912 F.3d 1249
10th Cir.2018Background
- Marvin and Mildred Bay (surface owners) sued Anadarko (mineral owner) alleging trespass from excessive surface use where lessees drilled multiple vertical wells instead of fewer directional wells. The dispute arose from a 1907 Union Pacific deed reserving "all coal and other minerals" and the right to use so much surface "as may be convenient or necessary."
- Anadarko purchased the mineral rights in 2000, leased to operators (Noble, etc.), who drilled seven vertical wells on the Bays' farm; the Bays argued directional drilling could have reduced surface impacts.
- The district court interpreted the deed to allow the mineral owner to choose the method it "deems most suitable" so long as the method was not "commercially unreasonable or contrary to accepted industry practices," applied that standard at trial, and entered JMOL for Anadarko after finding vertical drilling commercially reasonable.
- The Tenth Circuit reviewed whether the deed’s "convenient or necessary" language expands rights beyond the common-law reasonable-use rule from Gerrity Oil & Gas Corp. v. Magness and whether JMOL was proper under the correct legal standard.
- The panel concluded the deed did not expand rights beyond the common-law reasonableness test (Gerrity), that the district court erred by imposing an enhanced "commercially unreasonable" burden on the Bays, and reversed JMOL and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the deed's reservation of surface use as "convenient or necessary" expands the mineral owner's rights beyond the common-law reasonable-use rule | Bays: clause should be read narrowly; does not let Anadarko choose any convenient means that increases surface harm | Anadarko: clause viewed from mineral-owner perspective permits choosing the method it deems most suitable unless commercially unreasonable | Court: clause does not expand rights beyond Gerrity; interpret reservation according to ordinary meaning and precedent (construe reservations strictly) |
| Proper legal test for trespass based on excessive surface use | Bays: apply Gerrity burden-shifting reasonableness/necessity test; surface owner need only show material interference and that reasonable alternatives existed | Anadarko: district court’s modified test required showing vertical drilling was commercially unreasonable or contrary to industry practice | Court: apply Gerrity unmodified; district court erred by imposing heightened "commercially unreasonable" requirement |
| Whether JMOL was proper on trespass claim given the evidence (vertical vs directional drilling) | Bays: presented evidence of material interference and feasible less-intrusive alternative (expert modeling of directional wells) requiring jury resolution | Anadarko: produced unrebutted evidence that vertical drilling conformed to industry practice and was commercially reasonable, so JMOL proper | Court: JMOL improper under Gerrity because Bays presented rebuttal evidence of reasonable alternatives; remand for further proceedings |
| Whether Anadarko can be vicariously liable for lessee Noble's alleged trespass | Bays: Anadarko may be liable if it authorized or ratified lessee's conduct | Anadarko: ordinarily lessor not liable for lessee; no evidence of authorization/ratification | Court: decline to decide; noted lessor can be liable if it authorized or ratified trespass; left issue for district court to address on remand |
Key Cases Cited
- Gerrity Oil & Gas Corp. v. Magness, 946 P.2d 913 (Colo. 1997) (adopts reasonableness/necessity test and three-step burdens for surface-use trespass claims)
- Barker v. Mintz, 215 P. 534 (Colo. 1923) (interpreting identical Union Pacific reservation language; court applied reasonableness and necessity considerations)
- Notch Mountain Corp. v. Elliott, 898 P.2d 550 (Colo. App. 1995) (deed language must show intent to create greater surface rights than at common law)
- Baca Land & Cattle Co. v. Savage, 440 F.2d 867 (10th Cir. 1971) (similar "necessary or convenient" clause construed to allow only reasonably suitable means respecting landowner interests)
- Getty Oil Co. v. Jones, 470 S.W.2d 618 (Tex. 1971) (accommodation doctrine: operator must use less intrusive reasonable means where available; supports jury submission if surface use makes existing use infeasible)
- Merriman v. XTO Energy, Inc., 407 S.W.3d 244 (Tex. 2013) (material interference requires that lessee’s use completely precludes or substantially impairs existing surface use)
- McCormick v. Union Pac. Res. Co., 14 P.3d 346 (Colo. 2000) ("other minerals" in old reservations includes oil and gas)