In a decision that could find producers paying more to develop the Marcellus and Utica shales in West Virginia, the state Supreme Court has finally ruled that operators need clear permission from surface rights owners to site well pads on their land to extract natural gas from nearby properties.
The state Supreme Court unanimously affirmed a lower court’s ruling that found EQT Corp. had trespassed by using Margot Beth Crowder and David Wentz’s property in Doddridge County to tap into shale reserves held by other owners nearby. The two filed a lawsuit against the company in 2014 and were eventually awarded $190,000 in damages by a jury. The company appealed the case to the high court.
While the farm owners held a lease that allowed EQT to drill wells to tap oil and gas from beneath their surface estate, they argued that the company was not allowed to disrupt their property in order to produce from neighboring properties with horizontal wells. EQT had argued it was not in the wrong because nearly 40% of the lateral was through shale beneath their land, and the lease in question had been unitized with others nearby years ago.
“This court has never had occasion to directly address the question raised by the parties,” Justice John Hutchinson wrote for the majority. “However, precedent from this court has repeatedly noted that a mineral owner does not have an implied right to use the overlying surface lands to benefit mining or drilling on other property.
“...This court will not imply a right to use a surface estate to conduct drilling or mining operations under neighboring lands...the right must be expressly obtained, addressed, or reserved in the parties’ deeds, leases, or other writings.”
Following the ruling, EQT said it would continue to cooperate with its customers, partners and residents in the state.
“EQT has always worked with landowners to prevent potential issues or disagreements, including through the use of surface agreements to compensate surface owners on the impact of our operations,” spokesperson Linda Robertson said. “While we are disappointed in the court’s ruling, we don’t expect the decision to have a significant impact on our operations in West Virginia.”
David McMahon, an attorney for the plaintiffs, who is also co-founder of the West Virginia Surface Owners’ Rights Organization, agreed, saying drilling will continue. But he said the court’s ruling was one of the most important for surface estates in decades. In West Virginia, mineral and surface rights are severed, meaning they can be under different ownership, which has created varying interests over the years as unconventional drilling has boomed in the state.
In the past, McMahon noted that surface owners often agreed to be paid only what the land was worth as a meadow or a wood lot, for example. After the state Supreme Court’s decision, they can now “insist on surface use protections,” and demand better payment from operators based on what the well pad is worth to development, he said.