Who owns the empty spaces in the soil beneath the ground? A seemingly contradictory concept in navigating the complexities of ensuring your ownership of…nothing. There has been much confusion in Texas concerning pore space ownership due to unsettled case law and a lack of direct legislation. The lack of clarity has added inefficiency to the work of developers, potentially requiring them to acquire surface and mineral estate properties to avoid legal claims. However, a recent Texas Court of Appeals decision may have finally resolved the issue. Myers-Woodward, LLC v. Underground Services Markham, LLC, 2022 WL 2163857 (Tex. App. – Corpus Christi 2022, pet. filed), is pending review by the Texas Supreme Court, and if it is upheld, surface owners will be granted control of the pore space used for energy storage. Pore space ownership disputes can be avoided by simply identifying who owns the title to any existing pore space when drafting mineral conveyances or leases.
In addition to the developing case law, Senate Bill 2107 has passed through the Texas State Senate and has been referred to the House Energy Resources Committee. The proposed bill addresses ownership of the “pore space” underlying the land’s surface where carbon sequestration occurs. When introduced, it contained a provision allowing carbon sequestration companies to pass on their liability to the state ten years after their injections end. However, the bill was subsequently engrossed, and the latest version of SB 2107 contains a single provision that vests ownership of pore space in the owner or owners of the surface estate of the land above it. If SB 2107 passes in its current form, it would be an essential step in terms of Texas’ future as a participant in the carbon sequestration industry. As the Texas Legislature has not explicitly addressed ownership of pore space, this legislation would give carbon sequestration companies peace of mind regarding any potential conflicts with mineral rights owners over pore space ownership.
Moreover, House Bill 4484 is the companion bill to SB 2107. The Texas House Energy Resources Committee is currently reviewing it, and has yet to pass through either the House or Senate. While Section 7 of HB 4484 contains the same pore space ownership provision found in SB 2107, Section 6 includes the provision allowing Texas to assume title to any stored CO2 10 years after injections have stopped at a geologic storage facility. The condition provides that any responsibilities and potential liabilities associated with the stored CO2 and the storage facility would be transferred to the state. Additionally, Section 6 would require potential carbon sequesters to obtain consent from at least 60 percent of the pore space owners at the proposed geologic storage facility before any carbon sequestration project commences. Section 6 also creates protections for mineral rights owners; carbon sequesters will be required to ensure that “injection and geologic storage of CO2 will not endanger or injure any oil, gas, or other mineral formation in any material respect.” HB 4484 and SB 2107 in their current form would both: 1) provide the regulatory certainty that carbon sequestration companies are looking for when deciding where to take their projects; 2) ensure that the Texas economy does not miss out on a large job and revenue source; and 3) place Texas on a more level playing field in the carbon sequestration industry with the likes of North Dakota, Wyoming, and Louisiana.
Even though Myers and the bills currently being considered by the Texas Legislature may resolve the question of pore space ownership, a favorable ruling for surface owners would raise fresh questions regarding express and/or implied rights of pore space owners to pierce through severed mineral formations to reach their pore space. From a contractual perspective, it would be prudent for both surface/pore space owners and mineral rights owners to clearly define their duties and liberties from a legal and operational standpoint, as there could be consequences for any interference against a mineral or pore space operation. Pore space owners could elect to negotiate subsurface access rights with mineral owners through arrangements akin to the standard surface use agreements between surface owners and mineral rights holders.
In the absence of clear common law or statutory authority, astute operators have taken to creating all-encompassing agreements that explicitly establish the identity of the surface, pore space, mineral interests, and interest holders, the respective access rights of each, and consequences for interference or damage to the respective interests. Until the case law or legislative authority becomes settled, RR&A can assist CCUS developers conducting geologic storage operations in negotiating and drafting these agreements to limit the likelihood of expensive litigation due to access and interference-related disputes.
Nevertheless, RR&A is aware of the ever-growing implementation of CCUS in Texas and continues to update itself as to legal trends in this transition period. Don’t hesitate to contact RR&A to confirm that your operations are consistent with Texas’ theory of pore space ownership and that you are acting to mitigate risk before investing valuable capital.
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