The energy transition is driving underground energy storage development for an array of energy products, from green hydrogen to carbon dioxide and compressed air energy storage. However, in Texas, which has been a national leader in underground storage for natural gas and other hydrocarbon products, the case law has been long unsettled regarding whether the surface estate or mineral estate owns underground pore space used for energy storage. The absence of legislation and unsettled case law in a state with commonly severed surface and mineral estates has added inefficiency to the work of developers, potentially requiring them to acquire surface and mineral estate properties to avoid legal claims. A 2022 Texas Court of Appeals case, Myers-Woodward v. Underground Services Markham, No. 13-20-00172-CV has the potential, if not overturned by the Texas Supreme Court where it is pending for review, to settle this case law in favor of the surface estate. This article summarizes several key title issues in Myers-Woodward, and also raises strategic considerations for developers seeking to de-risk underground storage projects in Texas.

Mineral Estate vs. Surface Estate: Who Owns the Pore Space?

In Myers-Woodward, a landowner originally entered a mineral lease with a salt mining company to produce salt in an underground formation. Producing such salt through water solution mining left behind a pore space (sometimes referred to as a “cavern”, “cavity” or “well”) which did not naturally exist in the subsurface matrix. The dispute focused on who owns and has the right to use such pore space as a kind of “underground warehouse” to store energy products like oil, gas and other liquids on behalf of third-party customers.