Considering the Mineral Estate When Planning Solar Projects PDF
Introduction
The split property estate system under Texas law creates unique difficulties for surface developers, especially in rural areas. Careful planning can alleviate some of the uncertainty and risk. This paper offers a brief overview of the relevant law in Texas and suggests several options for planning solar projects.
Mineral Estate Law
Texas law divides real property into two separate property rights—what are termed the surface and the mineral estates. The mineral estate has the right to explore, develop, access, and use the minerals below the surface of the land.[1] The mineral estate may access and use the surface and superadjacent airspace to the extent reasonably necessary to enjoy its mineral rights.[2] Because mineral owners hold the “dominant estate” over surface owners, it is extremely important for owners and lessees of the surface estate to be cognizant of the implications of the split estate.
Due to the mineral owner’s superior or dominant interest, the surface owner’s use of the land must yield to the mineral owner.[3] This dominance does have limits. The mineral owner must exercise its rights reasonably and with due regard to the surface estate.[4] The mineral owner may prevent actions of the surface owner only if those actions interfere with the mineral owner’s reasonable present use of the land.[5] The mineral owner is liable for damage to the surface estate owner only for negligence and excessive use of the land.[6]
Based on the notion of “due regard,” the Texas Supreme Court has created what is known as the Accommodation Doctrine. In Getty Oil Co. v. Jones, the court stated the doctrine as follows (referring to the lessee of a mineral estate): where 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.[7]
This doctrine first asks, what is the surface owner’s existing use of the land?[8] The condition and use of the land by the surface owner is an important consideration in judging the reasonableness of the mineral estate’s actions.[9] Next, the doctrine asks whether the mineral owner’s activities impair the surface owner’s existing use of the land.[10] The surface owner must show that the mineral owner is causing more than a minor inconvenience.[11] Finally, the surface owner must show that there are reasonable alternatives available to the mineral owner on the land.[12] Even if the surface owner is currently using the land and has no alternative, he or she will have to yield if the mineral owner has no reasonable alternative.[13] The burden of proof is on the surface owner.[14]
A summary of the applicable cases are found in the attached appendix.
Considerations for Solar Projects
1) Waivers and Accommodation Agreements
Due to the unfavorable legal position of the surface owner, the best option for a solar project seeking certainty as to its property rights is to negotiate a waiver of surface rights with the mineral owners. The agreement should include a waiver of all rights to the surface, including exploration, testing, access, and production. The surface owner must also consider that the mineral estate is most likely divided between several owners and lessees. Accordingly, for a project to be completely secure from interference, all of the mineral rights holders must sign a waiver. Because mineral owners and lessees have the dominant interest in the land, they likely will seek large consideration in return for the waiver. This possibly may render the exercise prohibitively expensive.
Accommodation Agreements are an option for when a waiver is not obtainable. Such an agreement can specify what surface uses will be permitted and/or which areas the mineral owner may develop. Mineral owners may be more amenable to such an agreement because it preserves some of their rights of access and production. Businesses especially want to maintain positive relations with the surface owner and may be more willing to consider accommodation. These agreements also are most suitable for situations where the mineral owner already has conducted geological surveys. In that case, the mineral owner should have a clearer idea of what areas are needed for development and can plan appropriately. Again, some consideration or value will need to be given in exchange for such an agreement.
2) Plan for Accommodation
In addition to an agreement, it is advisable to plan ahead for possible oil and gas exploration and development. If any geological surveying has been done, be sure to site away from likely drilling sites. If there has been no activity, it still is important to establish a solar project with flexibility in mind. If the surface owner or lessee can show reasonable consideration of the rights of the mineral owner, it will be proper for the mineral owner to choose the alternative that will cause the least detriment to the solar project.
Texas Railroad Commission regulations specify spacing requirements for oil wells.[15] If the solar project is located in an area with existing oil and gas exploration, spacing limitations may obviate the need for a signed agreement or serve as an effective negotiating tool.
Allowing easy access to the property is especially important. Courts have viewed the placement and use of roads as a reasonable part of mineral development. Courts also repeatedly have rebuffed attempts by the surface owner to block the placement or use of roads. At sites where there is present or possible future oil or gas wells, it is important for surface owners to plan for the placement and frequent use of roads. Solar developers may even want to construct their own paved roads to prevent the use of dirt roads that could create sunlight-blocking debris as well as to prevent mineral developers from placing roads at inconvenient locations.
Due to the long periods between data collection, permitting, and construction, solar developers should attempt to proactively coordinate with the mineral owners. The Accommodation Doctrine will not apply if the surface owner has no “existing use” on the land. Because it is likely that data collection and siting plans would not be considered a present use but only a speculative future use, solar developers could be in a vulnerable position before construction begins. This is where coordination, previous agreements, or a declaratory judgment may be appropriate.
3) Declaratory Judgment
Texas law provides that courts may issue a declaratory judgment determining a question of law to prevent a future legal dispute.[16] The judgment “is intended as a means of determining the parties’ rights when a controversy has arisen but before a wrong has been committed.”[17] Once the solar developer has a siting plan created, he may seek a judgment stating that reasonable alternatives still would be available to the mineral owner. The steps above for planning to accommodate would support such a case.
4) Title insurance
Obtaining title insurance is also a feasible solution for a solar developer. A solar project may purchase several types of endorsements as part of a title insurance package that would cover interference by oil and gas developers on the land.
Conclusion
Solar developers (especially those considering undeveloped property) should consult an attorney early in the planning process. Although surface owners are at a comparative legal disadvantage to mineral estate owners, careful planning and preparation can avoid costly delays and conflicts down the road.
[1] These rights are implied. However, the oil and gas lease may expand or contract the associated rights of the mineral estate.
[2] Getty Oil Co. v. Jones, 470 S.W.2d 618, 621 (Tex. 1971).
[3] See Humble Oil & Ref. Co. v. Williams, 420 S.W.2d 133, 134 (Tex. 1967).
[4] Getty Oil Co., 470 S.W.2d at 621.
[5] Atlantic Ref. Co. v. Bright & Schiff, 321 S.W.2d 167, 169 (Tex.Civ.App. – San Antonio 1959, writ ref. n.r.e.).
[6] Humble Oil & Ref. Co., 420 S.W.2d at 134; Getty Oil Co., 470 S.W.2d at 621.
[7] Getty Oil Co., 470 S.W.2d at 622.
[8] Id.; Texas Genco, LP v. Valence Op. Co., 187 S.W.3d 118, 123–24 (Tex. App. – Waco 2006, pet. denied).
[9] Getty Oil Co., 470 S.W.2d at 628 (op. on reh’g).
[10] Id. at 622; Texas Genco, LP, 187 S.W.3d at 123–24.
[11] See Davis v. Devon Energy Prod. Co., 136 S.W.3d 419, 425 (Tex.App. – Amarillo 2004, no pet.); Ottis v. Haas, 569 S.W.2d 508, 514 (Tex.App. – Corpus Christi 1978, writ refused n.r.e.).
[12] Sun Oil Co. v. Whitaker, 483 S.W.2d 808, 812 (Tex. 1972).
[13] Texas Genco, LP, 187 S.W.3d at 122.
[14] Getty Oil Co., 470 S.W.2d at 628 (op. on reh’g).
[15] See 16 Tex. Admin. Code § 3.37 (Tex. R.R. Comm’n).
[16] Tex. Civ. Prac. & Rem. Code § 37.004 (Vernon 1986) (Declaratory Judgments Act).
[17] Etan Indus., Inc. v. Lehmann, __ S.W.3d __, 2011 WL 6276308, at *4 (Tex. 2011).
*The information and opinions in this publication are not intended to provide legal advice, and should not be treated as a substitute for legal advice concerning particular situations. Legal advice should always be sought before taking any action based on the information provided. The publisher bears no responsibility for any errors or omissions contained in this Article.
