December 26, 2014

Tenth Circuit: Subsurface Mineral Rights Lessee May Cross Surface Owner’s Property to Access Leasehold

The Tenth Circuit Court of Appeals issued its opinion in Entek GRB, LLC v. Stull Ranches, LLC on Thursday, August 14, 2014.

Stull Ranches is the surface owner of a tract of property in rural Colorado. Entek GRB leases subsurface mineral rights, and, in order to access those subsurface rights, sought to access them by installing oil wells on the surface of Stull’s property. Entek’s subsurface oil leasehold rights extend onto neighboring property owned by the Bureau of Land Management, and Entek sought to traverse Stull’s property in order to reach the subsurface minerals on BLM’s property, since the only way to access the BLM property was on the existing road crossing Stull’s property. Stull objected, arguing that Entek’s drilling would disrupt Stull’s grouse hunting business. The district court granted summary judgment to Entek regarding access to its wells on Stull’s property, but denied Entek’s request to cross Stull’s property in order to access the BLM land. Entek appealed to the Tenth Circuit.

The Tenth Circuit explored the history of the government’s land grants, specifically as to separate grants of surface ownership and rights to subsurface minerals and water. Stull is the successor in interest of land acquired under the Stock-Raising Homestead Act of 1916, which expressly reserved to the government all mineral rights, along with the right to enter and use as much of the surface as is “reasonably incident” to the exploration and removal of mineral deposits, and the right to enact future laws and regulations regarding “disposal” of the mineral estate. The subsequently-enacted Mineral Leasing Act granted the Secretary of the Interior the right to amend mineral leases, which it did for the lease encompassing the subsurface mineral rights on Stull’s property and the adjacent BLM property in the Focus Ranch Unit Agreement. This agreement deems all drilling and producing operations on one part of a leasehold interest will be accepted and performed on all leasehold interests. Because Entek is allowed to drill through Stull’s surface estate to access its subsurface mineral lease, it is deemed access to all leasehold interests, including the leasehold interest on BLM’s surface property. Entek has the right to use the existing road that traverses Stull’s property in order to achieve efficient access to its subsurface leasehold.

Stull also argued that, in a case involving the prior holder of Entek’s current rights, the district court ruled that the lessee of the mineral rights was not permitted to access a different property in order to reach a well on an adjacent tract. However, that case was not appealed because the prior lessee entered into an agreement with Stull allowing it to traverse Stull’s property. The Tenth Circuit ruled that preclusion was precluded by this prior agreement.

The district court’s grant of summary judgment to Stull was vacated and the case was remanded for further proceedings consistent with the Tenth Circuit opinion.

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