Pump jack pumping oil in west Texas near Midland/Odessa with thunderstorm clouds
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Texas is the largest producer of greenhouse gases in the United States, accounting for over one-eighth of all U.S. emissions. Interestingly, Texas also has the largest potential for carbon storage in its vast underground formations , should geological carbon sequestration at scale becomes a reality. The U.S. Department of Energy has estimated that Texas has onshore storage capacity for between 661 million and 2.4 billion tons of carbon dioxide.
Clearly, Texas has an enormous opportunity to help U.S. and global efforts to reduce atmospheric carbon emissions. But the lack of clear laws governing who has the right to use that underground space poses a stumbling block that could delay or even cripple efforts to capture market share for this nascent environmental solution.
In order for Texas to fully take advantage of this potential, the Texas legislature and/or the courts must unequivocally clarify who has ownership rights to the underground pore space where the carbon would be injected and stored.
Property rights in land use can be divided into two distinct estates—the mineral estate and the surface estate. When it comes to who owns the underground pore space in situations where the mineral and surface rights have been separated, states in the U.S. follow either the ownership-in-place theory, known as the “American” rule, or the non-ownership theory, known as the “English” rule. Under the English rule, the mineral estate holds ownership of that pore space. Under the American rule, which the majority of U.S. states follow, the mineral estate has ownership of the underground minerals but not of any geological formations – those remain the property of whoever has the surface estate.
However, the American rule does give owners of the mineral estate the right of reasonable use of the pore space during mineral extraction. Thus, in jurisdictions which follow the American rule, the surface estate may not lease the underground pore space until the mineral estate has completed extraction and has completely depleted the minerals.
Under Texas law, when the mineral estate has been severed from the surface estate, the mineral estate is dominant and can use the surface as is reasonably necessary to develop oil and gas or other minerals. However, while most states have clearly expressed whether they follow the American rule or the English rule, Texas law has not settled the issue of who owns the rights to lease subsurface pore space for the storage of carbon when the mineral and surface estates are separate.
There are several Texas cases that give conflicting answers when it comes to which rule the state follows.
In the 1991 Texas Court of Appeals case Mapco, Inc. v. Carter, the court concluded that the mineral owner was entitled to payment for storage rights in an underground salt cavern, even though all the salt had already been harvested, thus following the English Rule. This ruling conflicted with Emeny v. United States, a previous case in the United States Court of Claims applying Texas law that held that the surface owner should be compensated for pore space storage rights, following the American Rule. Specifically, the court ruled that rights conveyed in an oil and gas lease did not include the rights to “the geological structures beneath the surface, including any such structure that might be suitable for the underground storage of foreign or extraneous gas produced elsewhere.”
In the more recent Texas Court of Appeals case, FPL Farming, Ltd. v. Texas Natural Resources Conservation Commission, a surface owner alleged trespass against the Texas environmental regulatory agency for issuing an underground waste disposal permit where the wastewater injected would eventually migrate below the surface owner’s property. The court assumed, without deciding, that the surface estate did own the underground pore space and thus had the right to bring the legal action. The court did not address how this assumption conflicts with Mapco.
Texas has yet to explicitly resolve the issue as to underground pore space ownership.
Texas’s conflicting case law needs to be clarified in order for carbon capture and storage to flourish in Texas, because companies need to know who has the right to lease the underground storage space. According to the Texas Railroad Commission, “in many areas of Texas, especially those where there has been extensive historical oil and gas development, it is common for the mineral estate and surface estate to be owned by different people.” Thus, the issue of pore space ownership is going to be a prevalent one going forward.
Given that the majority of states follow the American rule and allocate pore space ownership to the surface estate, Texas will likely eventually do the same. However, the longer the delay in clarification, the longer this unresolved issue will create a headache for those wanting to invest in carbon capture and storage for purposes other than enhanced oil recovery. That may cause them to instead redirect their investments to states where the issue has been settled.
Everything is bigger in Texas, and so is its potential to help the United States reduce its greenhouse gas emissions . Resolving the pore space ownership question once and for all would be a huge step in reducing barriers to carbon capture and storage and towards helping Texas become a leader in combating climate change.
Elizabeth George is currently an Energy Scholar with the Energy Initiative at the University of Houston. She is a recent graduate of the University of Houston Law Center and is a 2016 graduate of The Ohio State University in Columbus, Ohio where she received her B.S. in Environment and Natural Resources.
UH Energy is the University of Houston’s hub for energy education, research and technology incubation, working to shape the energy future and forge new business approaches in the energy industry.
