Important Considerations Involving the Sale or Lease of Subsurface Property Rights
By: Alisa N. Carr, Esq.
With the recent increase of exploration and drilling in the Marcellus and Utica shale formations many land owners have been approached by energy companies offering to purchase or lease their subsurface property interests. Division, or severance, of title between surface and subsurface property is not a new phenomenon. Nonetheless, many land owners are unaware that the lease or sale of subsurface mineral interests can adversely affect surface rights, access and use. Land owners considering selling their subsurface property rights should be aware of several important issues.
After title is severed, the owner of the subsurface property will have the right to access the surface and occupy as much of the land as is necessary to extract the mineral (coal, oil, gas, etc.) to which he has title. The owner of the subsurface property obtains this right upon purchasing the subsurface property; regardless of whether it is expressly stated in a contract of sale (1). A fundamental concern of surface owners is to what extent a subsurface property owner may impinge upon the surface rights in the recovery of the minerals and, how much of the surface he may occupy, alter, or destroy in order to extract minerals. Pennsylvania case law holds that the subsurface mineral estate is dominant over the surface estate, although the subsurface owner’s right to enter the surface property is not limitless (2). The easement is restricted to reasonable use justifiable to related activities which are essential to the orderly removal of the mineral property (3).
Unfortunately, neither the courts, nor the legislature, have clearly defined or explained reasonableness in the context of easements or rights of way for mineral extraction. Reasonable use must be addressed in leases or other documents of conveyance, otherwise, a subsurface owner can encroach on the surface property until such time as the surface owner takes action in court by suing to curtail activity, allowing a Judge or jury to decide whether or not the encroachment is a reasonable means of accessing the subsurface matter. The burden is on the surface owner to seek legal redress to prevent or restrain the subsurface owner’s exercise of his rights (4). For this reason, the sale or lease of subsurface interests, without a well-defined right of way for surface access, can result in costly litigation and unpredictable results.
There are two important rights, however, that surface owners retain. First, subsurface owners have a duty to ensure that the surface continues to be supported (5). If the removal of subsurface minerals damages or weakens the support of the surface, the subsurface owner must take remedial steps to restore the support precisely as it was prior to the removal. Second, the subsurface owner must exercise his right to obtain his property “with due regard to the owner of the surface.” (6) Again, though, where the subsurface owner does not fulfill his obligation to show due regard for the surface property, the surface owner is left to seek redress in court—a solution that could be costly, time-consuming and unpredictable.
In order to protect your property rights, Leech Tishman recommends that all land owners considering the sale, assignment or lease of their subsurface mineral rights execute written documents that clearly define the rights and obligations of the parties in conjunction with the exploration and removal of subsurface minerals. Additionally, Leech Tishman recommends consulting a lawyer regarding all such negotiations and document preparation.
Alisa N. Carr is a Partner of the firm and involved with oil & gas and land use matters. She can be reached at 412.261.1600 x218 or firstname.lastname@example.org. Recognition is extended to Meagan Fassinger, a summer Law Clerk at Leech Tishman, for her assistance and research in preparing this article. Please feel free to contact Alisa with any questions you may have.
Leech Tishman is a firm dedicated to providing full-service commercial legal services to individuals, businesses, and institutions. We combine a deep understanding of our clients and their businesses with skilled legal counsel to find solutions. We offer legal services in alternative dispute resolution, bankruptcy & creditors’ rights, construction, corporate, employment, energy, environmental, safety & toxic torts, estates & trusts, government relations, insurance coverage & corporate risk mitigation, litigation, real estate, and taxation. For more information call 412.261.1600 or visit www.leechtishman.com.
(1) See Chartiers Block Coal Co. v. Mellon, 25 A. 597, 598 (Pa. 1893).
(2) See United States v. Minard Run Oil Co., 1980 U.S. Dist. LEXIS 9570, at *14 (W.D. Pa. 1980).
(3) Babcock Lumber Co. v. Faust, 39 A.2d 298, 303–04 (Pa. Super. 1944); See also, United States Steel Corporation v. Hoge, 468 A.2d 1380 (Pa. 1983)
(4) See Belden & Blake Corp. v. Pa. Dep’t of Conservation & Natural Res., 969 A.2d 528, 532 (Pa. 2009).
(5) See Pringle v. Vesta Coal Co., 33 A. 690, 690 (Pa. 1896).
(6) Chartiers Block, 25 A. at 598.