Buried Pipeline Ruling Favors Lessors

Co-author Brittany Blakey

In Texas, what happens to an obligation to bury pipelines when, after creation of the obligation, the surface and minerals are severed?  Henry v. Smith explains.

Henry et al own the surface estate of the Camp Creek Ranch, a 15,000-acre tract in Archer County. Smith et al are lessees in three oil and gas leases. At the time the leases were executed the original lessors owned both surface and minerals. Each lease contains special surface covenants, including a requirement that the lessee to bury flowlines and pipelines to a certain depth at the lessor’s request.

Eventually, the mineral estates became severed from the surface. After purhasing the surface,  Henry et al requested that the lessees bury all flow lines pursuant to the covenants.

Lessees refused, taking the position that Henry et al could not enforce the covenants because the covenants had been detached from the surface estate through the mineral reservations (i.e, the covenants do not belong to the surface owners). Henry et al sued to enforce the covenants or, alternatively, recover damages for their breach.

The question

Were the surface covenants conveyed with the surface estates or reserved to the mineral estates (plural; at inception of the leases there were three different tracts).

The answer

Surface owners win. Because a pipeline burial covenant is “attached to the surface” it generally runs with the land and is conveyed through a deed. To deviate from the general rule, the deed must contain a reservation or exception that expressly reserves or detaches the burial covenant. The court will not infer a reservation by implication.

The court observed that the mineral reservations in the deeds from the previous owners to Henry et al did not mention the surface estates or surface covenants. And there were no express words revealing an intent by the grantors to detach the surface covenants from the surface estates. Therefore, because there was no reservation of the surface covenants, the deeds conveyed the covenants to Henry et al.  The trial court’s decision in favor of the lessees was reversed and the case remanded to the trial court.

The dead cow and injunctive relief

The surface owners alleged that the lessees’ actions constituted a nuisance, were negligent, and violated the Texas Natural Resources Code and the National Electric Code (who knew there was such a thing). The result was the electrocution of a cow, so innocent, not yet on its journey to the charnel house, and without doubt a prize cow and a credit to bovines everywhere.

The evidence was mixed. The standard for review of an injunction ruling is abuse of discretion. The appellate court declined to second-guess the trial court’s refusal to grant injunctive relief.

Sandra Jaffe, co-founder of Preservation Hall,  RIP.

from Texas Bar Today https://ift.tt/3mZBtwb
via Abogado Aly Website