The Oil and Gas Addendum

Deed Placement of ‘Right of Way’ Proves Decisive

When a railroad company acquired a narrow strip of land more than a century ago, did it also acquire the oil and gas beneath it — or just the right to run trains across the surface? That question continues to generate litigation wherever old rail corridors cross mineral-rich land, and it was front and center in a recent decision from the El Paso Court of Appeals. In SRO Land & Minerals, et al. v. BNSF Railway Company (No. 08-24-00347, June 19, 2026).

The first railroad in Pennsylvania was constructed back in 1832.  It ran between Philadelphia and Germantown.  Over the next 75 years, railroads were constructed and developed at a staggering pace.  To build these rail lines, the operators had to acquire thousands of miles of narrow land corridors either via an outright conveyance from the surface owner or sometimes simply by a surface easement.  By the mid-twentieth century there were almost 10,000 linear miles of railroads across the Commonwealth.  According to the Association of American Railroads, there are still approximately 5,080 linear miles of active railroads today in Pennsylvania. These railroads crisscross the entire Commonwealth and move over 57 million tons of coal, steel, stone and petroleum products each year.  Most, if not all, of these railways are known as “standard gauge”, meaning there are 56.5 inches between each rail.  And standard gauge lines typically lie within a 50-to-100-foot rail corridor. Overall, these railroad corridors cover about 67,800 acres of land across Pennsylvania. That’s a lot of land.  And the original instruments creating these corridors are often over 120 years old.

Who owns the oil and gas under these corridors?

As I have written before, assessing such ownership can be complicated and challenging.  See, The Neale Rule: Who Actually Owns the Oil and Gas Under Railroads?  (March 2024). The 8^th District Court of Appeals in El Paso Texas recently addressed this thorny question in SRO Land & Minerals, et al v. BNSF Railway Company (No. 08-24-00347, June 19, 2026) and perhaps expanded the unique principles that govern the interpretation of ancient railroad deeds. 

At issue in SRO Land was a 1901 Deed which purported to grant a 100-foot-wide rail corridor to the Pecos River Rail Company in Reeves County, Texas.  The pertinent language in the 1901 Deed provided as follows:

. . . has granted, bargained and sold, and by these presents does grant, bargain, sell and convey unto the said [Grantee] all and singular the right, title and interest of the said [Grantor], in and to those certain pieces or parcels of land, for the purpose of maintaining and operating the line of railroad owned by the second party thereupon, a way and right of way one hundred (100) feet in width, being fifty (50) feet on each side of its main tract over, upon and through the following named surveys situated in Reeves County, Texas . . . .

Although the actual railroad itself had long ceased operation, the successor to the original rail operator, BNSF Railway Company (“BNSF”), asserted that the 1901 Deed conveyed a fee simple interest in and to the 100-foot corridor.  As such, BNSF maintained that in 2024 it still owned the oil and gas estate underlying the corridor and that it alone had the exclusive right to negotiate a new oil and gas lease regarding the same.  The surface owners disputed BNSF’s oil and gas ownership and argued that the 1901 Deed only granted a limited surface easement and that the oil and gas was never conveyed or transferred to the Pecos River Rail Company. The surface owners filed suit in 2024 seeking a declaration that they owned the oil and gas estate underlying the dormant rail corridor. 

The surface owners argued that the term “right of way” in the granting clause of the 1901 Deed evidenced an intent to only convey as easement.  In support of their position, the surface owners relied on a line of Texas cases that generally observed that “. . . where the granting clause of a deed conveys a right of way of designated width across, over and through a tract of a land, it is a conveyance of a mere easement in the property and not of a fee simple”. See, Gulf Coast Water Co. v. Hamman Exploration, 160 S.W.2d 92, 94 (Tex. Civ. Apps. – 1942).  The surface owners also argued that their interpretation of the 1901 Deed was not foreclosed or undermined by the so-called Neale Rule.  According to the surface owners, because the term “right of way” was deliberately set forth in the granting clause of the 1901 Deed, the Neale Rule compelled the finding of a mere easement. See, BNSF Railroad Co. v. Chevron Midcontinent, 528 S.W.3d 124 (Tex App- El Paso, 2017) (“Neale directs us to look at the granting clause to determine what was conveyed…”). This conclusion was further supported by the specific language in the 1901 Deed itself.  The surface owners emphasized that the 1901 Deed only conveyed a 100 feet wide strip of land “over, upon and through” the subject land. Such language, according to the surface owners, evidenced a clear intent to create an easement on the surface estate and nothing more. See, BNSF Railroad Co. v. Chevron Midcontinent, 528 S.W.3d at 127 (observing that the placement of the term “over” in the granting clause showed that the grantor “did not intend to convey the entirety of the lands. . . but only an easement”).

In response, BNSF argued that the Neale Rule was implicated but application of the rule produced a different outcome.  BNSF noted that the granting clause in 1901 Deed contained fee language which, under Neale, negated the finding of an easement. The granting clause stated that the original grantor “does grant, bargain, sell and convey. . . all and singular the right, title and interest…in and to those certain pieces or parcels of land.”  This language, according to BNSF, evidenced an intent to convey the entirety of the property.  And because said language appeared in the granting clause, the Neale Rule required that such language take precedence over other language in the deed that suggested only an easement was being conveyed.  In addition, BNSF pointed out that the purported “right of way” language in the granting clause relied upon by the surface owners appeared after the words “in and to those certain pieces of or parcels of land.”  This placement had legal significance. Because it came after the reference to “land”, the “right of way” language merely described the strip of land being conveyed and was not a limitation on the scope of the grant.  Finally, BNSF argued that the 1901 Deed contained a clear and specific expression of intent that had to be given appropriate weight.  The 1901 Deed stated that “[I]t is the object and intent of this instrument to convey to the [Grantee] a strip of land. . . ” (emphasis added).  Such language suggested the conveyance of a fee interest and not merely a surface easement.  

Both parties moved for summary judgment.  The trial court agreed with BNSF and ruled that the 1901 Deed conveyed a fee interest.  The surface owners then appealed to the Court of Appeals in El Paso. 

The dispositive issue on appeal was the precise location of term “right of way” in the 1901 Deed.  The El Paso court noted that the term appeared after the phrase “in and to those certain pieces or parcels of land.”  Relying on the Neale Rule, the El Paso court opined that such placement indicated that the phrase was not intended to limit the nature of the grant but rather to describe the anticipated use of the land.  See, Neale, 252 S.W. 2d at 453 (“a deed which in the granting clause grants, sells and conveys a tract or strip of land conveys title in fee, even though in a subsequent clause or paragraph the deed the land conveyed is referred to as a right of way”). As such, the inclusion of such language did not change or reduce the scope of the grant: it merely described its intended use as a railroad corridor.  Rather than creating a conditional estate, the language simply reflected the purpose for which the land was acquired and could not diminish the breath of the conveyance itself.

The El Paso court was also unpersuaded by the surface owners’ argument that the phrase “over, upon and through” evidenced an intent to create only a surface easement.  The panel noted that such language could simply refer to going from one side or extremity of the grantor’s land to another and is not conclusive evidence of an easement.

Perhaps the most controversial aspect of SRO Landis its treatment of the Texas Supreme Count’s landmark decision in Texas Electric Railway Cop. v. Neale.  Although the court stated that its holding was faithful to Neale, the opinion arguably narrows that precedent in a manner that departs from the Supreme Court’s broader approach to railroad deed construction.

In Neale¸ the Texas Supreme Court rejected the proposition that repeated references to a “right of way” necessarily create an easement. Instead, the Neale Court emphasized that expressions describing the purpose of which land is conveyed do no “reduce or debase” an otherwise complete conveyance of fee title. The Neale Court further instructed that deeds must be construed as a whole and that the parties’ intent must be gathered for the entire instrument rather than isolated words or phrases. Neale thus became the foundation for modern Texas railroad-deed jurisprudence. As noted above, the El Paso panel relied heavily on this language, quoting Neale for the proposition that a statement of purpose does not diminish an otherwise complete grant of title.

Nevertheless, one may argue that the court’s application of Neale is incomplete. The 1901 Deed repeatedly characterized the property as a railroad right of way and expressly stated that the conveyance was made for construction and operation of the railroad. Rather than considering these provisions as evidence bearing on the grantor’s overall intent, the court largely dismissed them as legally insignificant because the granting clause first conveyed “all right, title, and interest.” In doing so, the opinion arguably elevated the granting clause above the remainder of the instrument. Moreover, the panel’s emphasis on where the term “right of way” appeared within the granting clause put form over substance and ignored other provisions in the deed itself. Such a formalistic application of the Neale Rule is disconcerting.

What is the takeaway from SRO Land? 

Location, location, location.  Although not binding on Pennsylvania courts, the logic and rationale espoused by the El Paso court could find its way into Pennsylvania jurisprudence.  In Fleck v. Universal Cyclops Steel Corp, 397 Pa. 648 (Pa 1959), the Pennsylvania Supreme Court adopted its own version of the Neale Rule observing that “if and where the granting clause and the habendum clause are inconsistent, conflicting or repugnant, the granting clause must prevail.” Under Fleck, the language in a granting clause will generally control over inconsistent language found elsewhere in a railroad deed. But such a rule is not absolute as courts must examine the entire instrument in order to ascertain the intent of the parties.  That caveat may no longer be applicable if Pennsylvania follows the new formalistic approach adopted by the El Paso court. Under that approach, the location of the term “right of way” in the underlying deed is determinative:  if it appears after the grant of a “strip of land” or “parcel of land”, the conveyance will be characterized as a fee simple. Conversely, if the term appears before the reference to a “strip of land” or “parcel of land”, the conveyance will be characterized as an easement. 

If you have questions regarding the scope or effect of a railroad deed or have questions or concerns as to who owns the oil and gas under a railroad corridor, please call Robert J. Burnett at 412-288-2221 or contact him at rburnett@hh-law.com.