Easements in oil and gas law - Welborn Sullivan Meck & Tooley

Report
Oil, Gas and Mineral Land Titles Seminar
June 5, 2014
Steve Bain and Jennifer Cadena*
Welborn Sullivan Meck & Tooley, PC
1125 17th Street, Suite 2200
Denver, CO 80202
(303) 830-2500
[email protected]
[email protected]
www.wsmtlaw.com
*prepared with the help of Maki Iatridis
EASEMENT

Non-possessory interest in
real property
Non-possessory: Use of the
land belonging to another
 Real Property



If you have an easement,
you do not own the land,
but have a right to use it
for a particular purpose
“Typically” runs with the
land
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EASEMENT

The pipeline company
needs an easement from
the surface owner


Can be exclusive or nonexclusive
Surface owner will limit
ability to use surface
Pipeline
 Specified time

 “One year after the pipeline
is no longer used”
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LICENSE




Not an interest in real
property
Yearly payment
Personal, non-assignable
Revocable
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5
Can a License be obtained for a pipeline?
6
Yes, but who would want to?
….
Licenses are hardly ever used
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General Examples

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Pipelines
Drainage
Utilities
Roads (RS 2477)
Railroads (in patent)
Access to development of minerals
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Types of Easements generally
In Gross
 Appurtenant

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Purpose and intent determines
If unclear, presumption is appurtenant
Lewitz v. Porath Family Trust, 36 P.3d 120 at 122 (Colo. App. 2001)
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
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Personal Interest
No connection with the land
Roads and utilities, typically
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

Runs with the land
Example 1:

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I own Parcel A and have an easement over Parcel B
You purchase Parcel A from me by deed, but it doesn’t mention
an easement
When you purchase Parcel A, do you also get the easement?
A
B
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

Runs with the land
Example 2:



I own Parcel B which is “burdened” by an easement
You purchase Parcel B from me by deed, but it doesn’t mention
an easement
When you purchase Parcel B, are you “burdened” by the
easement?
A
B
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
Creates “dominant” and “servient” estates
 Dominant - Who benefits from the easement?
 Servient – Who is serving the other? Who owns the
property on which the easement is located?
A
B
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
Creates “dominant” and “servient” estates
 Dominant - Who benefits from the easement?
 Servient – Who is serving the other? Who owns the
property on which the easement is located?
A
A (Dominant)
B (Servient)
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
Dominant

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May do whatever is reasonably necessary to use easement
Servient

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Can’t “unreasonably” interfere with easement
Although servient owner retains right to use easement area, this
use must be consistent with easement owner’s rights
A
B
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
Express

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Grant
Reservation
Implication
Necessity
 Pre-existing Use

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Prescription
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
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Grant/Reservation
Signed by landowner bound by easement
May be in a deed or separate agreement
Mineral Deed example:
Grantor deeds Grantee “all right, title and interest in and
to all of the oil, gas and other minerals located in, on and
under [Blackacre] . . . together with the right of ingress
and egress at all times for the purpose of exploring,
operating and developing said lands for oil, gas and other
minerals and storing, processing, treating, transporting
and marketing the same therefrom and to use so much of
the surface of the land as is necessary or convenient for
any such activities . . . .”
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Oil and Gas Lease may contain express grant
Lessor hereinafter leases to Lessee the oil and gas . . . “together
with the right of ingress and egress and the right to conduct
operations including, but not limited, to construct and
maintain pipelines, telephone and electric lines, tanks, powers,
ponds, roadways, plants, equipment, and structures thereon to
produce, save and take care of said oil and gas . . . .”

If not express, then implied
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
Not expressed in writing

Implied by the transaction

Typically, by necessity or by preexisting use
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
Necessity (common law & by statute)
Common ownership
 No other way to access land
 Must be current and continuing
 Lack of necessity terminates claim
 Payment

A
B
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
Necessity
Common ownership
 No other way to access land
 Must be current and continuing
 Lack of necessity terminates claim
 Payment

A
B
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
Necessity
Common ownership
 No other way to access land
 Must be current and continuing
 Lack of necessity terminates claim
 Payment

A
B
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Preexisting Use

Level of “necessity” may be less than access to
property
A
B
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Unopposed
Continuous trespass
Statutory period of 18 years
Open, notorious, visible and adverse
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Voluntarily
Agreement by parties
 Quitclaimed by easement owner
 Express terms of easement instrument

Abandonment

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Voluntary, affirmative acts
Intent to abandon
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
Trespass if easement holder exceeds “scope” of
easement
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
Facts:
I own Parcel A in fee
 I deed you Parcel A, reserving the
minerals
 That deed does not mention an easement
to access the surface of the property

Do I have an easement to develop the minerals?
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YES
Similar to an easement by necessity
Without this implied easement, the mineral
owner will not be able to develop his/her
minerals
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Do I have an easement on the surface
to access adjoining land?
NO, the easement is limited to developing my
minerals – unless there is an express easement
allowing me to access adjoining land
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How much surface of the land can I
(or a lessee) use to develop the
minerals?
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Traditional Rule



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May use surface to extent reasonably
necessary
Allows mineral owner to use the surface
without obtaining surface owner’s
permission or paying surface owner for
compensation
Mineral owner may not destroy the surface
Can include drilling/operating wells and
constructing roads and pipelines
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But, what is reasonable?
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Modified Traditional Rule

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No longer merely extent reasonably necessary
Focus on “accommodation” – there must be “due
regard” for the surface owner and mineral owner


You must attempt to “accommodate” each other
The accommodation doctrine has been codified.
C.R.S. § 34-60-127

An operator may still enter upon and use that amount of
the surface as is “reasonably necessary.”
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But, what is reasonable?
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

Due to the possible litigation as to what is
“reasonable,” operators typically obtain
surface use agreements
According to C.R.S. § 34-60-127:
The standard of conduct set forth in this section shall not be
construed to abrogate or impair a contractual provision binding
on the parties that expressly provides for the use of the surface
for the conduct of oil and gas operations or that releases the
operator from liability for the use of the surface.
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SURFACE USE AGREEMENT shall mean any
agreement in the nature of a contract or other form
of document binding on the Operator, including
any lease, damage agreement, waiver, local
government approval or permit, or other form of
agreement, which governs the operator’s activities
on the surface in relation to locating a Well, MultiWell Site, Production Facility, pipeline or any
other Oil and Gas Facility that supports oil and gas
development located on the Surface Owner’s
property.
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Timely and hassle free access
Provide tubing for corrals
Cattle guards
Grading and gravelling driveways
Water supply wells
Updating landowner’s abstract
Dust suppression
Repairing/upgrading fences*
* James J. O’Malley & Kendor P. Jones, “Chained Gates and No Trespassing Signs:
Dealing with Wary Landowners in a Brave New World,” 51 Rocky Mt. L. Inst. 7-1, 7-23
(2005).
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Timing and coordination of drilling operations
Segregation of topsoils
Location of production equipment
Noise control
Visual aesthetics
Protection of water wells
Fencing and protection of livestock
Safety issues
Indemnification and liability issues
Reseeding and reclamation
* James J. O’Malley & Kendor P. Jones, “Chained Gates and No Trespassing Signs:
Dealing with Wary Landowners in a Brave New World,” 51 Rocky Mt. L. Inst. 7-1, 7-24
to 7-25 (2005).
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Seismic work
Access
Construction of locations for wells, tank batteries,
meters and processing equipment
Construction of roads, flowlines, gathering lines
and power lines
Compressor siting
Cutting of fences and trees
Workover operations*
*See Christopher G. Hayes, “Surface Use Agreements,” Severed Minerals, Split Estates,
Rights of Access, and Surface Use in Mineral Extraction Operations, 15-1, 15-4 (Rocky
Mt. Min. L. Fdn. 2005).
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
COGCC Setbacks


In 2013, setbacks increased from
150–350 feet to 500–1,000 feet
Proposed Ballot Initiative
Setbacks
No. 85 – 1,500 feet and no taking
 No. 86 – 2,000 feet and no taking
 No. 87 – 1/2 mile and no taking
 No. 88 – 2,000 feet

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Who leased first?
 How soon is each likely to be
developed?
 Can development be staggered?
 Safety concerns
 Height concerns

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Jennifer Cadena
Steve Bain
Welborn Sullivan Meck & Tooley, PC
1125 17th Street, Suite 2200
Denver, CO 80202
(303) 830-2500
[email protected]
[email protected]
www.wsmtlaw.com
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