Mineral Trespass: Expanded Regulation in the Wake of Technological Advancement

Abstract

Technological advancements in the oil and gas industry have created challenges for courts and the Texas Railroad Commission regarding how to properly balance the protection of lessors and lessees, while also furthering the public interest of maximizing production. The Texas Railroad Commission currently does not have regulations in place to protect mineral lessors or lessees with respect to spacing between separate leases covering different depths in the vertical plane within the same tract. Without correct spacing regulations from the Railroad Commission, an operator’s production within deeper strata cannot be properly analyzed by courts in trespass actions. The move from vertical to horizontal drilling has enabled operators to use technologic advancements, such as hydraulic fracturing, to obtain oil, gas, and other hydrocarbons that were once thought unattainable. Mineral owners have been given opportunities through oil and gas lease clauses, such as the Pugh clause, to sever their mineral rights and create separate leasehold estates within the same tract of land. Requiring operators to adhere to expanded Rule 37 spacing requirements in the vertical plane would help reduce subsurface trespass claims. The Texas Railroad Commission should expand Rule 37 to apply to horizontal severances in the vertical plane, as well as offset lease lines. Courts should reshape subsurface trespass analyses by balancing multiple factors. In the absence of clear and convincing evidence of a physical intrusion, future courts should analyze and balance the following factors for subsurface trespass claims: (i) public interest in exploration, or the interests of society; (ii) speculation versus evidence of a physical intrusion based on a reasonable and prudent operator standard; (iii) the degree of waste from allowing production versus not allowing production; and (iv) harm to the geologic formation. The proposed spacing regulations would have positive effects on all parties to an oil and gas lease by mitigating subsurface trespass claims, creating efficient drainage, and preventing both surface and economic waste. Further, courts have yet to address the issue of subsurface trespass and the impact of the rule of capture regarding multiple wells drilled on the same tract in the vertical plane. In the absence of adequate spacing requirements in the vertical plane, courts should employ a holistic analysis for subsurface trespass claims and consider multiple elements rather than solely the public interest.