Oil and Gas Lease: Surface Use; Well Access Road; Maintenance

摘要

The surface rights of the parties are governed by a 1955 oil and gas lease and a 1991 Stipulated Permanent Injunction. In 2005 the stream flow of the San Juan River is increased by the government to comply with the Endangered Species Act resulting in erosion of the leased land and damage to the road used by XTO to access its wells. XTO proposes to construct a new road to access its wells because repair of the existing road would cost three to four times more than a new road, and the existing road area would continue to be affected by the increased stream flows in the San Juan River. Armenta, the landowner, objects to construction of a new road and contends XTO has an obligation to repair the existing road. Following a multi-day evidentiary hearing in the district court, and after receiving the recommendations of a special master, the district court approves construction of a new road and annual compensation to Armenta for lost hay production associated with the new route. Armenta appeals. Held: affirmed. The court holds mat XTO owns the right to make reasonable use of the leased land to conduct its oil and gas operations, which includes the construction and use of roads to access its wells. However, XTO's reasonable access must be exercised with "due regard" for Armenta's surface rights. The district court properly balances the right of XTO to use the land to conduct operations with Armenta's surface use. The court of appeals holds mat XTO, under the circumstances, is not obligated to rebuild the existing road but rather can pursue construction of a new road, using an alternative route, which the district court finds would minimize interference with Armenta's use of the surface.