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U.S. District Court Grants Preliminary Injunction Allowing Lessee  to Utilize Surface Overlying Severed Mineral Estate to Develop Neighboring Lands

By Casey Valentine
In EOG Resources, Inc. v. Lucky Land Management, LLC, 2024 U.S. Dist. LEXIS 31348, United States District Court for the Southern District of Ohio granted a preliminary injunction to EOG Resources, Inc. (EOG), enjoining Lucky Land Management, LLC (Lucky Land) from interfering with EOG’s reasonable use of the surface in connection with its lease of the severed oil and gas rights underlying approximately 313.20 acres located in Noble County, Ohio. 

As background, the mineral rights to the property were severed from the surface in 1950. When Lucky Land acquired the surface rights to the property in 2022, the property was subject to an existing oil and gas lease that was subsequently assigned to EOG. Lucky Land intended to use the property as a hunting ground and claimed to have made nearly $300,000 in improvements to the property. EOG planned to erect two well pads on the property and offered as much as $100,000 to Lucky Land to enter into a Surface Use Agreement that would release EOG from any surface damages that could arise in connection with the construction and operation of its two well pads. Lucky Land rejected EOG’s offers and refused to allow EOG to access the surface. Before it could develop the property, EOG needed to clear trees. However, federal regulations protecting certain species of endangered bats prohibit tree clearing during the months of April through September.

Facing potential construction delays, EOG filed a complaint against Lucky Land as well as a motion for a preliminary injunction to enjoin Lucky Land from interfering with EOG’s use of the surface of the property in connection with its oil and gas lease. The district court examined four factors: (1) whether EOG had a substantial likelihood of success on the merits, (2) whether EOG would suffer irreparable harm if a preliminary injunction was not issued, (3) whether the preliminary injunction would cause substantial harm to others, and (4) whether the public interest would be served if the district court granted the requested the preliminary injunction.

The severance deeds and EOG’s oil and gas lease were silent as to whether the reservation of rights included the right to develop minerals underlying neighboring lands. The district court concluded that the severance deeds and EOG’s lease did not grant EOG an express right to use the surface to develop oil underlying neighboring lands. However, the district court found that EOG had a strong likelihood of success on the merits because EOG’s proposed use of the surface (i) did not exceed what is reasonably necessary for EOG to enjoy its right to the mineral estate and (ii) gives due regard to Lucky Land’s use of the surface. The district court noted that the two horizontal well pads impacted less surface acres than drilling 16 two-acre vertical well pads across the property. The district court also found that EOG’s $100,000 offer demonstrated further due regard for Lucky Land’s surface rights. Specifically, the district court found that $100,000 for the disturbance of approximately 45 acres, most of which would only be temporarily disturbed, was an appropriate payment based on the price per acre that Lucky Land paid to purchase the property.

Next, the district court found that EOG would not suffer irreparable harm if the injunction was not granted. While EOG may suffer construction delays and substantial added costs, the district court noted that this type of harm only warranted injunctive relief in unique circumstances that were not present in this case. Lastly, the district court found the third and fourth factors to be neutral. After balancing the four factors, the district court’s finding that EOG had a strong likelihood of success on the merits ultimately tipped the scales in its favor and the district court granted EOG’s motion for a preliminary injunction.

Tags: Horizontal Wells, Surface Use, severed minerals, Reasonable Use of Surface

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