Fracking Of Other Properties From West Virginia Land
October 21, 2019
By Paul R. Yagelski, Esquire
Can An Oil And Gas Company Use The Surface Of Your West Virginia Land To Frack The Shale Under Other Properties?
You own the surface of your land, but you do not own the minerals thereunder. They have been severed from the surface. An oil and gas company has leased the oil and gas and wants to use your surface to install a wellpad and one or more wells from which it will extend its horizontal laterals to frack the shale under other properties. This is not an uncommon occurrence. If you live in West Virginia, however, this can no longer be done unless the right to do so is agreed to by the surface owner or the right is expressly obtained, addressed or reserved in the parties’ deeds, leases or other writings.
On June 5, 2019, in EQT Prod. Co. v. Crowder, No. 17-0968, 2019 WL 2414728 (W. Va. June 5, 2019), the West Virginia Supreme Court held that a mineral owner or lessee has an implied right to use the surface of a tract in any way reasonable and necessary to the development of minerals underlying the tract. However, a mineral owner or lessee does not have the right to use the surface to benefit mining or drilling operations on other lands in the absence of an express agreement with the surface owner permitting those operations. In other words, although the oil and gas under your property have been leased, the oil and gas company cannot come onto your property, place a wellpad thereon along with one or more wells and use these wells and horizontal fracking to develop the oil and gas under other properties unless you agree to this. If the oil and gas company puts a well(s) on your property, it can only use this well(s) to develop or produce the oil and gas from underneath the surface of your property, not from underneath other properties.
The Plaintiffs, in EQT Prod. Co. v. Crowder, Margo Beth Crowder and David Wentz, owned only the surface of their land in Doddridge County, West Virginia, not the mineral rights. Defendant EQT Production Company (“EQT”) held a century-old lease that allows EQT to drill wells to extract oil and gas from beneath the plaintiffs’ surface estate. Plaintiffs brought their law suit to challenge EQT’s use of their surface estate to drill horizontal wells that extend under neighboring properties so that EQT could extract natural gas from beneath those properties. Plaintiffs contended that EQT’s lease does not allow it to use their surface estate to extract oil and gas from neighboring mineral estates. Accordingly, plaintiffs asserted that EQT is trespassing on their surface tracts to the extent that EQT is drilling for or removing minerals from neighboring properties.
The Circuit Court of Doddridge County agreed with the plaintiffs and entered an order granting them partial summary judgment, finding that EQT trespassed to the extent it used plaintiffs’ surface lands to conduct operations under neighboring mineral estates. A jury subsequently awarded plaintiffs $190,000 in damages. EQT then appealed the Circuit Court’s partial summary judgment and order and the jury’s damage award. The West Virginia Supreme Court affirmed the Circuit Court’s Order and the jury’s damage award.
The ownership of plaintiffs’ surface tracts was traced back to Joseph L. and Bell Carr who, in 1901, owned a 351 acre tract in Doddridge County, West Virginia. In August 1901, the Carrs leased the 351 acres of oil and gas below the Carr tract to predecessors of EQT. The lease agreement stated that EQT’s predecessor had a lease “for the sole and only purpose of mining and operating for oil and gas, and of laying pipe lines and building tanks, stations and structures thereon, to take care of said products [.]” The lease was to last “as long thereafter as oil or gas . . . is produced therefrom[.]” The parties agreed that the lease remained in effect.
Until 1936, the Carrs and their successors in title owned the entire 351-acre tract in fee, subject to the 1901 oil and gas lease. At that time, the owner of the Carr tract decided to split the surface from the mineral estate beneath the tract. In November 1936, the then owner of the Carr tract, R.L. McCulty, conveyed to Grace Lowther “the surface only” of the Carr tract. Mr. McCulty retained the right to the oil and gas royalties from the 1901 lease, as well as sole ownership of any other minerals beneath the surface.
By the mid-1970s, Grace Lowther and her successors partitioned the surface of the Carr tract into several smaller parcels. In 1975, one of these parcels, within the boundaries of the original Carr tract, was conveyed to plaintiffs. Plaintiffs, who were married, constructed a home on their parcel built from timber cut on the land and moved into the home in April 1997.
In 2003, plaintiffs divorced. By several deeds, plaintiffs partitioned their surface estate between themselves, with Mr. Wentz owning two parcels and Ms. Crower owning one parcel. All three surface parcels are within the bounds of the 351-acre Carr tract. Both plaintiffs live in homes on the surface tracts.
Between 1902 and 1936, and under the 1901 oil and gas lease, EQT’s predecessors drilled three conventional vertical wells on the surface of the 351-acre tract. These vertical wells were designed to pull oil and gas from the rock strata beneath the 351-acre Carr tract. After the surface estate was severed from the mineral estate in 1936, EQT’s predecessors drilled six more conventional vertical wells on the Carr tract.
By 2011, Patty J. and R. Keith Crihfield owned the mineral estate beneath the Carr tract, an estate that included the right to royalties from the 1901 oil and gas lease. On March 11, 2011, the Crihfields signed an “Amendment of Ratification of Oil and Gas Lease” that allowed EQT to pool and/or unitize and combine the rights provided by the 1901 lease with other leases to drill and extract oil and gas under neighboring lands.
EQT then sought permits to drill modern, horizontal Marcellus shale gas wells on plaintiffs’ surface lands. EQT designed the wells to extract gas from a total area of 3,232 acres, not just the 351 acres beneath the Carr tract. Modern technology allowed EQT to initially drill vertically on plaintiffs’ surface lands, but then curve the head of the drill and extend the bore of the well horizontally thousands of feet beyond the Carr tract and through mineral estates under neighboring properties.
In mid-2012, plaintiffs learned of EQT’s plans to use their surface lands to extract gas from beneath neighboring properties. Plaintiffs through their lawyer advised EQT that it did “not have the right to burden, damage, and otherwise occupy the Crowder/Wentz property for the purpose of extracting minerals from other mineral tracts.” EQT was advised that EQT had rights to use plaintiffs’ surface lands only “as are reasonably necessary to extract the severed minerals from beneath the Carr tract.” In addition, EQT was told that it did not have lease rights or plaintiffs’ permission to enter their surface lands and warned EQT: “Do not enter the Crowder/Wentz property for oil and gas operations.” EQT ignored the letter.
In February 2013, EQT entered onto plaintiffs’ surface parcels (and adjacent parcels in the Carr tract) through various two-lane roads and cleared about 42 acres. EQT also constructed a 19.7 acre wellpad. By June 2014, EQT had drilled nine new wells on plaintiffs’ land and had drilled some 9.7 miles (51,470 feet) of horizontal bores under neighboring properties.
In the Circuit Court, plaintiffs asserted that EQT had trespassed on their lands to not only drill into the middle strata underlying their lands, “but to drill into, frack, produce and transport gas from neighboring mineral tracts.” EQT responded that the 1901 Carr oil and gas lease was unitized in 2011 with oil and gas leases on neighboring lands and that EQT’s actions were proper. EQT asserted that horizontal drilling is reasonably necessary to the production of natural gas in the shale formations under the Carr tract. Accordingly, it was reasonable and necessary to extend that drilling under neighboring properties to produce natural gas from beneath those properties. The Circuit Court found that EQT had the implied right to use plaintiffs’ surface lands “for wellpads, roads, and pipelines to drill into, and produce gas from, but only from, the mineral tract underlying the plaintiffs’ lands.” EQT had no express or implied right to enter or use plaintiffs’ surface lands to drill into and produce gas from neighboring mineral tracts. Hence, the Circuit Court ruled that EQT was liable to plaintiffs for trespass.
The West Virginia Supreme Court in reviewing its own decisions and those of other jurisdictions along with writings from a number of commentators held that a mineral owner or lessee has an implied right to use the surface of the tract in any way reasonable and necessary to the development of minerals underlying the tract. However, a mineral owner or lessee does not have the right to use the surface to benefit mining or drilling operations on other lands, in the absence of an express agreement with the surface owner permitting those operations.
The Supreme Court noted that when plaintiffs’ surface estate was severed from the mineral estate in 1936, the surface estate was subject only to the terms of the 1901 lease. The deeds covering the surface and mineral estates contained no language altering the burden imposed on the surface under the 1901 lease and no express language allowing the surface estate to be used in the extraction of hydrocarbons from neighboring lands. After the 1936 severance, the mineral owner and lease holder only had the rights, explicit and implicit, to use the surface to reasonably explore for and extract minerals from the Carr tract. The court therefore declined to rewrite the 1936 severance deed to alter EQT’s rights and the surface owners’ burdens. The Court would not imply a right to use the surface estate to conduct drilling or mining operations under neighboring lands. The right must be expressly obtained, addressed or reserved in the parties’ deeds, leases or other writings.
In sum, under the 1901 lease, EQT only had a right to conduct operations on the plaintiffs’ surface lands to explore for and extract oil and gas from beneath the Carr tract. EQT had neither an express agreement with plaintiffs (or their predecessors) nor an implicit right to use the plaintiffs’ surface lands to benefit its drilling operations on neighboring lands.
Accordingly, in West Virginia, unless the right to use the surface estate to conduct drilling or mining operations under neighboring lands is reserved, addressed, or obtained from the parties’ deeds, leases or other writings; e.g., a surface use agreement with the surface owner, the right to use the surface estate to conduct drilling or mining operations under neighboring lands will not be implied and an oil and gas company has no such right. As such, an oil and gas company, where there is no such right, cannot come onto your property, even if it has been pooled, to drill from your property, using your surface estate to conduct drilling or mining operations under neighboring lands without your permission. Should the oil and gas lessee want to utilize the surface of your land to access minerals under neighboring land, it will need to reach a separate agreement with you, the surface owner.
This is a huge development for landowners in West Virginia, as now the oil and gas company cannot simply come onto the landowner’s land and say that it can use its surface to drill and frack the shale under neighboring lands without some express agreement with the landowner or some statement in a deed, lease or other writing that allows the oil and gas company to do so. In West Virginia, the landowner now has a recognized right to prevent operations from its lands into other properties and can now enter into an agreement for compensation with an oil and gas company to allow it to do so, should the landowner desire to do so. Before this decision, the landowner did not have such a right in West Virginia.
If you have questions about your oil and gas rights in West Virginia, contact us or call (412) 338-1124.