The Oil and Gas Addendum

Solar farm developers who do not enter into surface use agreements with Pennsylvania oil, gas and mineral owners (and their lessees) could create legal jeopardy for their solar farm projects. All surface developments in Pennsylvania, including solar farms, must accommodate subsurface owners' reasonable use of the surface of the property to develop the subsurface resources. This relationship is known as the "Accommodation Doctrine", a concept that was outlined in Pennsylvania over a century ago, and was discussed in detail in a prior blog post.

The Accommodation Doctrine in Pennsylvania originated in Chartiers Block Coal Co. v. Mellon, 25 A. 597 (Pa. 1893). That Pennsylvania Supreme Court case centered on the rights of a coal owner to place mining infrastructure on the surface. The Chartiers court identified the preeminence of the subsurface owner's rights and explained the intellectual basis for the elevation of subsurface owners' rights over rights of surface owners and surface lessees, like solar farm developers:

So it often happens that the owner of a farm sells the land to one man, the iron, or oil, or gas to another, giving to each purchaser a deed, or conveyance in fee simple for his particular deposit or stratum, while he retains the surface for settlement and cultivation precisely as he held it before. The severance is complete for all legal and practical purposes. Each of the separate layers or strata becomes a subject of taxation, of incumbrance, levy, and sale, precisely like the surface. As against the owner of the surface each of the several purchasers would have the right, without any express words of grant for that purpose, to go upon the surface to open a way by shaft, or drift, or well, to his underlying estate, and to occupy so much of the surface, beyond the limits of his shaft, drift, or well, as might be necessary to operate his estate, and to remove the product thereof. This is a right to be exercised with due regard to the owner of the surface, and its exercise will be restrained, within proper limits, by a court of equity if this becomes necessary; but subject to this limitation it is a right growing out of the contract of sale, the position of the stratum sold, and the impossibility of reaching it in any other manner.

Id. at 598.

The Pennsylvania Supreme Court reaffirmed the Accommodation Doctrine in Belden & Blake Corp. v. Commonwealth of Pennsylvania Department of Environmental Resources,969 A.2d 528 (Pa. 2009). There, the Supreme Court reiterated that the oil and gas owner has the right to the reasonable use of the surface. Additionally, it is the obligation of the surface owner to seek redress for surface development to determine if it is reasonable. Id.

Solar farms have a large physical footprint. The geographic area occupied by the solar cells and supporting infrastructure like inverters, batteries and power lines can encompass most, if not all, of a property. That can leave only a small amount of open space on a property that possibly available for subsurface development, like a well pad. But, if a solar farm developer preserves an open area for potential oil and gas well pad(s), is that "good enough" to insulate the solar farm developer from a challenge by the oil and gas owner that the subsurface rights have been impaired? A Texas appellate court recently suggested the answer to that question is "no".

In Lyle v. Midway Solar, LLC, 618 S.W. 3d 857 (Tex. App. 2020) the Texas Court of Appeals reviewed a dispute between oil and gas owners and a solar farm development. The plaintiffs in that case, the Lyles, owned an undivided interest in part of an undeveloped mineral estate in west Texas, with their interest stemming from a mineral reservation in a 1948 that conveyed the surface. Id. at 862. The Lyles never leased or developed their mineral interest and admitted that they had no plans to drill wells on it. Id. at 863.

In 2015, the surface owner overlying the Lyles’ mineral estate entered into a lease with Midway Solar, allowing that entity to build a solar farm on the surface above the Lyles’ mineral estate. Id. This solar lease allowed Midway Solar to place solar panels, transmission lines and electric lines on the surface. Id. The surface owner worked with Midway Solar to identify “Designated Drill Site Tracts” to accommodate oil and gas development, but there was no indication that the Lyles had any input into these selected locations. Id.

Midway Solar constructed its solar farm, installing solar panels and transmission lines which covered approximately 70% of the surface above the Lyles’ mineral estate. Id. Midway Solar did not develop an 80 acre tract at the north end of the property or a 17 acre tract at the south end of the property, which were identified as the “Designated Drill Site Tracts”. Id. As part of its development, Midway Solar obtained surface waiver agreements from numerous mineral owners, but not the Lyles nor any of the other undivided mineral interest owners in the tract where the Lyles owned their interest. Id.

The Lyles filed suit, claiming that the other surface waiver agreements clouded the Lyles’ mineral title, that the surface owner and Midway Solar breached the 1948 severance deed by denying the Lyles reasonable access to their minerals because the solar farm and related connections covered 70% of the surface of the Lyles’ mineral estate, and that the surface owner, Midway Solar and the parties that signed surface waiver agreements were trespassing on Lyles’ mineral estate. Id. at 865.

The Court of Appeals began its analysis by examining whether the “accommodation doctrine” applied to this case. In Texas, the surface and mineral estates can be separated from one another. Coyote Lake Ranch, LLC v. City of Lubbock, 498 S.W. 3d 53, 60 (Tex. 2016). The mineral estate is considered “dominant” over the surface, meaning that the mineral estate owner generally has the right to use the surface to extract the subsurface minerals as well as other rights reasonably necessary for that extraction. Merriman v. XTO Energy, Inc., 407 S.W. 3d 244 (Tex. 2013). But, the mineral owner’s rights to use the surface are not absolute and are addressed by the AccommodationDoctrine, which, under Texas law, states that the ”mineral and surface estates must exercise their respective rights with due regard for the other’s”. Lyle, 618 S.W. 3d at 869.

Under the Accommodation Doctrine in Texas, the surface owner must show the mineral owner’s use of the surface completely precludes and substantially impairs the surface owner’s existing use and that there is no reasonable alternative available to the surface owner to continue its existing use. Id. In addition to that, the surface owner must also prove that “given the particular circumstances, there are alternative reasonable, customary and industry-accepted methods available to the [mineral owner’ which allow recovery of the minerals and also allow the surface owner to continue the existing use.” Id.

If the evidence shows that the mineral owner has an alternative means of accessing its minerals without disturbing the surface owner’s use then the accommodation doctrine may require that alternative method to be adopted. Id. But, if there is only one means for the mineral owner to use the surface to produce its minerals, then the mineral owner has a right to pursue that use, regardless of surface damage. Id. The result is a cautionary tale for solar farm developers, and even wind farm developers, and a reminder of the preeminence of the rights of subsurface owners. But, while the primacy of subsurface rights remains, the unanswered question is "what happens" if a solar farm (or a wind farm) development covers the entirety of the surface of a severed mineral estate. If you have an issue with the interplay between oil, gas or mineral rights and solar farms or wind farms, contact attorney Brendan O'Donnell at 412-288-2226 or odonnellba@hh-law.com.