Land & Renewables Connection

Does the Texas Supreme Court’s Decision in Myers-Woodward, LLC v. Underground Services Markham, LLC Require Pennsylvania Courts to Re-Examine Ownership of Subsurface Spaces?
 

If you drive around Pennsylvania, you are likely not going to encounter a “For Sale” sign offering a cavern in the ground. But the voids, pore spaces, and cavities in the subsurface can be quite valuable now and in the economy of the future. For instance, the United States Strategic Petroleum Reserve stores oil in salt caverns near the Gulf Coast. Diverse projects ranging from carbon capture and storage projects to geothermal projects, to data centers could use these subsurface spaces for different purposes.

A persistent, and growing question is “who” owns these subsurface voids, pore spaces, caverns and cavities. “Who” can use these underground spaces for economic benefit? The Texas Supreme Court recently evaluated this issue in Myers-Woodward, LLC v. Underground Services Markham, LLC, ___ S.W. 3d. ___ (Tex. 2025). The Texas High Court evaluated historical Pennsylvania precedent as part of its deliberation. Is the Texas Supreme Court’s conclusion consistent with Pennsylvania’s historical approach or does the Texas Supreme Court offer a different perspective that challenges how Pennsylvania courts have addressed the issue?

The Myers-Woodward case involved a 160 acre property in Matagorda County, Texas. In 1947, the property’s owner executed a deed (the “1947 Deed”) that conveyed:

[an] (8/8ths) interest in all of the said oil, gas and other minerals in, on and under said land, together with all and singular the rights and appurtenances thereto in anywise belonging, with the right of ingress and egress and possession at all times for the purpose of mining, drilling and operating for said minerals and the maintenance of facilities and means necessary or convenient for producing, treating, and transporting such minerals, and for housing and boarding employees, unto said grantee, his heirs, successors and assigns, forever ....

Later in 1947, the parties updated the 1947 Deed to address a royalty question, with that correction deed stating that “. . .  the 1/8th royalty includes not just oil but also ‘a royalty of 1/8 of all the gas or other minerals in, on, or under, or that may be produced from’ the property.”

The rights that were granted in the 1947 Deed became vested in the Texas Brine Company. In 2008, the Texas Brine Company sold some of its rights to Underground Services Markham, LLC. The deed from Texas Brine Company conveyed all of its “ . . . right, title and interest, in and to all of the salt and salt formations only, in, on and under and that may be produced from the property . . .”

After acquiring its rights in the property, Underground Services Markham attempted to resolve royalty issues by negotiating with Myers-Woodward, which owned the surface. That was unsuccessful. In 2013, Underground Services Markham filed a lawsuit against Myers-Woodward. That lawsuit asked for two declarations.

• First, it sought a declaration about royalty obligations involving salt that was mined.

• Second, Underground Services Markham asked for a declaration that it “. . . owns the cavern space created by its mining efforts in the salt formation underlying the property and that Myers has ‘no rights in and to any substances (not produced or originating from the Subject Tract or lands pooled therewith) stored in any caverns created in the salt mass or revenues derived therefrom.”

While the royalty issue here is interesting, it will be discussed another time. The focus here is Underground Services Markham’s request for a declaration about its ownership of mined-out cavities where it wanted to store hydrocarbons. Those cavities were extensive, with Underground Services Markham mining 2.6 million tons of salt from the property between 2015 and 2019.

During the salt mining activities, Underground Services Markham's lawsuit worked its way through the Texas courts. The trial court concluded that Underground Services Markham owned the caverns that it created as part of its salt mining operation. However, the trial court also determined that Underground Services Markham did not have the right to inject hydrocarbons and minerals produced off-site into those caverns. The trial court reasoned that Underground Services Markham’s rights were limited by the scope of the 1947 Deed to “. . . mining drilling and operating for [salt] and the maintenance of facilities and means necessary or convenient for producing, treating, and transporting [salt], and for housing and boarding its employees.”

Myers-Woodward prevailed on the cavern ownership question in an initial appeal. The appeals court concluded that Myers-Woodward, as the owner of the surface estate, owned all of the non-mineral elements of the subsurface, which included the empty spaces in the subsurface. Therefore, according to the appeals court, Underground Services Markham had no ownership of the caverns and voids created by its salt mining operations and had no rights to use those caverns for any purposes other than what was in the 1947 Deed.

The case then made its way to the Texas Supreme Court. The High Court framed its analysis of the salt cavern ownership question based on the rights granted in the 1947 Deed. The Supreme Court observed that there were two levels of ownership. The 1947 Deed conveyed “all of the said oil, gas and other minerals in, on and under said land, together with all and singular the rights and appurtenances thereto in anywise belonging.” And, out of that scope of rights, Underground Services Markham acquired “all of Grantor's right, title and interest, in and to all of the salt and salt formations only.” Simplifying matters, the Texas Supreme Court explained that:

The question, then, is whether empty spaces within salt formations, created decades later as a byproduct of salt production, were included within the 1947 conveyance of “other minerals” to USM's predecessors. Or, as USM frames it, whether its ownership of the “salt formations” includes the empty space created inside the salt formations by its salt-production efforts. If so, then USM owns those empty spaces. If not, then Myers owns them.

Both sides presented straightforward positions that were grounded in legal authority. Myers-Woodward relied on Texas oil and gas cases where the Texas Supreme Court had indicated that the subsurface voids and reservoirs that remained after oil and gas extraction did not belong to the mineral owner, unless an agreement said otherwise.

For its part, Underground Services Markham reasoned that those decisions were based on oil and gas, which are substances that can change locations, and subjects of the rule of capture, meaning that the oil and gas could migrate from property to property. Underground Services Markham argued that because the salt is a hard mineral whose physical location is fixed and the rule of capture does not apply, Texas courts’ prior decisions about ownership of voids and cavities in the oil and gas context did not apply. Interestingly, Underground Services Markham relied on decisions about voids and caverns from coal mining jurisdictions, including Pennsylvania, which held that the owner of the minerals also owned the caverns and shafts created by the mining activity.

The Texas Supreme Court sided with Myers-Woodward and concluded that the 1947 Deed did not grant rights to cavities and voids that were the result of mining operations. The Court reduced its rationale to two points. First, addressing the scope of the 1947 Deed, it wrote that Underground Services Markham “ . . . does not own the salt formations. At most, it owns the salt.” And the cavities and voids left over in the ground after salt mining activities were not “salt”.

The Myers-Woodward court’s second rationale was grounded in its view that Texas law was “. . . reasonably clear that underground storage space generally belongs to the surface owner absent a contrary agreement.” From that premise, it reasoned that Underground Services Markham was proposing that one rule apply to underground storage spaces in salt and other mineral formations and that another rule apply to underground storage spaces in non-mineral rock formations. The Court rejected this level of complexity and held that “the surface owner, and not the mineral lessee, owns the possessory rights to the space under the property’s surface, absent an agreement to the contrary.”

Does the Texas Supreme Court’s rejection of Underground Services Markham’s argument create a conflict between Texas law about ownership of subsurface cavities and pore spaces and Pennsylvania law about those topics - since Underground Services Markham relied, in part, on Pennsylvania law? The answer is “maybe”, but it is not an absolute.

The most important point is that these analyses are fundamentally based on what deeds or leases say about ownership or lease rights. While states have background rules that apply in the absence of a statement in a deed or a lease, courts evaluating disputes are most likely going to first look at what a deed or agreement says about ownership.

The Pennsylvania case that Underground Services Markham cited was Lillibridge v. Lackawanna Coal Co., 22 A. 1035 (Pa. 1891). In this 19th century dispute, the Pennsylvania Supreme Court reviewed the breadth of rights conveyed in a deed which stated ‘[t]o have and to hold the coal in and under said land unto the said party of the second part, its successors or assigns, until the exhaustion thereof under the terms of this indenture.” Id. at 1036.

The Lillibridge coal owner mined coal under the ground which created a cavern that the coal owner used as a tunnel to transport coal from mining on adjoining properties. The surface owner contended that these activities were beyond the scope of rights that were conveyed in the coal deed in question. Id. at 1036-37. The Pennsylvania Supreme Court rejected that argument.

Addressing the surface owners’ argument, the Supreme Court wrote that:

. . . it seems quite incongruous with the admitted ownership and estate of the defendant in the coal displaced. Under all the decisions, the coal in place was absolutely owned in fee-simple by the defendant. In a state of nature the coal necessarily occupied space. How could the defendant own the coal absolutely and in fee-simple, and not own the space it occupied? Or how is it possible to conceive of such a thing as the ownership of the space independently of the coal?

Id. at 1037. From this baseline, the Lillibridge court evaluated the practicalities of the surface owner’s contentions, seemingly focused on the fact that the coal owner’s subsurface transportation activities did not impact the surface owners:

In this way or chamber the plaintiffs, as owners of the surface, have no right or title. They have no access to it; they cannot use it; they are in no manner obstructed or injured by it. Nor can we understand how they are or can be injured in any other way. It is of no avail to say generally in the bill that they are injured. The injury must be stated specifically, so that a court may know what it is. This is not done, and we know not what the injury complained of is. How, then, can we enjoin the defendant? We are asked to enjoin against the removal of coal from the adjoining tract, but this is a matter with which the plaintiffs have no concern. They do not pretend to have any title or interest in that coal. They ask to enjoin removing that coal through the chamber or way made by the defendant through its own property, to-wit, the coal sold to them by the plaintiffs. Why or for what reason should we do this? The plaintiffs would gain nothing which they do not now have, if we did. No complaint is made in the plaintiffs' bill of either the deprivation or injury of any right growing out of the contract. The plaintiffs cannot possibly use any part of the space left by the removal of the coal, and hence they are not obstructed in the slightest degree. The right to use that space is exclusively in the defendant, and that use is not, and cannot be, questioned by the plaintiffs.

Id. at 1037.

After examining English courts’ treatment of related issues, the Pennsylvania Supreme Court in Lillibridge definitively sided with the coal owner about its rights to use its coal caverns to transport coal through the property. The Lillibridge court reasoned that:

There is no averment in the bill that all the coal in the vein has been taken out, or that the tunnel is opened on the bed-rock underneath the vein. On the contrary, it is alleged that the tunnel has been cut through the coal, by which we understand it is in the very body or substance of the coal which was bought by the defendant. It follows hence that the tunnel or way is exclusively within the defendant's own property, and is subject to such use as any owner may desire of property belonging to himself.

Id. at 1039.

The Pennsylvania Supreme Court’s decision in Lillibridge seems to be in tension with the Texas Supreme Court’s decision in Myers-Woodward. For its part, Lillibridge is still “good law” in Pennsylvania, but the breadth of its holding may be limited and may not provide dispositive guidance about “who” owns subsurface caverns, voids and pore space in Pennsylvania. There are several reasons for this.

First, the Pennsylvania Supreme Court in Lillibridge spent considerable effort to evaluate the practical impact on the surface owner of the coal company’s use of the tunnels as transportation avenues. There was no physical impact on the surface owner that came from the coal mining shafts being used to transport coal from elsewhere. And, the coal owner’s use of those caverns was related to transporting coal - and not some other substance. The Lillibridge  court did not get into questions about the loss of economic opportunity for the surface owner, and the economic benefit to the coal owner, which seems relevant in modern-day questions about ownership and rights to use caverns, voids and pore spaces.

Second, the Lillibridge decision equated ownership of the coal to ownership of the space where the coal had been before it was mined. While Pennsylvania recognizes oil and gas as real property that can be owned separately from the surface, Pennsylvania courts have recognized that a “ . . . lease of minerals in the ground is a sale of an estate in fee simple until all the available minerals are removed. . . “ Snyder Brothers, Inc. v. Peoples Natural Gas Co., 676 A.2d 1226, 1230. That seems to fall within the Texas Supreme Court’s analysis that the rights granted were to the mineral itself - not anything else.

Third, and relatedly, the Lillibridge court made clear that the tunneling in question was within the coal itself. The tunnel did not extend outside of the coal. Therefore, as a result, coal still remained in the ground. So, if the rights to coal ownership extended as long as coal remained in the ground, then preservation of some coal could keep the transportation rights through the coal intact. But, that is not a principle that extends to oil and gas. In Butler v. Charles Powers Estate ex rel Warren, 65 A.3d 885 (Pa. 2013), the Pennsylvania Supreme Court concluded that owners of the Marcellus shale formation did not own the gas within that formation.

There certainly are ways to distinguish the Pennsylvania Supreme Court’s decision in Lillibridge from the Texas Supreme Court’s Myers-Woodward holding. But, those cases present an interesting contrast in approaches to ownership of subsurface voids, cavities, caverns and pore spaces. While the ownership question will be principally focused on what a deed or lease says, the Myers-Woodward rationale does not seem to have the logical problems that arise from the Lillibridge approach, which did not substantively address economic utility or lost economic opportunities from the coal owner’s use of the mined-out caverns.

Ultimately, Pennsylvania courts will most likely be the ones to address the extent to which Myers-Woodward impacts Pennsylvania law related to ownership of spaces in the ground. That will impact “who” has rights to use those voids, caverns, cavities and pore spaces for economic opportunities ranging from carbon capture to subsurface disposal and injection of wastes. Until then, Myers-Woodward presents an intriguing different perspective on that ownership question.

Ownership of subsurface rights in Pennsylvania is a complicated subject that is likely to become more important in the future. If you have questions about these issues and ownership of subsurface rights, contact Brendan A. O’Donnell at odonnellba@hh-law.com or 412-288-2226.