On May 16, 2025 the Texas Supreme Court released its opinion in Myers-Woodward, LLC v. Underground Services Markham, LLC, 2025 WL 1415892 (Tex. May 16, 2025).
The underlying dispute stems from a 1947 lease made by the predecessor of the petitioner (Myers) to the predecessors of the respondents (Markham and United Brine, collectively referred to as USM).
The original lease to Markham was a fairly standard for its day oil & gas lease. It was followed by a correction lease three months later which clarified that the royalty calculation under the original oil lease included all minerals produced. It was entered into before salt caverns were in wide use as storage facilities. At some point, United Brine acquired the salt rights under the original lease.
In 2008, Markham acquired all of Texas Brine’s interest in the salt lease and its obligations to pay royalties.
After years of discussion, the parties could not agree on the calculation of salt royalties, soUSM sued Myers and the other royalty holders in 2013 seeking declarations:
- regarding the calculations of salt royalties; and
- that USM owned the cavern space created by its salt mining efforts.
USM began salt production after commencing suit. The royalty dispute revolves around whether the royalty should be calculated using spot or “market prices” at the time of production, or amounts under fixed price contracts USM had with third parties. The Texas Supreme Court reversed a key finding of the court of appeals and remanded without further instructions.
The more interesting discussion is the ownership and right to use the cavern space. Between 2015 and 2019, USM mined 2.7 million tons of salt. It asserted that it owned the voids or caverns left behind and that it was free to use those caverns to store hydrocarbons produced outside the lease. While modern leases contemplate ownership and usage of pore space and caverns, it was simply not thought about in the 1940s.
Texas precedent in oil cases has held that the surface owner, absent specific language in the lease to the contrary, owns the space left by oil and gas production, and is entitled to compensation for the use of that space.
So, it is no surprise that the Court found that Myers, as the surface owner, also owned the sub-surface possessory rights, citing Regency Field Servs., 622 S.W.3d, at 820 (citing Lightning Oil).
There are several interesting wrinkles in the case. First is that it specifically overruled the one Texas salt mining case, which had found the mineral estate holder owned the underground storage facility, Mapco Inc. v. Carter, 808S.W.2d 262. Mapco had been lightly followed and often criticized.
Second, the 2008 conveyance of the salt lease itself conveyed all of Texas Brine’s interest in all of the salt and “salt formations” in the property. Thus, USM argued that it owned those “formations.”
The Court found however, that USM did not own the salt formations (emphasis in original) because the original 1947 deed made no such conveyance. Instead, the original deed only conveyed the minerals, which included salt, but not the “non-salt portions of a ‘salt formation’”. That seems to be a straight forward, four-corners of the document analysis. The Court did acknowledge the logic of another argument advanced by USM that salt production was more closely related to traditional mining of fixed in place substances as opposed to migratory oil and gas. Thus, cases analyzing ownership of caverns created by hard rock mining in other states granted ownership of empty mines and mine shafts to the operator.
But those cases are not followed in Texas, and one has to wonder if those case are influenced by remediation responsibility.
In sum, Myers v. USM may not be viewed as blazing new legal trails, but it helps further clarify subsurface rights in Texas under mineral leases and calculation of royalties. This clarification applies equally to subsurface structures used for storage of hydrocarbon, and to those structures used for storage of CO2.
