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Office Buildings vs. Oil Wells

For several years now, The Woodlands, Texas has been booming for real estate in general and for commercial development in particular.  Even before that time it was an active area for companies exploring and producing oil and gas.  This combination can cause commercial developers significant issues not typically encountered elsewhere.

In the state of Texas, mineral ownership is referred to as the “dominant estate” with surface ownership conversely the “servient estate”.  What this translates to as a default for property ownership is that the mineral owner has a right to utilize as much of the surface as reasonably necessary to explore for and develop the minerals.

Fortunately Texas does provide some protections for a surface owner, including some municipal and statutory ordinances and with the most heavily debated protection being in the form of The Accommodation Doctrine.  The Accommodation Doctrine first came into existence in a 1971 lawsuit and, despite multiple legal cases attempting to solidify its application, has generally been narrowly defined and difficult for surface owners to use to their benefit.  Recently, in 2013 the Texas Supreme Court re-visited this doctrine resulting in only slight clarifications.

Essentially under the current interpretation of the Accommodation Doctrine, the surface owner must provide evidence that (1) the mineral owner’s use completely impairs the existing surface use and (2) there is no reasonable, alternate method for the mineral owner to access the minerals and still permit the existing surface use.  Unfortunately, for commercial developers purchasing an empty tract without an established “existing use”, there is no protection from the Accommodation Doctrine.  In addition, it has become the burden of the surface owner to prove up these arguments in order to have the protection of The Accommodation Doctrine.

Fortunately, commercial developers performing due diligence at the time of purchase have several options that provide a more solid solution than later reliance on the Accommodation Doctrine.  These options include securing Surface Waivers from the mineral estate owner and/or specific title policy endorsements which insure against the risk of surface damage by a mineral estate owner.  Completing proper title due diligence costs a tiny fraction of the purchase price for a multi-million dollar development and can mean a huge difference in the outcome of a successful development.

Mineral rights in Texas can present unique issues for commercial developers. Understanding the scope of the mineral owner’s rights to use the surface estate and taking the actions necessary to mitigate the potential risks should be part of every developer’s due diligence activities.

Wendy Lambie

Phone Number: 866-912-8639

Fax Number: 281-210-1361

[email protected]

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