Supreme Court
Myers-Woodward, LLC v. Underground Servs. Markham, LLC
- Case number: 22-0878
- Legal category: Oil and gas
- Subtype: Royalty payments
- Set for oral argument: October 29, 2024
Case Summary
This case raises questions of who owns the right to use underground salt caverns created through the salt-extraction process and how a salt royalty interest is calculated.
USM owns the mineral estate of the property at issue, together with rights of ingress and egress for the purpose of mining salt. Myers owns the surface estate and a 1/8 nonparticipating royalty in the minerals. USM sued Myers, seeking declaratory relief regarding the royalty’s calculation and the right to use the underground salt caverns, in which it stored hydrocarbons. Myers countersued, seeking, among other things, a declaration that USM cannot use the subsurface to store hydrocarbons. The parties filed competing summary-judgment motions.
The trial court granted USM’s motion in part, declaring USM the owner of the subsurface caverns, and granted Myers’s motion in part, holding USM may only use the caverns for the purposes specified in the deed, effectively denying USM the right to use the salt caverns for storing hydrocarbons. The trial court then held that Myers’s royalty is based on the market value of the salt at the point of production, and it entered a take-nothing judgment on Myers’s remaining claims. Both parties appealed.
The court of appeals reversed the judgment declaring that USM owns the subsurface caverns and rendered judgment that they belong to Myers. The court expressly declined to follow Mapco, Inc. v. Carter, 808 S.W.2d 262, 278 (Tex. App.—Beaumont 1991), rev’d in part on other grounds, 817 S.W.2d 686 (Tex. 1991) (per curiam) (holding that the salt owner owns and is entitled to compensation for the use of an underground storage cavern), holding instead that most authority in Texas requires a conclusion that the surface estate owner owns the subsurface. It affirmed the remainder of the judgment, including the holding that the Myers’s royalty interest is 1/8 of the market value of USM’s salt production at the wellhead.
Both Myers and USM petitioned for review, raising issues regarding the calculation of Myers’s royalty interest and the ownership of the caverns. The Supreme Court granted both petitions.
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