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Texas Court Addresses Conflict Between Solar and Mineral Development

March 17, 2021

In the last decade, solar energy development has grown annually at an average rate of 49%.[1] As more land is used for this renewable resource, increased conflicts with the owners of minerals underlying those lands are inevitable. A recent case in Texas, Lyle v. Midway Solar, LLC,[2] highlights how courts may address such conflicts. The court acknowledged that the “accommodation doctrine” may limit the rights of mineral owners to interfere with solar facilities overlaying their minerals. However, application of the doctrine to determine surface rights can only occur after the mineral owner attempts to develop its minerals.

The Facts

The Lyles own 27.5% of the mineral rights in a 315-acre tract in Pecos County, Texas derived from a 1948 Deed. Gary D. Drgac owns 100% of the surface rights in the same tract. The Lyles never leased their mineral interest to an oil and gas operator and have no current plans to develop the minerals. They commissioned no geological studies on the property and never received any offers to lease or purchase the mineral estate. In 2015, Mr. Drgac leased the surface of the property to Midway Solar, LLC (“Midway”) to build a solar energy facility on the property. Under the terms of the lease, Midway could place solar panels on the property, as well as transmission lines, electrical lines, and cable lines. The solar lease acknowledged that the minerals had been severed and identified the rights of the mineral owner as an “encumbrance” on the land.

Drgac and Midway amended the lease to identify “Designated Drillsite Tracts” for future operators to explore for and access minerals. These tracts were exempt from solar facility construction. Midway’s solar facility eventually covered 70% of the surface of the property, leaving the two drillsite tracts undisturbed. Midway obtained surface waiver agreements from adjoining mineral interest owners for purposes of accessing the property but did not obtain a waiver from the Lyles.

The Lawsuit

After construction of the facility, the Lyles sued Midway and Drgac alleging they had breached the terms of the 1948 Deed, denying reasonable access to the minerals by covering 70% of the surface with solar panels and transmission lines. The Lyles also argued that Drgac and Midway were trespassing on their mineral estate. They sought damages for trespass and breach of contract arguing that the solar facility had “destroyed and/or greatly diminished the value” of their minerals.

The Accommodation Doctrine

In Texas, a mineral estate is “dominant,” meaning the mineral owner has the right to use the surface to extract minerals using methods reasonably necessary for extraction. The mineral estate’s dominance is limited by the “accommodation doctrine,” which requires the mineral and surface estates to exercise their respective rights with due regard for the rights of the other. The surface owner carries the burden to show that (1) the mineral owner’s use of the surface completely precludes or substantially impairs the surface owner’s existing use, (2) there is no reasonable alternative method available to the surface owner by which the existing use can be continued, and (3) there are “alternative, reasonable, customary, and industry-accepted methods available to the mineral owner” to recover the minerals. If alternative methods allow mineral development without disturbing the surface owner’s existing use, the accommodation doctrine may require the adoption of that alternative method. If only one method of extracting the minerals is available, the mineral owner may pursue that method, regardless of surface damage. Parties have the right to set their own contractual terms as they see fit, provided such rights do not violate public policy.

The Lyles argued that the 1948 Deed expressly delineated the parties’ rights. The Deed states, “Grantors further reserve unto themselves, their heirs and assigns, the right to such use of the surface estate . . . as may be usual, necessary or convenient in the use and enjoyment of the oil, gas and general mineral estate.” The Lyles argued the word “usual” evidenced the grantor’s intent to reserve the right to drill vertical wells, the “usual” method of drilling at the time the Deed was signed. Directional and horizontal drilling had not been invented. Therefore, covering 70% of the surface with solar facilities violated that contractual right and preserving small drilling pads for vertical and horizontal wells was insufficient.

The court disagreed because it did not interpret the term “usual” as applying to a specific drilling method. Rather, it referred more generally to the right to use the surface to use and enjoy the mineral estate. The Deed made no reference to specific drilling methods and had the grantors intended such a specific meaning of “usual” they could have explicitly reserved the right to drill vertical wells. The court therefore determined that the contractual language did not override application of the accommodation doctrine, which should inform what rights each party had to the surface.

Attempt to Develop the Minerals

Midway argued that for the Lyles to maintain a claim for trespass, the Lyles must currently be using or plan to use the surface to develop their minerals. The Lyles countered that they had already suffered damages from the solar facility blocking access to the mineral estate.

The court determined that if the Lyles exercised their rights, Midway would have to yield to the degree mandated by the application of the accommodation doctrine. However, until such rights are exercised, there is nothing to be accommodated. To maintain a claim for trespass, the Lyles must have first sought to develop their minerals.

The court’s reasoning is that if a claim for trespass could be maintained without an attempt to develop, mineral owners could simply claim damages from any surface activities that could potentially hinder mineral development in the future. Furthermore, there would be no way to calculate damages since future development would be subject to different markets and technologies.

Although the Lyles’ claim for trespass was premature and therefore dismissed without prejudice, the court acknowledged that the determination of each parties’ rights to the surface would be determined in the future if an actual conflict arises.

Conclusion

Lyle v. Midway Solar, LLC should encourage solar developers to be fully aware of outstanding mineral rights on properties they seek to develop. A review of title ownership and an understanding of contractual rights reserved in mineral deeds may allow solar developers to negotiate surface uses up-front and avoid disruptions to their operations due to con

[1] https://www.seia.org/solar-industry-research-data.

[2] 2020 Tex. App. LEXIS 10385.

If you have further questions, please contact Hayden Weaver.

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