Key Operating & Equipment, Inc. v. Hegar Case Study

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On June 20, 2014, the Texas Supreme Court held that an oil and gas production company, Key Operating & Equipment, Inc. (“Key”), had the right of access on an adjacent tract of land that is part of a pooled drilling unit. Key Operating & Equipment, Inc. v. Hegar, No. 13-0156, 2014 Tex. LEXIS 504 (Tex. Jun. 20, 2014). Key was the lessee of two contiguous tracts, the Hegar Tract (owned by the plaintiffs) and the adjacent Richardson Tract. In 1994, Key built a road across the Hegar Tract to access wells located on both tracts. In 2000, the Hegar Tract lease expired for failure to produce. However, Key continued to use the road across the Hegar Tract to access the producing well on the Richardson Tract. The Hegars filed suit claiming that Key’s use of the road constituted a trespass. The trial court agreed and enjoined Key from using the Hegar Tract. The First Court of Appeals initially reversed, but later withdrew its opinion and affirmed. The Supreme Court in a unanimous opinion has now reversed the First Court of Appeals, noting that the owner of the dominant mineral estate has the right to go upon the surface of that land to produce and remove the minerals, and also incidental rights necessary for that production and removal. The mineral lessee’s incidental rights include the right to use as much of the surface as is reasonably necessary to produce the minerals. Because Key's production from a tract pooled with others is legally treated as production from each tract within the unit, The Supreme Court held that Key has the right to use the surface of any of the units’ pooled tracts in its production activities.

 


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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