USE OF EASEMENTS INOIL AND GAS LAW

Oil, Gas and Mineral Land Titles SeminarJune 5, 2014

Steve Bain and Jennifer Cadena*Welborn Sullivan Meck & Tooley, PC

1125 17th Street, Suite 2200Denver, CO 80202

(303) 830-2500sbain@wsmtlaw.com

jcadena@wsmtlaw.comwww.wsmtlaw.com

*prepared with the help of Maki Iatridis

Types of Surface AccessEASEMENT

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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Types of Surface Access

EASEMENT The pipeline company

needs an easement from the surface owner Can be exclusive or non-

exclusive

Surface owner will limit ability to use surface Pipeline Specified time

“One year after the pipeline is no longer used”

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Types of Surface Access

LICENSE

Not an interest in real property

Yearly payment Personal, non-

assignable Revocable

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Licenses and pipelines

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Licenses and pipelinesCan a License be obtained for a

pipeline?

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Licenses

Yes, but who would want to?

….

Licenses are hardly ever used

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Easements

General Examples Pipelines Drainage Utilities Roads (RS 2477) Railroads (in patent) Access to development of minerals

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Terminology and Types of Easements

Types of Easements generally In Gross Appurtenant

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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Easements in Gross Personal Interest No connection with the land Roads and utilities, typically

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Easements Appurtenant Runs with the land Example 1:

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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Easements Appurtenant 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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Easements Appurtenant 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

A

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Easements Appurtenant 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 (Servient)

A (Dominant)

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Easements Appurtenant Dominant

May do whatever is reasonably necessary to use easement

Servient 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

A

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Creation of Easements Express

Grant Reservation

Implication Necessity Pre-existing Use

Prescription

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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 . . . .”17

Creation of Easements - Express

Oil and Gas Lease may contain express grant

If not express, then implied

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Creation of Easements - Express

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 . . . .”

Not expressed in writing

Implied by the transaction

Typically, by necessity or by preexisting use

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Creation of Easements - Implication

Creation of Easements - Implication

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

A

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Creation of Easements - Implication

Necessity Common ownership No other way to access land Must be current and continuing Lack of necessity terminates claim Payment

A

B

A

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Creation of Easements - Implication

Necessity Common ownership No other way to access land Must be current and continuing Lack of necessity terminates claim Payment

A

B

A

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Creation of Easements - Implication

Preexisting Use Level of “necessity” may be less than access

to property

A

B

A

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Creation of Easements - Prescription

Unopposed Continuous trespass Statutory period of 18 years Open, notorious, visible and adverse

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Termination of EasementsVoluntarily

Agreement by parties Quitclaimed by easement owner Express terms of easement instrument

Abandonment Voluntary, affirmative acts Intent to abandon

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Scope

Trespass if easement holder exceeds “scope” of easement

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Implied Easement for Benefit of Mineral Estate

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

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Do I have an easement to develop the minerals?

Implied Easement for Benefit of Mineral Estate

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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Implied Easement for Benefit of Mineral Estate

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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Easement for Benefit of Mineral Estate

How much surface of the land can I (or a lessee) use to develop the

minerals?

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Easement for Benefit of Mineral Estate

Traditional Rule 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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Easement for Benefit of Mineral Estate

But, what is reasonable?

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Easement for Benefit of Mineral Estate

Modified Traditional Rule 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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Easement for Benefit of Mineral Estate

But, what is reasonable?

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Easement for Benefit of Mineral Estate

Due to the possible litigation as to what is “reasonable,” operators typically obtain surface use agreements

According to C.R.S. § 34-60-127:

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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.

Surface Use Agreements

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COGCC Definition

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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, Multi-Well Site, Production Facility, pipeline or any other Oil and Gas Facility that supports oil and gas development located on the Surface Owner’s property.

Damage Releases and Agreements

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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Operations 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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Compatible Development and Surface Use Agreements

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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SUA Map

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Setbacks 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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Wind v. Oil & Gas Who leased first? How soon is each likely to be

developed? Can development be

staggered? Safety concerns Height concerns

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Questions?

Jennifer CadenaSteve Bain

Welborn Sullivan Meck & Tooley, PC1125 17th Street, Suite 2200

Denver, CO 80202(303) 830-2500

sbain@wsmtlaw.comjcadena@wsmtlaw.com

www.wsmtlaw.com

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