Surface Owner’s Regulatory Taking Claim Denied

by Gray Reed & McGraw
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In Walton v. City of Midland, the surface owner of a 35 acre tract within the city limits of Midland, Texas, contended that a provision in a city permit for an oil or gas well was a regulatory taking because it required the lessee to drill a water well on the surface owner’s property for landscaping purposes and that this requirement exceeded the lessee’s right to use water under its oil and gas lease.

The city granted the lessee a permit to drill a well for oil or gas on the surface owner’s property with the following requirement:

Operator shall drill one (1) freshwater well for the provision of irrigation water to maintain the trees required above. Said water well shall not be closer than five hundred (500) feet to the permitted oil and gas well. Operator shall maintain all required trees in a healthy and growing condition. The operator is authorized to drill only one well for irrigation purposes.

The Elements of a Taking Claim

The elements of an inverse condemnation claim are (1) the governmental entity intentionally performed an act in the exercise of its lawful authority, (2) that resulted in the taking, damaging, or destruction of the claimant’s property, (3) for public use. Such a claim may be based on a physical or regulatory taking. Walton alleged a regulatory taking.  (It is referred to as “inverse” bcause it is the opposite of the typical eminent  domain case, in which the government is the claimant.)

The Reasoning

The court determined there was no regulatory taking, focusing on the various tests applied by the United States Supreme Court that aim to identify regulatory actions that are functionally equivalent to the classic taking in which government directly appropriates private property or ousts the owner from his domain. The tests focus on the severity of the burden that government imposes upon private property rights. Several facts support th result in this case:

  • The provision did not require lessee to drill the well on the surface owner’s property, only that it could not be located closer than 500 feet to the permitted oil and gas well; therefore, the surface owner did not “suffer a permanent physical invasion of his property.”
  • Because the surface owner acquired the property subject to the mineral severance, granting the permit was consistent “with the parties’ already existing property rights” and no affirmative rights were granted to the lessee “to occupy or use” the land.
  • The value of the surface after the lessee drilled the well was $3,000 per acre, which shows “the granting of the permit did not deprive him of all economically beneficial use of the property to the extent that he was only left with a token interest.”

Takeaway

If the government is not specifically granting authority to occupy or use land, or taking away all but a token interest in private property, a regulatory taking action will most likely not succeed in Texas.

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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