As we determined in Part Two of this series, once the surface and mineral estates in a tract of land have been severed, possession of the surface will not suffice to adversely possess the mineral estate. How, then, would a party possess a separate mineral estate? Certain factors considered to determine possession of the surface, such as enclosure by fence or notorious possession, would be difficult to establish as to a 14,000-foot deep oil formation.
The issue is one that has evolved over time in Texas case law. It began as an imprecise standard, “something more” than possession of the surface. Courts have described this standard with language such as “exercise of dominion,” “asserting and enjoying ownership” and “dominion and control” – all being rather inexact in terms of implementation. The Texas Supreme Court’s decision in Natural Gas Pipeline Co. v. Pool (124 S.W.3d 188) sets forth a much more easily-identifiable standard: in terms of actual possession of the mineral estate, “in the case of oil and gas, that means drilling and production of oil or gas.”
In Kilpatrick v. Gulf Prod. Co. (139 S.W. 2d 653), the operator commenced operations on February 11, 1926, began production on September 7, 1928, and paid taxes on production from 1926-1937; the court held that adverse possession of the mineral estate was achieved under the five-year statute of limitations. However, the court was unclear as to when possession began; was it when the first dry well was drilled, prior to the production obtained in 1928? Was it the date drilling began on the producing well? Or was it the date production was first obtained?
The court was much clearer in Conley v. Comstock Oil and Gas LP (356 S.W.3d 755). Comstock began drilling on April 17, 2002, but “ran its gas well back pressure test” on October 26, 2002; the suit was filed on October 25, 2007. The court used the pressure test date as the date for beginning possession; and therefore, by bringing suit on October 25, 2007, the parties were one day short of meeting the five-year statute of limitations for adverse possession. The takeaway from this decision is that actual production is necessary; drilling alone would be insufficient. The court required Comstock to prove not only drilling, but also production of the severed mineral estate.
Under the holding in Pewitt v. Renwar Oil Corp. (261 S.W.2d 904), the drilling and production of a single well, together with paying taxes, was sufficient to achieve adverse possession after the statutory possession period. Temporary cessation did not interrupt the timeline of possession, because the lease itself under which the operator was acting did not expire. Considering Conley and Pewitt together, then, it appears that anything considered oil and gas production under the lease terms – or valid substitutes for production – are sufficient to maintain and continue the act of possession.
As is often the case, it may be easier to determine a clear definition by exclusion; Texas courts have clearly determined that the following acts are insufficient to establish adverse possession of a severed mineral estate:
- Mere execution of leases (Watkins v. Certain-Teed Products Corp., 231 S.W.2d 981);
- Payment of taxes on a royalty interest (Barr v. Wall, 265 S.W.2d 208);
- Drilling of an unsuccessful well (Lyles v. Dodge, 228 S.W.316);
- Purported sale of minerals still attached to the surface (Carminati v. Fenoglio, 267 S.W.2d 449); and
- Drilling/production on other lands pooled with the tract sought to be adversely possessed (Hunt Oil Co. v. Moore, 656 S.W.2d 634).
Next week in Part Four, the final part of our series on adverse possession, we will examine issues of co-tenancy and how to establish a claim of adverse possession against a co-tenant in ownership.
Kuiper Law Firm, PLLC specializes in oil and gas issues; if you have any questions about how the information in this article applies to you or your business, do not hesitate to contact us.
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