Opinion ID: 2567729
Heading Depth: 4
Heading Rank: 4

Heading: Only Damages Due to a Mineral Lessee's Unreasonable, Excessive, or Negligent Use of a Surface Estate are Compensable

Text: {31} We do not agree with Petitioner's characterization of the Court of Appeals' opinion; namely, that by requiring that the cost of repair always be considered, it creates an implicit duty of restoration on the part of mineral lessees. Petitioner reads the Court of Appeals' opinion too broadly. The Court of Appeals did not mandate the introduction of evidence of the cost to repair. It clearly used permissive language: evidence regarding cost of repair may be quite helpful in determining the diminution in value. . . . Id. ¶ 36 (emphasis added). Neither the Court of Appeals nor this Court hold that the cost to repair is always relevant when analyzing the diminution in value. We simply hold that, in certain circumstances, it may be. {32} Further, the essence of Carter Farms remains intact insofar as we again decline to recognize an implied contractual duty for all mineral lessees to completely restore the surface estate following drilling operations in the absence of negligence or an express contractual provision otherwise. See id., 103 N.M. at 120, 703 P.2d at 897. Carter Farms reaffirmed the fundamental tenet of oil and gas law that a mineral lease carries with it the right to use as much of the surface area as is reasonably necessary to extract the minerals below. Id. at 119, 703 P.2d at 896; see also Kysar v. Amoco Prod. Co., 2004-NMSC-025, ¶ 24, 135 N.M. 767, 93 P.3d 1272 ([W]hen a thing is granted[,] all the means to obtain it and all the fruits and effects of it are also granted. (quoted authority omitted)); 1 Howard R. Williams & Charles J. Meyers, Oil and Gas Law, § 202.2 (2007). The surface estate is subservient to the mineral estate. Bolack v. Hedges, 56 N.M. 92, 95, 240 P.2d 844, 846 (1952). Because the mineral lessee is entitled to use as much of the surface area as is reasonably necessary for extraction, it is not liable for damages resulting from such reasonable use. See Carter Farms, 103 N.M. at 119, 703 P.2d at 896. The owner of the mineral estate need not return the surface to its pre-drilling condition. Id. at 120, 703 P.2d at 897. {33} Thus, in order to prevail on a negligence claim, [d]amage to the surface estate by the owner of the mineral estate [must be] founded upon the unreasonable, excessive or negligent use of the surface estate. Id.; cf. Dean v. Paladin Exploration Co., Inc., 2003-NMCA-049, ¶ 14, 133 N.M. 491, 64 P.3d 518 (holding that, where contract expressly provides for lessee's liability for all damage to surface estate, negligence is not required for plaintiff to recover for damages). We emphasize the paramount significance of the essence of Carter Farms: damage to the surface estate caused by a lessee's reasonable use is not actionable. Id., 103 N.M. at 120, 703 P.2d at 897. {34} While it seems elementary to emphasize that damages giving rise to a negligence suit must be alleged to result from a breach of the mineral lessee's duty, after surveying the record and the proceedings below, we nevertheless feel compelled to do so because the parties have not differentiated between those damages alleged to have resulted from negligence and those damages resulting from Petitioner's reasonable use of the surface estate. However, in a negligence claim by a surface estate owner against a mineral lessee, the parties and the courts must draw a distinction in the evidence between the damages caused by the lessee's reasonable use, which are not actionable, and those damages to the surface estate caused by the lessee's alleged negligence, which are actionable. {35} To reiterate, the cost of repair may be relevant when analyzing the diminution in value of a piece of real property resultant from a mineral lessee's negligence. In the instant case, the trial court's exclusion of such evidence prejudiced Respondents and constitutes reversible error. Carter Farms ' permanent/temporary dichotomy is no longer useful or viable when assessing damages to real property. Instead, juries may consider the cost of repair and the diminution in value, without regard to whether the injury is characterized as permanent or temporary. Finally, only those damages alleged to have resulted from a lessee's unreasonable, excessive, or negligent use are actionable in a negligence claim.