Opinion ID: 1751747
Heading Depth: 1
Heading Rank: 3

Heading: Blanchard's trespass claim

Text: For its first point on appeal, El Paso argues that the circuit court erred in finding that it trespassed on the Blanchard property. In so doing, El Paso makes three specific arguments. First, El Paso contends that the circuit court erroneously interpreted the Commission's Rule B-42 to require permission of all surface owners prior to the undertaking of a seismic shoot. Second, El Paso asserts that Rule B-42 is unconstitutional as applied. Third, El Paso claims that the circuit court erroneously found that the Swift permit, which authorized El Paso to undertake the seismic shoot, was null and void because it, in effect, was an assignment without Blanchard's written consent. El Paso maintains that this permit was not in breach of the Swift lease. In response, Blanchard argues that the circuit court properly ruled that El Paso trespassed when it conducted seismic operations on his property. Blanchard maintains that El Paso's actions constituted a trespass because it did not have his permission to enter his surface estate as required by Rule B-42 of the Commission.
The crux of El Paso's first argument is that, because it is the owner of a mineral leasehold estate, which is situated under Blanchard's surface estate, it may reasonably use the surface for the purpose of developing the minerals. It is well settled in Arkansas that a mineral owner is properly considered a landowner. Schnitt v. McKellar, 244 Ark. 377, 386, 427 S.W.2d 202, 208 (1968). The owner of a mineral estate has the right to reasonable use of the surface for developing minerals, and the mineral estate is described as the dominant estate while the surface estate is depicted as the subservient estate. See, e.g., Diamond Shamrock Corp. v. Phillips, 256 Ark. 886, 511 S.W.2d 160 (1974) (holding that the owner of a mineral estate has the right to go upon the surface estate to drill wells and occupy the surface to the extent that it is reasonably necessary). In other words, the mineral owner or his lessee has a right of reasonably necessary surface usage to explore and develop the mineral estate. See, e.g., Arkansas Louisiana Gas Co. v. Wood, 240 Ark. 948, 403 S.W.2d 54 (1966). In Wood , we stated: [A]n oil and gas lease gives with it the right to possession of the surface to the extent reasonably necessary to enable a lessee to perform the obligations imposed upon him by the lease. This includes the right to enter upon the premises and use so much of it, and in such manner, as may be reasonably necessary to carry out the terms of the lease and [to] effectuate its purpose. Id. at 950, 403 S.W.2d at 55-6 (emphasis added). In Wood , we held that, in addition to sustaining $1500 damages to his property, the lessee's use of the landowner's stock pond was not reasonably necessary. Id. Notwithstanding this well established precedent, Blanchard relies upon Rule B-42 of the Arkansas Oil and Gas Commission, which provides: No entry shall be made by the permittee upon the lands upon which such seismic operations are to be conducted without the permittee having first secured a permit from the landowner authorizing such operations to be conducted. Id. [2] The Commission's statutory authority for implementing such a rule is found at Ark.Code Ann. § 15-71-110 (Supp.2007). In light of this regulation, we note the two paragraphs from El Paso's application with the Arkansas Oil and Gas Commission to conduct seismic operations read as follows: The undersigned Applicant acknowledges by the execution hereof that this Application is filed for purposes of conforming with the requirements of Act 1991, No. 5, and that any operation which Applicant herein is granted a permit to perform shall be subject to and in conformity with the provisions of said Act and all rules, regulations, and orders of the Arkansas Oil and Gas Commission applicable thereto. Applicant further agrees that it shall neither enter nor permit the entry upon any lands for the purpose of conducting such seismic operations without having first secured a valid permit or permits from the owner or owners thereof granting Applicant herein the right of entry. With these principles in mind, we turn to the present case. Here, the circuit court, in its May 22, 2006, order, referenced its July 31, 2000, order in which the court ruled that the Blanchards owned the entire surface estate of the land at issue, as well as an undivided portion of the mineral estate lying under their surface estate. The court also ruled that El Paso was an owner of a mineral leasehold estate under the Blanchard property. The court further ruled that Rule B-42 specifically sets out the procedures which those desiring to perform seismic operations must follow. In construing the language of Rule B-42, which was the regulation at the time of the filing of the lawsuit, the permittee must gain permission from the landowner before seismic operations are conducted on the land. Given a plain reading of the Commission's Rule B-42, the landowner equals the surface owner. Here, the surface owner is Blanchard. Thus, we hold that, notwithstanding El Paso's right to explore as a result of its one-half mineral rights, which flow directly from North Central to El Paso as authorized by the El Paso lease, El Paso nevertheless violated Rule B-42 by failing to obtain Blanchard's consent, as required by Rule B-42. Further, we hold that El Paso's conducting seismic activity was reasonably necessary under Wood, supra , because of its authorization to conduct its operations as a one-half mineral-rights owner. See also Musser Davis Land Co. v. Union Pacific Resources, 201 F.3d 561 (5th Cir.2000) (holding that seismic exploration is a generally accepted practice that was encompassed in the right to explore).
We now consider El Paso's arguments concerning the constitutionality of Rule B-42. The United States Supreme Court explained in Agins v. Tiburon, 447 U.S. 255, 100 S.Ct. 2138, 65 L.Ed.2d 106 (1980), that a zoning regulation amounts to a constitutional taking only if the ordinance does not substantially advance a legitimate state interest, or it denies an owner economically viable use of his land. Similarly, in National By-Products, Inc. v. City of Little Rock, 323 Ark. 619, 916 S.W.2d 745 (1996), we held that a municipality takes a person's land only when the regulation substantially diminishes the value of the land. In Lingle v. Chevron U.S.A., 544 U.S. 528, 125 S.Ct. 2074, 161 L.Ed.2d 876 (2005), the United States Supreme Court later set forth a consideration of the following factors, which include the economic impact of the regulation on the claimant and, particularly, the extent to which the regulation has interfered with distinct investment-backed expectations and `the character of the governmental action'for instance whether it amounts to a physical invasion or instead merely affects property interests through `some public program adjusting the benefits and burdens of economic life to promote the common good' ... [.] Id. at 538-39, 125 S.Ct. 2074 (citing Penn Central Transp. Co. v. New York City, 438 U.S. 104, 98 S.Ct. 2646, 57 L.Ed.2d 631 (1978)). At the outset, we note that El Paso filed its notice of appeal on July 14, 2006, in which El Paso gave notice of appealing the June 30, 2006, judgment, as well as all rulings preceding the judgment which were adverse to the Defendants/Appellants including but not limited to the court's `Order Denying Motion to Dismiss,' filed on March 12, 2004, which raises questions as to the constitutionality of Rule B-42 of the Arkansas Oil and Gas Commission as applied[.] In the March 12, 2004, order denying El Paso's motion to dismiss, the court states that the motion is denied for the reasons set forth and cited in Defendant/Counterclaimant's Response and supporting brief and oral arguments to this [circuit] court. According to Blanchard's brief in response to El Paso's motion to dismiss, Rule B-42 is not an unconstitutional taking without just compensation. Thus, we consider the arguments. We first note that when considering the validity of a regulation, we must give the regulation the same presumption of validity as a statute. Arkansas Residential Assisted Living Ass'n, Inc. v. Arkansas Health Services Permit Comm'n, 364 Ark. 372, 377, 220 S.W.3d 665, 668 (2005). With the Agins test in mind, we turn to the present case. First, we have noted that the United States Supreme Court has set aside the first prong of the Agins test. See Craft v. City of Fort Smith, 335 Ark. 417, 984 S.W.2d 22 (1998); hence, we will not address the substantially advances prong in Agins . Second, under the viable-use prong, we must determine whether Rule B-42 denies an owner an economically viable use of his interest in the land. Here, only seismic activity was prohibited without the express permission of the landowner. Similarly, under a Lingle analysis, Rule B-42 does not impact El Paso economically, as it is not prohibited from exploring the mineral estate in other capacities, such as drilling. For these reasons, we agree with the circuit court's rulings that Rule B-42 is constitutional as applied.
Next, we must determine whether El Paso's entrance upon Blanchard's property, pursuant to the April 1998 permit, was a license or an assignment, which the Swift lease prohibited. El Paso argues that Swift did not grant an assignment or sublease, but rather Swift's seismic permit was a license. In response, Blanchard argues that licenses are not assignable, and therefore, Swift did not have a license. Further, Blanchard maintains that under the lease agreement, Swift did not have the authority to grant a right without Blanchard's consent. We explained the difference between a license and a lease in Harbottle v. Central Coal & Coke Co., 134 Ark. 254, 203 S.W. 1044 (1918), where we stated: There is a marked difference between a license and a lease. Under the lease, the right of possession against the world is given to the tenant, while a license creates no interest in the land, but is simply an authority or power to use in some specific way. . . . . A license in respect to real estate is an authority to do a particular thing upon the land of another without possessing an estate therein. The test to determine whether an agreement for the use of real estate is a license or a lease is whether the contract gives exclusive possession as against all the world, including the owner, in which case it is a lease, or whether it merely confers a privilege to occupy under the owner, in which case it is a license. Id. at 1046 (citations omitted). However, [a] license not being assignable, an attempted assignment by the licensee of his rights thereunder has been regarded as bringing the license to an end[.] Tiffany Real Property, Sec. 837 (2004). Here, the Swift lease between Blanchard and Swift specifically provided that the rights granted to Swift were not subject to assignment or sublease, in whole or in part, without the express written consent of Blanchard. In paragraph ten of Exhibit A of the Blanchard-Swift lease, the following language is: This lease may not be assigned or subleased, in whole or in part, without the expressed written consent of James H. Blanchard, Jr. which consent shall not be unreasonably withheld. Any assignment or sub-lease granted by lessee without the expressed written consent of James H. Blanchard, Jr. shall be null and void. However, we agree with El Paso's argument that no assignment occurred. El Paso had the right to license seismic tests by way of its own lease of an undivided one-half interest in minerals under Blanchard's surface. El Paso had the right to explore, including seismic operations independent of Blanchard, who owned the other one-half mineral interest. Further, under Bonds, supra, El Paso did not breach the non-assignability clause of the Swift lease, particularly considering that El Paso was not a party to the Swift lease. As to the one-half mineral interest owned by Blanchard, Swift did not assign any right that was barred by the non-assignment clause in the lease. Under its right to explore given in the lease, Swift could license another party to conduct seismic operations without violating the agreement. El Paso acquired no interest in Blanchard's land through Swift's license, but only acquired the privilege to occupy the Blanchard property for the specific purpose of conducting seismic tests. Therefore, we hold that the permission to conduct seismic operations held by El Paso by way of Swift was a license and was not an assignment. Harbottle, supra . Accordingly, we reverse the circuit court's rulings on this point.