Kysar v. Amoco Production Co.

• Decision Date: 05 June 2004
• Docket Number: No. 28,231.,28,231.
• Citation: 93 P.3d 1272,2004 NMSC 25,135 N.M. 767
• Parties: Raymond L. KYSAR, Patsy Sue Kysar, and The Kysar Family Trust, Plaintiffs-Appellants, v. AMOCO PRODUCTION COMPANY, Defendant-Appellee.
• Court: New Mexico Supreme Court

93 P.3d 1272

135 N.M. 767

2004 NMSC 25

Raymond L. KYSAR, Patsy Sue Kysar, and The Kysar Family Trust, Plaintiffs-Appellants, v. AMOCO PRODUCTION COMPANY, Defendant-Appellee.

No. 28,231.

Supreme Court of New Mexico.

June 5, 2004.

Victor R. Marshall & Associates, P.C., Victor R. Marshall, Albuquerque, NM, for Appellants.

Holland & Hart, L.L.P., Bradford C. Berge, Tanya M. Trujillo, Santa Fe, NM, for Appellee. Hubert & Hernandez, P.A., Lee E. Peters, Las Cruces, NM, for Amicus Curiae New Mexico Farm & Livestock Bureau.

OPINION

MINZNER, Justice.

{1} In this opinion, we discuss the surface access rights of a mineral lessee by virtue of a communitization agreement, which the lessee was authorized to execute by a prior owner of the fee. We do so in order to answer two questions certified by the United States Court of Appeals for the Tenth Circuit. These questions arose in an appeal to the Tenth Circuit by Plaintiffs Raymond L. Kysar, Patsy Sue Kysar, and The Kysar Family Trust ("the Kysars") following the grant of summary judgment in favor of Defendant Amoco Production Company ("Amoco") by the United States District Court for the District of New Mexico. We have jurisdiction under NMSA 1978, §§ 39-7-1 to -13 (1997) and Rule 12-607 NMRA 2004.

{2} The first question certified is:

Under New Mexico law, does a mineral rights lessee, by virtue of a Communitization Agreement to which the mineral rights lessee is a party, gain a right of access over the surface estate of the unitized portion of the leased area in connection with operations on other premises or lands pooled or unitized therewith where the lease did not expressly grant this right?

Kysar v. Amoco Prod. Co., 73 Fed. Appx. 349, 349 (10th Cir.2003). We conclude that under New Mexico law a mineral rights lessee, having entered into a communitization agreement with the permission of the prior fee owner, enjoys a right of access over the surface estate of the portion of the leased area subject to the agreement. Thus, we answer the first question "Yes."

{3} The second question certified is:

Under New Mexico law, does a mineral rights lessee, by virtue of a Communitization Agreement to which the mineral rights lessee is a party, gain a right of access over the surface estate of the non-unitized portion of the leased area in connection with the production and extraction of minerals on other premises or lands pooled or unitized therewith where the lease did not expressly grant this right?

Id. We conclude that under New Mexico law a mineral rights lessee does not, by virtue of having entered into a communitization agreement with the permission of the prior fee owner, enjoy a right of access over the surface estate of the portion of the leased area that is not subject to the agreement. Thus, we answer the second question "No."

{4} We draw a distinction between the situations to which the two certified questions refer on the basis of the implied rights the mineral lessee enjoys in each situation. In drawing this distinction, we rely on the statutory and case law governing pooling and unitization that have developed in other jurisdictions; the purposes served by communitization agreements, which typically govern pooling and unitization on federal land; our own case law governing easements; and documents relevant to Amoco's rights, which contain phrases typical of pooling and unitization arrangements. Under New Mexico law, we conclude that a communitization agreement entered into with the permission of the fee owner supports an implied surface access right over land subject to that agreement but not over land that is not subject to the agreement. By "subject to the agreement" we intend to refer to the property actually committed to a joint or pooled operation by inclusion within the relevant unit.

I

{5} The certified questions arose from a dispute involving surface access to a gas well. The gas well is located on property adjacent to the property over which access is claimed. The relevant facts are undisputed.

{6} The Kysars own a ranch on the Animas River in San Juan County, New Mexico. Amoco is the lessee, under two leases executed by the Kysars' predecessors-in-title, of mineral estates located under the Kysars' ranch. Amoco is also, pursuant to a lease with the federal government, the lessee of the mineral rights underlying land owned by the Bureau of Land Management ("BLM") that is adjacent to the Kysars' property. The Kysars own property found in several different sections as shown on the schematic drawing below. We focus on property they own in Section 34, Sections 27 and 28, and in Section 22. The portion of Section 22 owned by the Kysars consists of 37 acres, and that portion of Section 22 is subject to the same communitization agreement to which the Sullivan E Well, also within Section 22, is subject.

{7} The Kysars brought an action for damages as a result of Amoco's use of roads on their ranch to develop and operate the Sullivan Gas Com E-1 Well ("the Sullivan E Well"), which is located on the BLM land. The BLM land is subject to a 1992 Communitization Agreement.

{8} The Sullivan E Well can be reached by two possible access roads that cross the Kysars' property. One road is the "Back Gate Road," which crosses portions of the Kysars' property in Sections 27 and 34. The other is the "Bridge Road," which crosses portions of the Kysars' property in Sections 27 and 28. The Bridge Road goes across a bridge that cannot support the heavy machinery and equipment Amoco's trucks must carry to and from the Sullivan E Well. As a result, Amoco presently uses the Back Gate Road to access the Sullivan E Well. Amoco also uses this road to operate several other gas wells located on the Kysars' property, within leases granted by the Kysars' predecessors-in-title. The Kysars are not contesting Amoco's use of these roads to access the wells located on their ranch.

{9} The northern part of the Kysars' ranch was once owned in fee by Maude Keys. In 1948, she signed an oil and gas lease ("the Keys lease") to Amoco's predecessor-in-title, leasing her land for purposes of "mining and operating for and producing oil and gas" in exchange for a royalty. Most of the land leased by Keys is located in Sections 27 and 28. The 37 acres in the southwest corner of Section 22 is the most northern portion of the Keys leasehold. The Keys lease contained no provision allowing the mineral lessee the use of the surface to reach other tracts located outside the land covered by the lease.

{10} The southern portion of the Kysar property, in Section 34 and the southern portion of Section 27, was originally owned by Onofre and Alvina Jaquez, who in 1948 executed a similar lease ("the Jaquez lease") to Amoco's predecessor-in-title. The Jaquez lease also contained no provision allowing the mineral lessee the use of the surface to reach other tracts located outside the land covered by the lease. In 1950, Onofre and Alvina conveyed their land to Keys, reserving one-half the oil, gas, and mineral rights.

{11} The Keys and Jaquez leases were amended in 1953, by separate documents, to provide the lessee the power "at its option and without [l]essor's joinder or further consent to pool and unitize the leasehold estate and the [l]essor's royalty estate ... with the rights of any third parties ... so as to create ... one or more drilling or production units." Both amendments provided that "[e]ach such drilling or production unit shall not exceed 320 acres," and both contained virtually identical clauses providing:

[T]he commencement, drilling, completion of or production from a well, or any portion of a unit created hereunder, shall not have the effect of continuing this lease in force insofar as it covers the land not included within such unit, and no unit shall be created which covers and includes land in more than one Section.

{12} Keys sold her land in 1956, reserving "all oil, gas, and other minerals." The deed also contains the phrase: "With right of ingress and egress for removal of the same." The Kysars purchased their ranch about 1983. Amoco entered into the communitization agreement in 1992. The Kysars did not sign or otherwise consent to the agreement. The only portion of the property Keys had leased to Amoco's predecessor-in-title that is subject to the agreement is the 37 acres the Kysars own in Section 22. No part of the property Jaquez had leased to Amoco's predecessor-in-title was subject to the 1992 agreement. Neither the Bridge Road nor the Back Gate Road cross any portion of the area subject to the communitization agreement.

{13} The Kysars filed a complaint in state district court alleging that Amoco's use of these roads in order to operate and service the Sullivan E Well constituted unlawful trespass and unfair trade practices under New Mexico law, and Amoco removed the case to federal court. The Kysars moved for partial summary judgment on liability; Amoco also moved for summary judgment. In granting Amoco's motion for summary judgment, the district court held in a well-reasoned written opinion that the 1992 Communitization Agreement authorized Amoco to use portions of the Kysars' property located in Sections 22, 27, 28 and 34 in order to access the Sullivan E Well.

{14} The district court first addressed the question of Amoco's right to use the surface of the Kysars' property within Section 22. The court noted that Tenth Circuit precedent supported the view that operations conducted anywhere within an area subject to a communitization agreement were deemed to occur on each lease within that area. See Cheyenne-Arapaho Tribes of Oklahoma v. United States, 966 F.2d 583, 585 (10th Cir.1992); Kenai Oil & Gas, Inc. v. Dep't of Interior, 671 F.2d 383, 384 (10th Cir.1982). The court reasoned that under that view the mineral lessee ought to enjoy an implied right of access to the entire surface subject to the agreement, as state courts had held. See Prop. Owners of Leisure...