 1953 Deed gave to the City. “The deed gives the City the right to drill wells ‘at any time and location’ but only ‘for the purpose of’ conducting operations to access the groundwater. The deed then limits the City’s use of the Ranch to what is ‘necessary or incidental’ to those operations. But the deed leaves unclear whether the City can do everything necessary or incidental to drilling anywhere, as it claims, or only what is necessary or incidental to fully access the groundwater, as the Ranch argues.” Because the deed did not clearly determine the rights of the parties, the Court turned to the question of whether the accommodation doctrine should apply to a severed groundwater estate.

The Court then reviewed and commented upon most of its accommodation doctrine cases. Of particular interest, it cited to and quoted from the Merriman case with approval as to the elements that must be proved to obtain relief:

To obtain relief on a claim that the mineral lessee has failed to accommodate an existing use of the surface, the surface owner has the burden to prove that (1) the lessee’s use completely precludes or substantially impairs the existing use, and (2) there is no reasonable alternative method available to the surface owner by which the existing use can be continued. If the surface owner carries that burden, he must further prove that given the particular circumstances, there are alternative reasonable, customary, and industry-accepted methods available to the lessee which will allow recovery of the minerals and also allow the surface owner to continue the existing use.

“The accommodation doctrine, based on the principle that conflicting estates should act with due regard for each other’s rights, has provided a sound and workable basis for resolving conflicts between ownership interests.” Groundwater and mineral estates, while somewhat different, are also very similar in that they are subterranean, have the same right to use the surface, are controlled by the rule of capture, are protected from waste, and are owned by the landowner in place. “[W]e are reluctant to search for a new approach to resolving disputes over a severed estate’s implied right to reasonable use of the surface when a proven rule is at hand.” Accordingly, the court held that the accommodation doctrine extends to severed groundwater estates. The Court expressly declined to consider in this opinion whether the accommodation doctrine is workable when both the minerals and the groundwater have been severed from the land.

The Court was unanimous in extending the accommodation doctrine to severed groundwater estates, but three justices in a concurring opinion partially disagreed with the majority. They would hold that the deed itself governed some of the contested surface uses in the case.

The significance of this case is that the accommodation doctrine was extended to severed groundwater estates.