THE ACCOMODATION DOCTRINE : VIRTEX OPERATING V. … › wp-content › themes › lancebruunlaw › ...Sun Oil Co. v. Whitaker, 483 S.W.2d 808, 812 (Tex. 1972). It was the first in

THE ACCOMODATION DOCTRINE: VIRTEX OPERATING V. BAUERLE –

OPERATORS v. DEER HUNTERS

LANCE K. BRUUN, Corpus Christi The Law Offices of Lance K. Bruun

State Bar of Texas OIL AND GAS DISPUTES

January 10-11, 2019 Houston

CHAPTER 10

Lance K. Bruun The Law Offices of Lance K. Bruun

American Bank Plaza 711 N. Carancahua, Suite 1660 Corpus Christi, Texas 78401

361-884-8300 [email protected]

Lance has been practicing law for 42 years. His areas of practice include oil and gas law and litigation, commercial law and litigation, and real estate law. His geographic area of practice includes all South Texas. Lance was a formerly a partner and shareholder in the Corpus Christi law firms of Head & Kendrick and Kleberg & Head. He opened his own law office in 1995 and has been in solo practice since. Lance is a graduate of the University of Texas at Austin (BBA 1974), and the University of Houston Law School (JD 1976). A complete biography may be found at www.lancebruun.com.

mailto:[email protected]

http://www.lancebruun.com/

The Accommodation Doctrine: VirTex Operating v. Bauerle – Operators v. Deer Hunters Chapter 10

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TABLE OF CONTENTS

I. INTRODUCTION ............................................................................................................................................. 1

II. DOMINANT MINERAL ESTATE ................................................................................................................... 1 A. Getty v. Jones ............................................................................................................................................. 1 B. Sun Oil Co. v Whitaker ............................................................................................................................... 3 C. Humble Oil & Refining Co. v. West ........................................................................................................... 4 D. Ball v. Dillard ............................................................................................................................................. 4 E. Tarrant Cty. Water Control Dist. v. Haupt ................................................................................................ 4 F. Merriman v. XTO ....................................................................................................................................... 5 G. Coyote Lake Ranch v. Lubbock .................................................................................................................. 5 H. VirTex v. Bauerle – Statement of the Case ................................................................................................. 6

III. BACKGROUND OF THE CASE ..................................................................................................................... 6

IV. ELEMENT 3 – REASONABLE, CUSTOMARY AND INDUSTRY-ACCEPTED ALTERNATIVES ........ 8

V. ELEMENT 1 – SUBSTANTIAL INTERFERENCE WITH SURFACE USE ............................................... 10

VI. ELEMENT 2 – NO REASONABLE ALTERNATIVE AVAILABLE TO SURFACE OWNER.................. 11

VII. DECLARATORY JUDGMENT VS. INJUNCTION ...................................................................................... 11

VIII. CURRENT STATUS OF THE VIRTEX CASE ............................................................................................. 12

IX. CONCLUSION ................................................................................................................................................ 12

APPENDICES .............................................................................................................................................................. 13 Appendix 1 - Jury Charge ................................................................................................................................ 13 Appendix 2 - Trial Court's Amended Final Judgment ..................................................................................... 27 Appendix 3 - COA Memorandum Opinion ..................................................................................................... 33 Appendix 4 - VirTex's Proposed Drilling Plan ................................................................................................ 59 Appendix 5 - VirTex's Proposed Power Lines ................................................................................................. 60


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THE ACCOMMODATION DOCTRINE: VIRTEX OPERATING v. BAUERLE – OPERATORS v. DEER HUNTERS I. INTRODUCTION

The Texas Supreme Court has “led the way in working out accommodations which preserve unto the severed mineral owner or lessee a reasonable dominant easement for the production of his minerals while at the same time preserving a viable servient estate.” Sun Oil Co. v. Whitaker, 483 S.W.2d 808, 812 (Tex. 1972). It was the first in the nation to recognize the accommodation doctrine—the current model for other states. See, e.g., Michelle Andrea Wenzel, The Model Surface Use and Mineral Dev. Accommodation Act: Easy Easements for Mining Interests, 42 AM. U. L. REV. 607, 631 (1993) (“Texas blazed the trail in the development of accommodation theory by advancing the prototypical doctrine in Getty Oil Co. v. Jones.”). This common-law doctrine is now a well-established tenet of our oil-and-gas jurisprudence. Coyote Lake Ranch, LLC v. City of Lubbock, 498 S.W.3d 53, 65 (Tex. 2016) (concurring opinion) (extending the accommodation doctrine to a severed groundwater estate).

The Court may yet again visit the accommodation doctrine if it grants the Petition for Review now pending in VirTex Operating Co., Inc. v. Bauerle, No. 04–16–00549–CV, 2017 WL 5162546 (Tex. App.—San Antonio Nov. 8, 2017, pet. filed). This case pits an operator’s right to use reasonable, customary and industry-accepted facilities – namely standard oilfield overhead power lines – against a deer hunter’s “passion” for “extreme flying” of helicopters used for game management operations. So far, the deer hunters are winning.

This paper will analyze the VirTex case after a discussion of the general nature of the so-called “dominant mineral” estate and the evolution of the accommodation doctrine before the Supreme Court, beginning with Getty.1 A disclaimer: this author was trial counsel for VirTex, so this paper will be focused on the issue primarily from the prospective of the operator. II. DOMINANT MINERAL ESTATE

An oil and gas lease gives the lessee the dominant estate, in that the lessee has an implied grant, absent an express agreement, of free use of so much of the surface as is reasonably necessary to effectuate the purposes of the lease, having due regard for the rights of the owner of the surface estate. Humble Oil & Ref. Co. v. Williams, 420 S.W.2d 133 (Tex. 1967); Warren Petroleum Corp.

1 This topic is also well covered in the recent paper by Rick D. Davis, Jr., The Accommodation Doctrine in Texas, Section

v. Martin, 153 Tex. 465, 271 S.W.2d 410 (1954); Warren Petroleum Corp. v. Monzingo, 157 Tex. 479, 304 S.W.2d 362 (1957); Brown v. Lundell, 162 Tex. 84, 344 S.W.2d 863 (1961). The rights implied from the grant are implied by law in all conveyances of the mineral estate and, absent an express limitation, are not altered by evidence that the parties to a particular instrument of conveyance did not intend the legal consequences of the grant. Sun Oil Co. v. Whitaker, 483 S.W.2d 808, 810-11 (Tex. 1972).

A surface owner who seeks to recover for damages to the surface without an agreement has the burden of alleging and proving either specific acts of negligence, or that more of the land was used than was reasonably necessary. Robinson Drilling Co. v. Moses, 256 S.W.2d 650, 650 (Tex. Civ. App.---Eastland 1953, no writ). The parties may provide in an agreement that the lessee shall pay for damages to land, and such provisions are enforceable whether or not the damage or destruction is occasioned by a reasonable use of the land. Most accommodation disputes arise because of the absence of an agreement, either in the applicable oil and gas lease, a separate surface use agreement, or otherwise. A. Getty v. Jones

As noted above, the Texas Supreme Court’s decision in Getty Oil Co. v. Jones, 470 S.W.2d 618 (Tex. 1971), is generally considered to be the seminal accommodation doctrine case. A detailed examination of that case is appropriate. Jones, the surface owner, sued for an injunction to restrain Getty, an oil and gas lessee, from using vertical space for pumping units that prevented the use by him of an automatic irrigation sprinkler system. Getty prevailed in the trial court on a JNOV. The court of appeals reversed, holding that vertical as well as lateral space was restricted to that which is reasonably necessary. The court remanded the case, however, on the further holding that the trial court had erroneously instructed the jury. Jones v. Getty Oil Co., 458 S.W.2d 93 (Tex. Civ. App.-San Antonio 1970), aff’d, Getty Oil Co. v. Jones, 470 S.W.2d 618 (Tex. 1971).

Jones purchased the land in question in 1955, which was then subject to prior mineral leases in which he acquired no interest. Getty held an oil and gas lease covering 120 acres out of the property; Amerada Petroleum Corporation and Adobe Oil Company held leasehold rights of other portions of the property. Jones drilled numerous water wells and installed pivot type irrigation systems to irrigate his crops. In due course, Getty drilled two wells which required beam-type pumping units, the height of which prevented the use of Jones’ pivot irrigation system.

Report of the Oil, Gas & Energy Law Section of the State Bar of Texas, Summer 2018.


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Prior to the time Getty drilled its two new wells, Adobe had drilled four wells and installed beam-type pumping units. Two of these wells were outside the circumference of the closest pivot points of the sprinkler system; the others would have interfered with the system and were placed in concrete cellars to provide clearance. In addition, the cellars were placed so that the support towers of the sprinkler system would pass around them. In its portion of the tract Amerada also had two wells within the circumference of the irrigation system, but both utilized hydraulic pumping units with a height that did not interfere with the irrigation system.

Jones’ contention was that under the facts and circumstances it was not reasonably necessary for Getty to install pumping units in the manner which denied him the use of his irrigation equipment. Getty's principal contention was that it had a right to exclusive use of the super-adjacent airspace above the limited surface area occupied by the pumps and that only the lateral surface of the land should be subject to the established rule of reasonably necessary surface usage.

First, the Court disagreed with Getty’s contention. “It has long been recognized that ownership of real property includes not only the surface but also that which lies beneath and above the surface. The use of land extends to the use of the adjacent air…. We now hold explicitly that the reasonably necessary limitation extends to the super-adjacent air space as well as to the lateral surface and subsurface of the land.” Getty, 470 S.W.2d at 621.

The reference to “air space” will find its way into the jury charge in VirTex v. Bauerle discussed later.

Getty further argued that if it acted in a reasonable manner to accomplish the purposes of the lease, then its placement of the beam-type pumping units on the surface was authorized by the lease as a matter of law. The Court responded that the “question to be resolved, then, is whether evidence may be entertained to show the effect of Getty's manner of surface use upon the use of the surface by Jones, together with the nature of alternatives available to Getty, in resolving the issue of reasonable necessity.” Getty at 621.

The Court noted the settled law concerning the dominate nature of the mineral estate and the implied right to reasonable use of the surface having due regard for the surface use.

“But under the circumstances indicated here; i.e., where there is an existing use by the surface owner which would otherwise be precluded or impaired, and where under the established practices in the industry there are alternatives available to the lessee whereby the minerals can be recovered, the rules of

reasonable usage of the surface may require the adoption of an alternative by the lessee.” Id.at 622. (emphasis added).

Jones’ witnesses testified that a critical shortage of labor necessitated the use of the automatic sprinkler systems to irrigate the crops. Summarizing Jones’ evidence, the court observed: “The record thus indicates that the irrigation system currently in use affords Jones the most advantageous, and perhaps the only reasonable means of developing the surface for agricultural purposes.” Id. (emphasis added).

Conversely, there was evidence, disputed by Getty, that the expense to Getty would have been less than $12,000 had it installed the pumps in cellars initially. A second alternative, hydraulic pumps, would have increased to cost by less than $5,000. Id. These alternatives were employed by adjacent operators on Jones’ property, as noted in the Court’s opinion on rehearing.

“It is also indicated that there is available to Getty the two types of pumping installations -- the beam-type pumps in cellars or the hydraulic pumps on the surface -- which are reasonable alternatives to its present use of the surface; and that Getty's use of an alternative method of producing its wells would serve the public policy of developing our mineral resources while, at the same time, permitting the utilization of the surface for productive agricultural uses. Under such circumstances the right of the surface owner to an accommodation between the two estates may be shown, dependent, of course, upon the state of the evidence and the findings of the trier of the facts.” Getty, 470 S.W.2d at 622-623.

Costs of alternative methods was an issue in the VirTex case and will also be discussed later.

The Court then focused on this special issue and accompanying instruction given to the jury.

“Do you find from a preponderance of the evidence that Getty Oil Company's erection of the pumping units in question at its Numbers One and Two Wells at such excess in height so that Plaintiff's sprinkler system will not pass over the same constituted a use of the surface of the land in question in a manner which is not reasonably necessary? “In answering the foregoing Special Issue, you are instructed that a determination of whether the erection of such pumping units by Getty Oil Company constitutes a use of the surface of the land in question in a manner


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which is not reasonably necessary involves weighing the degree of harm or inconvenience, if any, such pumping units cause to John H. Jones against the utility, if any, of such pumping units to Getty Oil Company and the suitability of other measures, if any, which would substantially serve the purpose of such pumping units to Getty Oil Company at less or no inconvenience or harm, if any, to John H. Jones.” Id. at 623 (emphasis added).

The Court agreed with the court of appeals that inclusion of the phrase “at such excess in height” in the issue was erroneous as a comment upon the weight of the evidence. In addition, it agreed with the lower court that the accompanying instruction erroneously called for a weighing of harm or inconvenience to Jones against the considerations pertaining to Getty. The Court noted that this was not the proper test, particularly in the suggestion that inconvenience to Jones may be a controlling element. “There must be a determination that under all the circumstances the use of the surface by Getty in the manner under attack is not reasonably necessary. The burden of this proof is upon Jones, the surface owner.” Id.

On rehearing, the Court made the following observations.

“We do not hold that a mineral lessee’s surface use may be found unreasonable without regard to the surface uses otherwise available to the surface owner. The reasonableness of a surface use by the lessee is to be determined by a consideration of the circumstances of both and, as stated, the surface owner is under the burden of establishing the unreasonableness of the lessee's surface use in this light.” “The reasonableness of the method and manner of using the dominant mineral estate may be measured by what are usual, customary and reasonable practices in the industry under like circumstances of time, place and servient estate uses.” “As indicated in the Court’s opinion, if the manner of use selected by the dominant mineral lessee is the only reasonable, usual and customary method that is available for developing and producing the minerals on this particular land then the owner of the servient estate must yield. However, if there are other usual, customary and reasonable methods practiced in the industry on similar lands put to similar uses which would not interfere with

the existing uses being made by the servient surface owner, it could be unreasonable for the lessee to employ an interfering method or manner of use. These considerations involve questions to be resolved by the trier of the facts.” Id. at 627 (emphasis added).

The emphasized phrases from the Court’s opinion on rehearing will be discussed with the VirTex case below. B. Sun Oil Co. v Whitaker

A year after Getty, the Supreme Court decided Sun Oil Co. v Whitaker, 483 S.W.2d 808 (Tex. 1972). This case involved the use of ground water for waterflood operations by the lessee of a severed mineral estate. The applicable oil and gas lease included the expressed contractual right to “free use of . . . water from said land except water from Lessor’s wells for all operations hereunder. . . .” Sun Oil, at 810. The jury answered special issues as follows:

“. . . the use of fresh water by Sun Oil Company for secondary recovery purposes from the well which it has drilled on said tract will materially affect the supply which the surface owner could produce by wells”; “. . . it is not reasonably necessary for Sun Oil Company to use water from the Ogallala formation underlying the Whitaker farm to waterflood the L. D. Gann lease”; and ". . . the proposed use of fresh water by Sun Oil Company for waterflood purposes will substantially devalue the farm owned by the Defendant Whitaker.” Id., at 812.

The surface owner argued that these jury findings supported the judgment of the trial court that it was not reasonably necessary for Sun to use the fresh water underlying his tract to waterflood the lease, and that Sun should find a water source elsewhere.

The Supreme Court concluded that there was no evidence to support the jury’s finding that it was not “reasonably necessary” for Sun to use the water underlying the Whitaker farm for its waterflood project. Further, “[t]o hold that Sun can be required to purchase water from other sources or owners of other tracts in the area, would be in derogation of the dominant estate.” Id.

Of interest to the VirTex case, the Court went on to state that its decision in Getty was not applicable because Getty was “limited to situations in which there are reasonable alternative methods that may be employed by the lessee on the leased premises to accomplish the purposes of this lease”. Id. (emphasis in original). Also, the Court noted that the waterflood operation would result in the production of additional oil valued at $3,200,000. Sun Oil, at 810.


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C. Humble Oil & Refining Co. v. West Humble Oil & Refining Co. v. West, 508 S.W.2d

812 (Tex.1971), was an action brought by royalty owners against Humble Oil and Refining Company, the fee owner of the gas field and mineral rights. The dispute arose from Humble’s action of injecting extraneous gas into the underground reservoir, for purposes of storage, prior to production of all the recoverable native gas. The Court framed the controversy this way: “Thus, we have again the recurring problem of adjusting correlative rights … This Court has led the way in conciliating conflicts between owners of the surface and of the mineral rights, and in requiring reasonable accommodations between them.” Id., at 815 (citing Getty, Sun Oil and numerous other cases).

Following a discussion of cases including Getty, the Court engaged in this rather subjective analysis:

“In the case at hand, the interests of the parties are evident; the Wests possess a royalty interest in native gas produced from the West Clear Lake Field, while Humble owns fee title to the lands, including the subsurface reservoir. In conciliating the interests asserted by each party, we must necessarily consider the unusual nature of the subsurface reservoir and the West Clear Lake gas fields. The unique geologic and geographic characteristics of the reservoir are shown by the record; further, the evidence establishes that since this reservoir lies in a water drive field, salt water encroachment reduces the storage capability as native gas is produced. Absent injection of extraneous gas, production of native gas to depletion will result in a “watering out” or total destruction of the storage capability of the reservoir. As a consequence, injunction against the injection of extraneous gas would render illusory Humble's ownership of the storage rights in the reservoir. “Moreover, our ruling will determine the continued existence of an important natural resource. The record reveals two significant features of the reservoir which vitally affect the public interest. First, the reservoir is well-suited as a "peaking" facility which can handle the seasonal fluctuations and rapidly increasing energy demands for the greater Houston area; secondly, it is a strategically located "emergency" facility, capable of providing a readily deliverable supply of gas at times when accidents, natural disasters or mechanical failures make continued delivery through normal channels impossible.

Under these circumstances, the accepted principles of accommodation that have ruled the resolution of like conflicts are determinative, and we hold that the Court of Civil Appeals erred in ordering the injunctive relief sought by the Wests.” Id., at 816 (emphasis added).

Relative value and public policy bear on the application of the accommodation doctrine. D. Ball v. Dillard

Getty was cited only in the dissent in Ball v. Dillard, 602 S.W.2d 501, 526 (Tex. 1980). This case involved a dispute between a mineral lessee and a surface lessee, where the latter locked out the operator. It is mentioned here because the Court held that the evidence conclusively established that the surface lessee unreasonably exceeded his rights by denying the operator access to the property and awarded the operator damages found by the jury. Id., at 523.

In VirTex the operator asserted a claim against the surface owner for unreasonable interference, introducing unrebutted evidence of damages in excess of $830,000, representing the extra expense of portable diesel generators. The jury answered the liability question against the operator and thus did not reach the damage question. Appendix 1, Question 6.

E. Tarrant Cty. Water Control Dist. v. Haupt

Getty was discussed extensively in Tarrant Cty. Water Control & Imp. Dist. No. One v. Haupt, Inc., 854 S.W.2d 909 (Tex. 1993). The question there was whether the accommodation doctrine applied when a governmental entity that owned the surface estate restricted the use of the surface by the mineral owner and lessee. The Water District condemned and then inundated the surface for a public drinking water supply and sought to enjoin drilling operations. The Court held that the accommodation doctrine must be considered. The Court’s opinion included the following analysis of the economic testimony.

“Several expert witnesses for both the plaintiffs and the Water District testified that restricting the means of access to only directional or platform drilling reduced the value of the plaintiffs' mineral interests to nearly zero. However, one witness testified that the minerals still had a net value of $937,500 even after considering the additional costs and risk of directional drilling. Additionally, James admitted that an economically viable platform well had been drilled on an adjoining tract of land. The trial court found that the plaintiffs [mineral owners] had access to the minerals under the


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tract, although not addressing whether such access was reasonable, as required by the accommodation doctrine. We consider this to be some evidence that the plaintiffs had reasonable access to the minerals by alternative means. Because the record contains some evidence of reasonableness, the reasonableness of the plaintiffs’ access is deemed found in support of the trial court's judgment.” Id. at 913 (emphasis in original).

The Court remanded the case to the court of appeals for reconsideration of the factual sufficiency of the evidence to support the trial court’s finding of access and the deemed finding of reasonableness in light of the accommodation doctrine. Citing Getty, the Court concluded the “evidence may indicate that surface drilling is the only manner of use of the surface whereby the minerals can reasonably be produced. In that event, the lessee has the right to pursue this use under the accommodation doctrine.” Id. (emphasis in original). F. Merriman v. XTO

The Supreme Court’s current articulation and application of the accommodation doctrine in the context of oil and gas operations can be found in Merriman v. XTO Energy, Inc., 407 S.W.3d 244 (2013). Merriman owned a 40-acre tract, and XTO Energy leased the minerals. Merriman used the property for his “cattle operation,” including an annual roundup involving sorting the cows into three temporary pens. Id. at 251. Merriman objected to XTO’s placement of a well on the property, which he contended precluded the roundup. Id.; see also Merriman v. XTO Energy, Inc., No. 10–09–00276–CV, 2017 WL 1901987, *4 (Tex. App.—Waco 2011, pet. granted) (noting Merriman testimony that “[i]t’s a matter of the way I like to work my cows. … I like to work my cattle myself the way I like to work them”) (emphasis added). Merriman testified that XTO’s well interfered with his temporary corrals, making his cattle sorting operation “practically impossible.” Merriman, 407 S.W.3d at 251.

The Court rejected the accommodation doctrine claim, holding that Merriman showed “only that XTO’s well precludes or substantially impairs the use of his existing corrals and pens, creates an inconvenience to him, and will result in some amount of additional expense and reduced profitability because to continue his cattle operation he will have to build new corrals or conduct his operations in more phases.” Id. at 251–52 (emphasis added). But proof of “inconvenience and some unquantified amount of additional expense” did not equate to a lack of reasonable alternative methods to maintain his existing use. Id. at 251–52.

The Court set out three elements which must be satisfied in order to trigger the mineral owner’s duty to accommodate.

“To obtain relief on a claim that the mineral lessee has failed to accommodate an existing use of the surface, the surface owner has the burden to prove that (1) the lessee’s use completely precludes or substantially impairs the existing use, and (2) there is no reasonable alternative method available to the surface owner by which the existing use can be continued. If the surface owner carries that burden, he must further prove that given the particular circumstances, there are alternative reasonable, customary, and industry-accepted methods available to the lessee which will allow recovery of the minerals and also allow the surface owner to continue the existing use.” Id. at 249 (citations omitted and emphasis added).

This is the template for a new Pattern Jury Charge discussed below. It should also be noted that if there is “only [one] reasonable, usual and customary method that is available for developing and producing the minerals on this particular land,” “[t]he lessee has the right to pursue this use, regardless of” whether it precludes or substantially impairs an existing surface use. Getty, 470 S.W.2d at 622.

The Court focused on identifying the existing use of the surface, noting that no bright lines can be drawn by which to categorize existing uses of surface estates. “The issue is one of fairness to both parties in light of the particular existing use by the surface owner and the principle underlying the accommodation doctrine: balancing the rights of surface and mineral owners to use their respective estates while recognizing and respecting the dominant nature of the mineral estate.” Merriman, 407 S.W.3d at 250. The Court concluded that the existing use was “a cattle operation and its essential parts.” Id. The characterization of the existing use of the surface was a factor in the outcome in the court of appeals in VirTex.

The conclusion in Merriman was that the surface owner did not produce evidence sufficient to raise a material fact issue as to an element on which he had the burden of proof: that he had no reasonable alternative means of maintaining his cattle operations on the 40-acre tract (element 2 in the court’s opinion quoted above). The granting of the trial court’s summary judgment in favor of the operator was affirmed. Id. at 252.

G. Coyote Lake Ranch v. Lubbock

The Supreme Court extended the accommodation doctrine to a severed ground water estate in Coyote Lake Ranch, LLC v. City of Lubbock, 498 S.W.3d 53 (Tex. 2016). In 1953, during what is often referred to as the “Drought of Record”, the City of Lubbock purchased from the Coyote Lake Ranch groundwater rights to help


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supply its residents and other towns. The relative rights of the parties were incorporated into a deed giving the City, among of things, the right to construct power lines on, over and under the Ranch. Id. at 56. The Ranch’s complaint concerning elevated power lines was that they would allow hawks to roost and prey on the Lesser Prairie Chicken, a threatened species for which the Ranch is a natural habitat. Id. at 57-58. After holding that the accommodation doctrine applied, the Court affirmed the ruling of the court of appeals that the trial court’s temporary injunction was overbroad because it “de facto” prevented the City from conducting any activities on the Ranch, including erecting any power lines even though the deed gave the City the right to do so. Id. at 65.

Even though the case did not involve oil and gas operations, the Court analyzed its oil and gas accommodation doctrine opinions, including a restatement of the three elements of the surface owner’s burden of proof. Id. at 62.

H. VirTex v. Bauerle – Statement of the Case

This case is an accommodation doctrine dispute between VirTex Operating Company, Inc., the mineral lessee, and the Leon and Cynthia Bauerle, the surface owners.

VirTex leases the minerals on 3,000 acres of the Bauerles’ 8,500-acre ranch. VirTex needs power to run the pumpjacks for its oil wells. The Bauerles contended that VirTex’s proposed overhead powerlines would impair their hunting lessees’ sporadic use of helicopters for game surveys, brush- and predator-control, and, most significantly, deer capture. The Bauerles alleged that VirTex had reasonable, customary, and industry-accepted alternatives to overhead powerlines, and that the hunters had no reasonable alternatives to helicopter use. A Frio County jury found that (1) VirTex’s installation of overhead powerlines failed to accommodate the Bauerles’ existing surface use; (2) there was no reasonable alternative method available to the Bauerles by which the existing use could be continued; and (3) there was an alternative reasonable, customary, and industry-accepted method available to VirTex that would allow recovery of the minerals while also permitting the Bauerles to continue their existing surface use. Appendix 1.

The trial court entered a “declaratory judgment” that permanently enjoined VirTex from installing overhead powerlines on the Bauerles’ property. The trial court also awarded the Bauerles attorney’s fees. Appendix 2.

The Fourth Court of Appeals affirmed. VirTex Operating Co., Inc. v. Bauerle, No. 04–16–00549–CV, 2017 WL 5162546 (Tex. App.—San Antonio Nov. 8, 2017, pet. filed). Appendix 3. VirTex filed a Petition for Review which, as of this writing, is in the briefing on the merits stage.

III. BACKGROUND OF THE CASE In 2008 the Bauerles bought an 8,500-acre ranch in

Frio County, Texas. Represented by counsel, they purchased only the surface estate, knowing they were not buying, and would not control mineral development on the property. They did, however, acquire a two-percent royalty interest. Ranch improvements included a high game fence around the perimeter, a substantial “hunting lodge”, and 20-acre deer management pens used for breeding White Tail Deer. Ranch facilities, including the hunting lodge, are powered by electricity from a 5.4-mile-long overhead power line.

That same year VirTex, an independent oil company, entered into agreements with the fee mineral owner, Exxon Mobil Corporation, to explore approximately 35% of the ranch, or 3,000 acres.

The year 2008 also saw the drilling and completion of the first Eagle Ford well by Petrohawk Energy Corporation in neighboring LaSalle County.

Soon after they purchased the ranch the Bauerles leased the entire 8,500 acres “to corporate people” for hunting. The Bauerles run cattle on the property themselves.

Leon Bauerle has never flown in a helicopter and is seldom around during hunting season. The hunting lessees manage the wild game. The hunting lessees began using helicopters in connection with their game management activities. Will Nichols, one of the lessees, uses helicopters a few times a year—not for hunting, but for brush control, predator control, deer surveys, and deer captures. Nichols’s annual helicopter use is less than 60 hours.

Nichols testified he uses helicopters primarily for his “passion”—deer-population management. Once a year, he traps 20 does and one buck and airlifts them to the deer management pens to breed. Nichols also engages in “trap, transport, and translocate,” which involves moving surplus deer to other ranches. The helicopter chases the deer at very low altitudes and traps or “captures” the animal by dropping a net on it. The helicopter pilots refer to this activity as “extreme flying”.

VirTex spudded its first well on the ranch in September, 2008. At that time VirTex was able to negotiate with the Bauerles a surface use agreement covering that one well only. The Bauerles did not welcome oil and gas exploration, particularly since they did not believe they owned a significant interest in the minerals. Interestingly, the agreement permitted power lines. However, the first well was completed as a Buda gas well and did not need electricity. VirTex and the Bauerles were never able to come to terms on a surface use agreement covering the rest of the operations. VirTex’s leases from the fee mineral owner were silent concerning surface operations.

VirTex proceeded to drill or re-drill fifteen wells on the ranch, including eight Eagle Ford wells. The


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Eagle Ford wells flow naturally in the early stages of production, but generally will later need artificial lift, like a pumpjack. Pumpjacks require a power source which is normally electricity. At the time of trial in April 2016, three of the Eagle Ford wells and one water well required electricity which was supplied by portable diesel generators.

According to the testimony of VirTex’s geologist, the location of the initial Eagle Ford wells proved up the entire 3,000-acre lease (he said it was all “good rock”). VirTex developed a plan that will result in the drilling of approximately forty-five Eagle Ford wells. Appendix 4. VirTex also designed a plan for overhead power line infrastructure to supply the field. Appendix 52. VirTex had already built an overhead power line to the Bauerle lease line on the adjacent Harlan lease to the east. The plan was to extend this line onto the Bauerle’s ranch.

Although never consummated, negotiations for a surface use agreement between VirTex and the Bauerles literally went on for years. They did not go well. Aside from dollars, a major source of resistance by the Bauerles was their insistence that overhead power lines could not be used because they would unreasonably interfere with the use of helicopters by their deer hunters.

During the negotiations, the Bauerles filed suit against VirTex asserting a claim under the accommodation doctrine to prevent overhead power lines. They did not request an injunction, but rather sought a declaratory judgment. And while framed as a request for a declaration, the petition stated:

“[T]herefore, the accommodation doctrine requires that Defendants do not install overhead electric power lines, but rather adopt an alternative method of powering their equipment.”

After the suit was filed VirTex attempted to build an overhead line to one well. When VirTex’s contractor arrived to install the line, the Bauerle’s lawyer instructed VirTex to halt construction or “he would take the matter up with [the trial judge].” VirTex voluntarily ceased those operations. This exchange later enabled VirTex to submit a wrongful interference claim to the jury. (Appendix 1, Question 6).

The case was tried and submitted to a jury in April 2016. The charge and the jury’s answers are attached. Appendix 1. At that time the Oil & Gas Texas Pattern Jury Charges had not yet been published. The accommodation doctrine question can now be found at Texas Pattern Jury Charges Oil & Gas PJC 302.3 (2016). The trial court did have the benefit of the Oil,

2 The yellow lines show VirTex’s lease lines, and the blue lines represent the routes of the proposed overhead power

Gas & Energy Law Sections draft questions and instructions including an accomodation doctrine question, and of course the Supreme Court’s articulation of the issue in Merriman.

A summary of the trial evidence will be reviewed by reference to these three elements which must be proved by the surface owner:

(1) the lessee’s use completely precludes or

substantially impairs the existing surface use (Element 1);

(2) there is no reasonable alternative method available to the surface owner by which the existing use can be continued (Element 2); and

(3) given the particular circumstances, there are alternative reasonable, customary, and industry-accepted methods available to the lessee which will allow recovery of the minerals and also allow the surface owner to continue the existing use (Element 3).

The charge submitted the accommodation doctrine claim in two questions. Question No. 4 incorporated both Elements 1 and 2, and added these instructions:

An alternative method is not unreasonable if it is merely more inconvenient or less economically beneficial than the existing method. Rather, the inconvenience or financial burden of continuing the existing use by the alternative method must be so great as to make the alternative method unreasonable. You are instructed that use of the airspace above the surface of the property constitutes use of the surface. Appendix 1, Question 4.

Element 3 was submitted as a separate question. Id., Question 5. The Pattern Jury Charge submits all three elements in one question and does not include the additional instructions quoted above.

At trial the Bauerles presented the testimony of Leon Bauerle, hunting lessee Nichols, and two designated experts, Graff, a helicopter pilot, and Kramer, “an oil and gas supervisor”. Nichols and Graff testified concerning Elements 1 and 2, and Kramer testified concerning Element 3. The latter will be discussed first.

VirTex witnesses included one of the owners, Dale Phipps, geologist Critchlow, VirTex’s engineer Brolls, and a helicopter pilot.

lines. The map depicts the VirTex acreage, not the entire 8,500-acre ranch.


8

IV. ELEMENT 3 – REASONABLE, CUSTOMARY AND INDUSTRY-ACCEPTED ALTERNATIVES The principal “alternative” option on which the

Bauerles relied, and on which the court of appeals focused, would have VirTex use natural gas generators to power the pumpjacks with gas produced from the Bauerle lease. This alternative originated with Kramer, “an oil and gas supervisor” without any engineering credentials.3

Kramer does not have a degree; he is neither an engineer nor a geologist. His experience in the oilfield involves “[w]orking closely with some of the office engineers and working with inspectors” for “almost 30 years.” He had also attended a few “two-day seminars on pipeline safety and operation.” He worked at the amine plant on the neighboring Harlan ranch more than 20 years earlier. Kramer conceded that decisions about how to power wells are typically handled by engineers in company offices. He had never been responsible for deciding how to power something as large and complicated as a 45-well Eagle Ford field.

Despite VirTex’s repeated objections and motion to exclude his testimony both before and during trial, the trial court allowed Kramer to testify as an expert witness about appropriate alternate methods of powering this 45-well Eagle Ford field.4 He was the only witness for the surface owners to testify concerning Element 3.

Kramer opined that natural gas is “[t]he next best option” to using electricity. He thus devised an elaborate plan for natural gas as a substitute for electricity delivered by overhead lines. VirTex’s lease provides for free gas, which means that VirTex has the right to use gas produced from the property with no royalty. But because the gas produced from the Eagle Ford wells on Bauerle property is sour, it must be “sweetened” before use. VirTex currently pipes that gas to the neighboring Harlan ranch amine plant, also operated by VirTex, where enough of it is sweetened to fuel a compressor. The remaining gas is then compressed and sent to a third-party processor for sweetening.

Kramer proposed that VirTex instead:

• use the Harlan ranch’s amine plant to sweeten all the gas,

• build a new, second pipeline to return the treated gas to the Bauerle lease, and

• use this gas to power generators that would run the pumpjacks.

The threshold problem with this scheme is that it would require the use of resources off the leased premises, which should make it unreasonable as a matter of law.

3 Quotes in this text are from the trial record unless indicated otherwise.

The accommodation doctrine requires a mineral owner to consider only alternatives that are available on the leased premises. Sun Oil v. Whitaker, 483 S.W.2d at 812. In Whitaker, the Supreme Court, as noted above, rejected a proposal that would have required the mineral lessee to purchase surface water “from other sources or owners of other tracts in the area,” holding that such a requirement “would be in derogation of the dominant estate.” Id. The accommodation doctrine is “limited to situations in which there are reasonable alternative methods that may be employed by the lessee on the leased premises to accomplish the purposes of this lease.” Id. (emphasis added); see also ERNEST E. SMITH & JACQUELINE LANG WEAVER, TEXAS LAW OF OIL & GAS § 2.1[B][2] (2013) (recognizing that “if accommodation is not possible within the confines of the leased premises, the surface use must give way”); TDC Eng’g, Inc. v. Dunlap, 686 S.W.2d 346, 349 (Tex. App.--Eastland 1985, writ ref’d n.r.e.) (recognizing that accommodation doctrine “does not obligate the oil and gas operator to use alternative methods unless they ‘may be employed on the leased premises’”) (quoting Whitaker).

A second problem is that to construct the new pipeline to return the processed gas to the Bauerle lease, VirTex would have to obtain an easement from the Harlan family, the owners of the adjoining property. But VirTex does not control the Harlans and can neither guarantee their consent nor command a reasonable price. Without the easement, VirTex could not lay a return pipeline on the Harlan ranch to bring gas back to the Bauerle lease.

The third problem, and the one that received the most attention at trial, was the relative cost of Kramer’s natural gas alternative. Reasonableness requires evaluation of the alternatives; something is not reasonable merely because the business can still survive. Cf. Haupt, Inc. v. Tarrant Cty. Water Control & Improvement Dist. No. One, 870 S.W.2d 350, 354 (Tex. App.—Waco 1994, no writ) (recognizing that reasonableness inquiry must include “its impact on the value of the mineral estate”). Given Texas’ “longstanding policy … to encourage maximum recovery of minerals and to minimize waste,” Lightning Oil Co. v. Anadarko E&P Offshore, LLC, 520 S.W.3d 39, 51 (Tex. 2017), the economic burden on the mineral lessee is critical to reasonableness. This is particularly truer given Texas’s requirement that the mineral lessee pay the cost of accommodation. VirTex argued the lower court in VirTex sidestepped this analysis. VirTex’s Petition for Review places this issue squarely before the Supreme Court.

4 The Court of Appeals ruled that the trial court did not abuse its discretion in admitting Kramer’s testimony. Op. at *10


9

Also fatal to the Bauerles’ claim was the fact that Kramer admitted the Harlan amine plant was inadequate to process enough gas to power 45 wells. The current TCEQ permit is for 450 MCF per day. The plant would have to expand its capacity, which would be a “major, major project,” costing $4 million. Because the excess gas could not be flared, VirTex would also have to drill a $4-5 million acid injection well. Thus, the plant-processing improvements alone would be $8–9 million. A federal permit would also be required, involving “months and months of dealing with the EPA and different agencies,” with no guarantee of approval. This evidence was unrebutted. In fact, Kramer admitted he had “no idea” what expanding the plant, drilling an acid injection well, and obtaining new permits would cost, although he admitted it “sure can” be expensive.

Additionally, powering pumpjacks with natural gas would be far more expensive than electricity. A natural-gas option would involve the following additional costs:

o purchase and installation: $692,633 more than

overhead powerlines; o maintenance: $177,730 more per year than

overhead powerlines; o fuel: $162,000 more per year than overhead

powerlines.

Over the ten-plus year life of an Eagle Ford well, these costs would lead to millions in extra expense. By comparison, in Getty Oil, the reasonable alternatives would have cost less than $12,000 and $5,000. 470 S.W.2d at 622. In Haupt, the court recognized that evaluation of reasonableness must include “its impact on the value of the mineral estate”. 870 S.W.2d at 354.

Kramer did not offer any testimony of any other oil fields where numerous wells with pumpjacks were fueled by processed natural gas. There was no evidence of “like circumstances of time, place and servient estate uses”, or “methods practiced in the industry on similar lands put to similar uses”, as stated in Getty. Getty at 627. VirTex argued, therefore, that Kramer’s opinions were not sufficiently tied to the facts of the case. Gammill v. Jack Williams Chevrolet, Inc., 972 S.W.2d 713, 720 (Tex. 1998).

The Bauerles did not address the vast cost differential between the industry standard—overhead powerlines—and their natural-gas alternative. Instead, they say they met their burden by eliciting testimony from Kramer and VirTex representative Broll that natural gas is the “next best” method if overhead powerlines are unavailable. But overhead powerlines are available at the Bauerle lease line and could be extended onto the Bauerle lease at a relatively reasonable cost, which Kramer and Broll confirmed.

The Bauerles attempted to overcome the financial issue by limiting the number of VirTex’s wells to four (the number of existing wells then needing electricity)

or nine (the number of existing wells that currently, or will eventually, need electricity)—and not the 45 or more wells VirTex planned. Kramer testified: “We have got to go with what we have now. Everything else is speculation.” VirTex’s witnesses insisted the wells would eventually be drilled. The trial court overruled VirTex’s objections and stated the jury could veto VirTex’s 45-well assessment:

“I find that Mr. Kramer’s methodology has been properly disclosed and that it is a question of fact as to how many wells that methodology applies to. . . . I think you need to make it clear to the jury that this is the methodology; the number of wells is – up to them”

The Bauerles’ attorney urged the jury to consider the costs only for powering nine wells and to disregard the massive expense associated with gas-powering 45 wells, upgrading the amine plant, and installing an acid injection well – even though the Bauerles’ entire case hinged on VirTex’s 45-well plan. They complained about a “spiderweb” of powerlines that would result from powering 45 wells as shown in Appendix 4. They said that VirTex would “construct miles of overhead electric power lines over the ranch in a dense, box-like grid in order to power both the wells it has already drilled and operated for many years and the wells that it might drill in the future.”

Although Kramer’s natural gas alternative was the primary focus of the Bauerles’ case, there was some evidence presented concerning two additional alternatives, namely the continued use of portable diesel generators and buried electric power lines. The witnesses for both sides agreed that portable diesel generators were (1) usually only a temporary solution while the operator waits for the overhead power line infrastructure to catch up, (2) less reliable and requiring more maintenance and service, and (3) significantly more costly than overhead power. VirTex’s unrebutted damage model at trial demonstrated that increased costs using portable diesel generators exceeded $830,000.

Buried electric lines was given even shorter attention. The witnesses also agreed the expense is three to four times more than for overhead lines, and maintenance costs are higher. Kramer could not name any other operation using buried power lines to supply a field.

Concluding the discussion concerning Element 3, the Bauerles asserted they met their burden because “VirTex had alternative means available to power the wells.” The court of appeals agreed. Op. at *10. VirTex responded that the abstract existence of alternatives is not enough. The alternatives must be “reasonable,


10

customary, and industry-accepted.” Merriman., 407 S.W.3d at 249.

Kramer’s cross-examination included the following exchange:

“Q: So assume that overhead electrical power

is available at the lease line. Assume that these wells that are going to be drilled as Eagle Ford wells and perhaps Austin Chalk wells in the future are going to produce sour gas, which means it needs to be processed before it can be used. Assume that we can have at least up to 45 Eagle Ford wells. With those assumptions, is it fair to say that the customary industry accepted method of providing power for production facilities such as pump jacks is overhead electricity?

“A: I believe so.”

That admission should have ended the case. V. ELEMENT 1 – SUBSTANTIAL

INTERFERENCE WITH SURFACE USE The court of appeals determined that overhead

powerlines would substantially impair the Bauerles’ existing surface use. VirTex argued the court made a critical, threshold error: It defined the surface use too narrowly. The existing surface use is cattle and hunting. E.g., Merriman, 407 S.W.3d at 250 (describing surface use as “a cattle operation and its essential parts”). The court singled out one small, rare aspect of the Bauerles’ cattle and hunting operation — “leasing property to hunters interested in using helicopters,” Op. at *7—and treated it as the entire surface use.

The Supreme Court examined this issue in Merriman, noting that “no bright lines can be drawn by which to categorize ‘existing uses’ of surface estates.” 407 S.W.3d at 250. The emphasis must be on “fairness to both parties.” Id. The Court focused not on specific aspects, but on the surface’s overall use. So, for example, Getty Oil targeted “the only reasonable means of developing the surface for agricultural purposes.” 470 S.W.2d at 622. Merriman defined the existing use as “a cattle operation and its essential parts,” rather than the surface owner’s precise placement of corrals and pens in the configuration he wanted. Merriman, 407 S.W.2d at 250.

In the VirTex case, the existing use is cattle operations and hunting “and [their] essential parts,” not just one facet of the hunting operation involving occasional use of a helicopter. And although overhead powerlines would complicate hunting lessee Nichols’s use of a helicopter for brush control, predator control, and deer-population management, those form a small

component of the hunting operation—just a few hours a year. There is no evidence that these are “essential” to hunting; Nichols (who hunts the entire property and not just the acreage within the VirTex lease) admitted that hunting can continue without them. Evidence to the contrary was nothing more than the personal preferences of a single deer hunter.

The evidence concerning Element 1 also came from the dueling testimony to the parties’ helicopter pilots. Unlike Kramer, the qualifications of Bauerles’ pilot, Graff, were not challenged. Both pilots had equal credentials and experience. At the conclusion of Graff’s re-direct, there was the following exchange:

Q. Currently this box of power lines does

not exist; you understand that, right? A. Yes, sir. Q. This is proposed. As the ranch sits today

without these power lines, if the box of power lines was added, would that substantially impair your ability to use helicopters for game management on this ranch?

A. Absolutely.

That answer notwithstanding, in cross examination Graff testified as follows: • “[I]t’s possible” to do deer capture inside the

proposed power lines; it would be “more difficult but possible.”

• He flies other ranches with power lines; they do not prevent him from doing his work, including all the tasks at issue in this case.

• He admitted power lines are not uncommon, and he has never refused to fly ranches with power lines; “almost every ranch is going to have some sort of power lines somewhere.”

• He looks for power poles and gets an idea where the lines are; he looks for all obstacles

• Power lines are something he lives with every day as a helicopter pilot in South Texas.

• Graff also admitted that the power lines proposed by VirTex were not yet in place, and so “I’d like to see the situation” before he could say for certain whether helicopter use would be impacted.

• He testified that if he decided he could not “catch” in the area of VirTex’s power lines, he could “go to other parts of the ranch”.

• Looking at the proposed lines, Graff stated that pilots “look out for everything,” and if these lines were built, “it’s possible” to conduct the tasks Bauerle’s hunting lessees are doing on the


11

property; he said he could fly in that area, and he can work anywhere.

• They can do captures in the area of proposed power lines, but it would be more dangerous However, “nothing is impossible.”

There was no evidence or testimony to explain why the Bauerle ranch was different or unique from any other property where Graff flies. Further, there was no evidence or testimony of an example of overhead power lines on any other property precluding or substantially impairing similar helicopter operations. VirTex argued that because there was no basis for Graff’s his opinion, his statement that the proposed power lines would substantially impair helicopter operations was merely conclusory and therefore was no evidence. Houston Unlimited v Mel Aces Ranch, 443 SW3d 820, 829 (Tex. 2014) (holding that “the evidentiary value of expert testimony is derived from its basis, not from the mere fact that the expert has said it.”).

The Court of Appeals Nevertheless found the evidence concerning Element 1 was legally and factually sufficient to support the verdict. Op. at *6. VI. ELEMENT 2 – NO REASONABLE

ALTERNATIVE AVAILABLE TO SURFACE OWNER The court of appeals also held that no reasonable

alternatives existed because flying helicopters near overhead powerlines would be dangerous, and because Nichols might not lease the property if the lines were installed. Op. at *8. This conclusion overlooks that most of the ranch—more than 5,500 acres—would have no overhead powerlines. And even within the 3,000 acres of the VirTex lease,5 Graff—the Bauerles’ helicopter expert—testified that helicopter operations could proceed.

Again, Merriman is instructive. Merriman owned a 40-acre tract (not 8,500 acres), and XTO Energy leased the minerals. Merriman used the property for his “cattle operation,” including an annual roundup involving sorting the cows into three temporary pens. Merriman, 407 S.W.3d at 251. Merriman objected to XTO’s placement of a well on the property, which he contended precluded the roundup. Id.; see also Merriman v. XTO Energy, Inc., No. 10–09–00276–CV, 2017 WL 1901987, *4 (Tex. App.—Waco 2011, pet. granted) (noting Merriman testimony that “[i]t’s a matter of the way I like to work my cows. … I like to work my cattle myself the way I like to work them”) (emphasis added). Merriman testified that the well interfered with his temporary corrals, making his cattle

5 The actual footprint of VirTex’s operations was approximately 2,000 acres.

sorting operation “practically impossible.” Merriman, 407 S.W.3d at 251.

The Supreme Court rejected his accommodation doctrine claim, holding that Merriman showed “only that XTO’s well precludes or substantially impairs the use of his existing corrals and pens, creates an inconvenience to him, and will result in some amount of additional expense and reduced profitability because to continue his cattle operation he will have to build new corrals or conduct his operations in more phases.” Id. at 251–52 (emphasis added). But proof of “inconvenience and some unquantified amount of additional expense” did not equate to a lack of reasonable alternative methods to maintain his existing use. Id. at 251–52.

As in Merriman, VirTex argued the evidence established only inconvenience and additional expense involving helicopter use, not the absence of reasonable alternatives. Even if Nichols would not lease a ranch with overhead powerlines, this does not show a lack of reasonable alternatives. Nichols used helicopter as a personal preference. (“It’s . . . the only way that I can manage a property the way that I want to manage it.”) (emphasis added). The Bauerles’ helicopter expert Graff stated that powerlines “would cost you time . . . to move to other parts of the ranch because then you’re . . . having to catch deer farther away which means that the guys have to haul them farther . . .; so it’s just time consuming.”

Merriman was a no-evidence challenge focused on Element 2. The Element 2 evidence in VirTex closely mirrors Merriman. The Court of Appeals nevertheless found the evidence to be legally and factually sufficient. Op. at *8.

VII. DECLARATORY JUDGMENT VS.

INJUNCTION Another aspect of the VirTex case elevating its

importance to the jurisprudence of this state is the award of attorney’s fees. Until now, no Texas case authorized recovery of attorney’s fees on an accommodation-doctrine claim, because no statute or contract provides for that relief. See MBM Fin. Corp. v. Woodlands Operating Co., 292 S.W.3d 660, 669 (Tex. 2009) (“Texas has long followed the ‘American Rule’ prohibiting fee awards unless specifically provided by contract or statute.”). Yet the Bauerles pleaded their accommodation-doctrine claim as a “declaratory judgment” action and recovered fees. See TEX. CIV. PRAC. & REM. CODE § 37.009.

Although the Bauerles’ petition purports to plead a claim only under the DJA, the requested declarations parrot the elements of an accommodation-doctrine claim. They were really seeking a permanent injunction:


12

[T]herefore, the accommodation doctrine requires that Defendants do not install overhead electric power lines, but rather adopt an alternative method of powering their equipment.

The trial court’s sole “declaration” ordered VirTex not to install overhead powerlines for its wells:

IT IS ORDERED, ADJUDGED, DECREED and DECLARED that Defendants shall not install overhead power lines on the Plaintiffs’ property, but rather shall use an alternative method of powering their equipment that will accommodate Plaintiffs’ existing use of the surface.

Appendix 2 (emphasis added).

A review of accommodation-doctrine cases show they all involve injunctive relief:

• Coyote Lake Ranch, LLC v. City of Lubbock, 498

S.W.3d 53 (Tex. 2016) (holding trial court’s temporary injunction was too broad).

• Merriman, 407 S.W.3d at 246, 247 (suit for injunctive relief).

• Tarrant Cty. Water Control & Imp. Dist. No. One v. Haupt, Inc., 854 S.W.2d 909, 910 (Tex. 1993) (combined suit for injunction to prohibit drilling and inverse condemnation action).

• Humble Oil & Refining Co. v. West, 508 S.W.2d 812, 816 (Tex. 1974) (reversing permanent injunction).

• Getty Oil Co. v. Jones, 470 S.W.2d 618, 619 (Tex. 1971) (suit for injunction).

• Sun Oil Co. v. Whitaker, 483 S.W.2d 808, 812 (Tex. 1972) (suit for permanent injunction).

• Davis v. Devon Energy Prod. Co., L.P., 136 S.W.3d 419 (Tex. App.—Amarillo 2004, no pet.) (affirming permanent injunction).

• Ottis v. Haas, 560 S.W.2d 508, 513-14 (Tex. Civ. App.—Corpus Christi 1978, writ ref’d n.r.e.) (affirming trial court’s denial of permanent injunction).

If the award of attorney’s fees in the VirTex case is affirmed, one could reasonably expect an increase in accommodation doctrine litigation, as the prospect of recovering fees will embolden surface owners to resist oil and gas operations on their property. VIII. CURRENT STATUS OF THE VIRTEX

CASE VirTex has filed with the Supreme Court a

Petition for Review presenting the following issues:

1. When overhead powerlines are the “reasonable, customary, and industry-accepted” method for powering oil wells, can the mineral lessee be required to use expensive, impractical, inferior, contingent, and novel alternatives?

2. Would overhead powerlines preclude or substantially impair the Bauerles’ existing surface use—hunting “and its essential parts”?

3. Could the Bauerles reasonably continue commercial deer hunting and cattle operations if VirTex installed overhead powerlines?

4. Should the Bauerles’ expert testimony have been excluded, and does it fail to support the verdict?

5. Can the Bauerles recover otherwise non-recoverable attorney’s fees by pleading their accommodation-doctrine claim under the Declaratory Judgments Act?

As stated above, as of this writing the Court has ordered briefing on the merits. IX. CONCLUSION

The accommodation doctrine imposes a modest duty on the dominant mineral owner/lessee to accommodate a servient estate’s existing surface use, if feasible. But the doctrine should not be applied lightly. The Supreme Court has erected a high barrier to overcome the mineral estate’s dominance. E.g., 8 PATRICK H. MARTIN & BRUCE M. KRAMER, WILLIAMS & MEYERS OIL AND GAS LAW § 218.8 (2013) (observing that this Court’s stringent requirements “make[] it reasonably difficult for the surface owner to prove that the mineral owner’s actions exceeded the scope of the implied easement of surface use”) (citing Merriman, 407 S.W.3d at 251–52).

Did the court of appeals flip this burden? VirTex argues it did by requiring the mineral lessee to utilize inferior methods and incur vast expense to indulge a single hunter’s “passion” for “the most extreme flying that you can possibly do,” balanced against the most conventional means to produce oil and gas. The Bauerles understandably argue they have a jury verdict, fair and square, and two courts have agreed. So far, the score is operators 0, deer hunters 2.

CAUSE NO. 12-10-00365-CVF

ROBERT LEON BAUERLE and CYNTHIA BAUERLE,

Plaintiffs, v.

VIRTEX OPERA TING CO., INC., and VJRTEX PRODUCING COMPANY, L.P.

Defendants.

CHARGE OF THE COURT

MEMBERS OF THE JURY:

IN THE DISTRICT COURT

8151 JUDICIAL DISTRICT

After the closing arguments, you will go to the jury room to decid0). the <MJs.cu,tiRK!n~1!i~~~ questions that are attached, and reach a verdict. You may discuss the case UITl'""-fl·rn

only when you are all together in the jury room.

Remember my previous instructions: Do not discuss the case with anyone else, either in person or by any other means. Do not do any independent investigation about the case or conduct any research. Do not look up any words in dictionaries or on the Internet. Do not post information about the case on the Internet. Do not share any special knowledge or experiences with the other jurors. Do not use your phone or any other electronic device during your deliberations for any reason. I will give you a number where others may contact you in case of an emergency.

Here are the instructions for answering the questions.

1. Do not let bias, prejudice, or sympathy play any part in your decision.

2. Base your answers only on the evidence admitted in court and on the law that is in these instructions and questions. Do not consider or discuss any evidence that was not admitted in the courtroom.

3. You are to make up your own minds about the facts. You are the sole judges of the credibility of the witnesses and the weight to give their testimony. But on matters of law, you must follow all of my instructions. 4. If my instructions use a word in a way that is different from its ordinary meaning, use the meaning I give you, which will be a proper legal definition.

5. All the questions and answers are important. No one should say that any question or answer is not important.

6. Answer "yes" or "no" to all questions unless you are told otherwise. A "yes" answer must be based on a preponderance of the evidence [unless you are told otherwise]. Whenever a question requires an answer other than "yes" or "no," your answer must be based on a preponderance of the evidence [unless you are told otherwise].

13

The Accommodation Doctrine: VirTex Operating v. Bauerle – Operators v. Deer Hunters________________________________________________________________________________________________________Chapter 10

The tenn "preponderance of the evidence" means the greater weight of credible evidence presented in this case. If you do not find that a preponderance of the evidence supports a "yes" answer, then answer "no." A preponderance of the evidence is not measured by the number of witnesses or by the number of documents admitted in evidence. For a fact to be proved by a preponderance of the evidence, you must find that the fact is more likely true than not true.

A fact may be established by direct evidence or by circumstantial evidence or both. A fact is established by direct evidence when proved by documentary evidence or by witnesses who saw the act done or heard the words spoken. A fact is established by circumstantial evidence when it may be fairly and reasonably inferred from other facts proved.

7. Do not decide who you think should win before you answer the questions and then just answer the questions to match your decision. Answer each question carefully without considering who will win. Do not discuss or consider the effect your answers will have.

8. Do not answer questions by drawing straws or by any method of chance.

9. Some questions might ask you for a dollar amount. Do not agree in advance to decide on a dollar amount by adding up each juror's amount and then figuring the average.

10. Do not trade your answers. For example, do not say, "I will answer this question your way if you answer another question my way."

11. The answers to the questions must be based on the decision of at least ten of the twelve jurors. The same ten jurors must agree on every answer. Do not agree to be bound by a vote of anything less than ten jurors, even if it would be a majority.

As I have said before, if you do not follow these instructions, you will be guilty of juror misconduct, and I might have to order a new trial and start this process over again. This would waste your time and the parties' money, and would require the taxpayers of this county to pay for another trial. If a juror breaks any of these rules, tell that person to stop and report it to me inunediately.

14


Presiding Juror:

1. When you go into the jury room to answer the questions, the first thing you will need to do is choose a presiding juror.

2. The presiding juror has these duties: a. have the complete charge read aloud if it will be helpful to your deliberations; b. preside over your deliberations, meaning manage the discus- sions, and see that

you follow these instructions; c. give written questions or comments to the bailiff who will give them to the judge;

d. write down the answers you agree on; e. get the signatures for the verdict certificate; and f. notify the bailiff that you have reached a verdict.

Do you understand the duties of the presiding juror? If you do not, please tell me now.

Instructions for Signing the Verdict Certificate:

1. You may answer the questions on a vote of ten jurors. The same ten jurors must agree on every answer in the charge. This means you may not have one group of ten jurors agree on one answer and a different group often jurors agree on another answer.

2. If ten jurors agree on every answer, those ten jurors sign the verdict.

If eleven jurors agree on every answer, those eleven jurors sign the verdict.

If all twelve of you agree on every answer, you are unanimous and only the presiding juror signs the verdict.

3. All jurors should deliberate on every question. You may end up with all twelve of you agreeing on some answers, while only ten or eleven of you agree on other answers. But when you sign the verdict, only those ten who agree on every answer will sign the verdict.

Do you understand these instructions? If you do not, please tell me now.

FILED Ar j : Sc O'CLOCK p M

,, ....... \ . ) / ·- . ) D 'h,.yi.-U .<.>. /

JUDGE PRESIDING

15


QUESTION 1

Did Virtex fail to comply with the following provision of the 2008 Surface Use Agreement between the parties?

"Should it be necessary to install tank batteries on said land for [the Mars McLean Well No. 3], the operator agrees to place the tank batteries within 50 yards of Farm to Market Road #117."

Answer ""0" or "No"

Answer: \\ {,, S

16


If you answered ''Yes" to Question 1, then answer the following question. Otherwise, do not answer the following question.

QUESTION2

Was VirTex's failure to comply with the provision of the 2008 Surface Use Agreement excused?

Failure to comply by VirTex is excused if compliance is waived by the Bauerles.

Waiver is an intentional surrender of a known right or intentional conduct inconsistent with claiming the right.

Answer "Yes" or "®" Answer: \)o

17


If you answered "Yes" to Question 1 and "No" to Question 2, then answer Question 3. Otherwise, do not answer Question 3.

QUESTION3

What sum of money. if any, if paid now in cash, would fairly and reasonably compensate the Bauerles for their damages, if any, that resulted from VirTex's failure to comply with the 2008 Surface Use Agreement?

Consider the following elements of damages, if any, and none other.

The value of the land, if any, used by VirTex for tank batteries for the No. 3 Well.

Do not add any amount for interest on damages, if any.

Answer separately in dollars and cents for damages, if any.

Answer: _ ...... ~__.\r--1-~_0_

18


QUESTION 4

Would VirTex's (lessee) installation of overhead power lines fail to accommodate the Bauerles' (surface owner) existing use of the surface of the property in question?

A lessee fails to accommodate an existing use of the surface if-

1. the lessee's use of the surface completely precludes or substantially impairs the surface owner's existing use; and

2. there is no reasonable alternative method available to the surface owner by which the existing use can be continued.

An alternative method is not unreasonable if it is merely more inconvenient or less economically beneficial than the existing method. Rather, The inconvenience or financial burden of continuing the existing use by the alternative method must be so great as to make the alternative method unreasonable.

You are instructed that use of the airspace above the surface of the property constitutes use of the surface.

Answer"'(§}" or "No.>'

Answer: __ ,_le_~--

19


If you answered "Yes" to Question 4, then answer Question 5. Otherwise, do not answer Question 5.

QUESTIONS

Is there an alternative reasonable, customary, and industry-accepted method available to the lessee that will allow recovery of the minerals and also allow the surface owner to continue the existing use?

Answer "'(~~r or "No."

Answer: --~ ..... e __ S ____ _

20


QUESTION6

Did the Bauerles unreasonably interfere with VirTex's (lessee) production of the minerals from the Bauerle's (surface owner) property?

The lessee has the right to go onto the surface of the land to extract the minerals, as well as those incidental rights reasonably necessary for the extraction, including the right to use as much of the surface as is reasonably necessary to extract and produce the minerals.

Answer "Yes" or '~"

Answer: \.) 0

21


H you answered "Yes'' to Question 6, then answer Question 7. Otherwise, do not answer Question$.~. ~

QUESTION?

What swn of money, if any, if paid now in cash, would fairly and reasonably compensate VirTex for its damages, if any, that resulted from such interference as found by you in answer to Question 6?

Consider the following elements of damages, if any, and none other.

The reasonable and necessary expenses incurred by VirTex to supply power to its pump jacks and water well, less the expenses VirTex would have incurred to power its pump jacks and water well using electric power.

Do not add any amount for interest on damages, if any.

Answer separately in dollars and cents for damages, if any.

Answer:-------

22


If you have answered "Yes" to Question 1 and "No" to Question 2, answer the following question. Otherwise, do not answer the following question.

QUESTIONS

What is a reasonable fee for the necessary services of the Bauerles' attorney in prosecuting their claim, as found by you in your answer to Question No. 1?

Answer with an amount for each of the following, stated in dollars and cents:

1. For representation through trial and the completion of proceedings in the trial court.

Answer: ~$\ . \~ 2. For representation through appeal to the court of appeals.

\ \}-50 I

Answer:

3. For representation at the petition for review stage in the Supreme Court of Texas.

Answer: ) \.) - - -=-- -4. For representation at the merits briefing stage in the Supreme Court of Texas.

Answer: -~-'-~-'-0-5. For representation through oral argument and the completion of proceedings in the

Supreme Court of Texas.

Answer:

23


With r egard to Question 4 and 5, answer both Questio.;_ 9 and Question 10.

QUESTION9

What is a reasonable fee for the necessary services of the Bauerles' attorney in prosecuting their claim, as found by you in your answer to Questions 4 and 5?

Answer with an amount for each of the following, stated in dollars and cents: . ~.

1. For representation through trial and the completion of proceedings in the trial court. Answer: \\05T2....'d\

2. For representation through appeal to the court of appeals. Answer: ~\ )b00

3. For representation at the petition for review stage in the Supreme Court of Texas. Answer: b) boo . ·

4. For representation at the merits briefing stage in the Supreme Court of Texas. Answer: \ J--1 6o l)

5. For representation through oral argument and the completion of proceedings in the Supreme Court of Texas. ~wer: :l , L\ ()0

QUESTION 10

What is a reasonable fee for the necessary services of VirTex's attorney in defending against the Bauerles' claim, as found by you in your answer to Questions 4 and 5?

Answer with an amount for each of the following, stated in dollars and cents:

1. For representation through trial and the completion of proceedings in the trial court. Answer: ~5) L~:i

2. For representation through appeal to the court of appeals. Answer: \\' vSU

3. For representation at the petition for review stage in the Supreme Court of Texas. Answer: ')1J,\)

4. For representation at the merits briefing stage in the Supreme Court of Texas. Answer: lo )h'oo

5. For representation through oral argument and the completion of ·proceedings in the Supreme Court of Texas. ~wer: Y\J L 1 J. \)

24


Verdict Certificate

Checyne:

_c/_ C Our verdict is unanimous. All twelve of us have agreed to each and every answer. The presiding j ror has signed the certificate for all twelve of us.

l ., 1nS :SR\ )'.\z.AP.

Printed Name of Presiding Juror

__ Our verdict is not unanimous. Eleven of us have agreed to each and every answer and have signed the certificate below.

__ Our verdict is not unanimous. Ten of us have agreed to each and every answer and have signed the certificate below.

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

Signature Named Printed

25


CAUSE NO. J2-JO-OOJ65..CVf

ROBERT LEON BAUERLE and IN 111E DlBTRICT COURT CYNllflA BAUERLE,

PJ•lnrlffa,

V.

VIJlTl?X OJ>P.RATlN'O CO., INC., and VlRTEX PRODUCING COMP ANY, LP.

Defendonts.

AMENDED FIN AL JUDGMENT

81stJUDJCJAL DJSTIUCT

17R.10 COUNTY, TBXAS

On April lS.-20, 2016, 1bis case was tried to 11jury on alt mailers. JllalodM, Robert Lean

Bauerle and Cyntttla DaUOrle ("Plalntim''), app,oared tbrough tbc.ir llUorno)'l, Byron Stone of

Dunn S01ttb, LLP 1tnd Glady Roberts, Jr. of tho Low Office of Grady R.obGlls. k. and annou1ll.-ea

tc•dy for triti.I. Dcfol'ldao.U, VirTax Open.ting Co., Inc. Md Vir'I'ex. Prodlltlln& Company, LP.

("Defendants"), eppclSI'Cd t.bX'ough lb:al.r &1l:omey, Lanae K.. Bruun of the Law Offices of Lance, K

B111Un, and. ann.ounood ready for tde.l.

Afuir being empaneled a.a.d awom, the jury heard tettimony, ~coived the cvidene<; a:nd

hearcl th.~ cl.osiog crgumcnts of tho parties' cospcctlve llU.Qtneyi, Attcr the close of evidclo°" and

closing AtiWlleJ\ts; the Cow·c submlttcd the CA5e to the jury on April 20, 20) 6. Tho jury rot urned

a. "Verdict thilc the Court regeived, filed. and entered of rcoord on April 20, 20 I(), A truo nnd

cor:rc<..1 CQPY of the Charge of the Court, conhlining tho jury's verd.ict, Je attaohed b.croro es

Exhibit I end iocorporatad b.~in ("Jury's Vcrdictj. AIJ mattus in contl'OV'CTIY, legal and

factuaJ, have now been submitted to tho Cowt for It• determination.

On M«y 20. 2016, the Court cntel'tl<i a Ffoai 1udgmont based on the Jwy's Verdict. On

luly 14, 2016, tho Court c.onaidered Defendants' Mdlion to Di~gard Jury Ftnd1ng1 an~ for

J~ent Noa.wilhstandh\g tbe Verdier; Motion tX> Vaca~ Modify, Correct or Reform Judgment

27


<Yt in tht Alternative, Motion for New Trial ("Motion''). Aftu conaidcrins tile Motion and

Plaintiff.,' respomc thereto, and hearing the irrgum.ent of CQUD5CI, the Court granted the Motion.

io part, llnd act a~dc the Jury's tlodlng1 wltb rcapei;ir ro Questions l, 2, 3, and 8 and granted it

part!al judgmenl notwilh.ttand!ns the vordiot ju favor of Defendants u to Plaintif&' breach of

conlrecl claim. Thll Court dcpicd all other relief rc4fub~ced. Aoooniingly, the ·or1giual Pillai

Judgment damd Ma.y 20, 2016 ill vacated and set uide. The Cow:t. enters \his Amended

Judame•rt in it! p.lftce.

Baaed on the Jury's Verdict, and th" Court's grant of a pert.in! judgment notwilliafandin,

the YCJidior in favor of Defondsnta as to Plaintiffs' br~ach of oontr'ect cW1n, tho Conrt l1eceby

RENDERS th.i3 Amended Pinal Judgment,

Tl1e Pl.lllntitf! baVin& ptevaikd on th.cir dec1a'8tnry judamcnt oJaJm, IT IS ORDERED,

ADJUDGED. DECREIID. and DECL..ARED Olat Oefen.danta .tha.ll not io.,tall over.head po~

llnt1 oo the Plointiffa' pooperty. but rather shall use on alwnative method of powering their

equipment that wlll accommodate Plaintiffs' existing use of che surfa.ce .

.Pursuant to Ch!flltel.' 37 of the Tbxa1 Ci vll Practice & R.etn.cdies Codo, tho Court finds lhal

lt la e(J\Jitable anti junt for Plaintiffs to recover renlfon1bfe and ucaasakJ attorney'• &ea and "°41ti

lncumc.l' in ci>nnection with tlusir dc<:lamtory judament claim. It )! therefore Olill.BRBD,

AOIUDOED, ltnd DECREED that Ph1.icttiffa sballreoover Sl to,5n.BJ la attomey'1 foes through

trial, plll! fa><ablo co\1rt costs> igains1 Df.f®danta, Jointly Md lff>Venlly QD lhelr decl~tDry

judamenc chtim. 'rho Court hae detonnitiod Dof6nde.nla 1ha.JI not n:cover attomoy'a ~Cl in

~orui~tfon with their dererao·ofthe decl1t1tory Judsmcmt.cJaint.

1n the eveot the Defendants appeal tbi, ,..mcoded FfoaJ Judgment aud they ore nol

!ll.Ccc.u.t\JJ, Plt.intlffi !ha.ll have and recover 1Jom Defondanta, jointly and sevcrft.lly, additional

28


attorney' s fees in the following amount! for eacih stage of thei appeUate proceedings, as

Declae1tory Judgment claim:

a. For representation through Rpp~I to the court of appeals: $21,000. b. Fol'T~tation al the ptrtlnon for review sta~ in tbo Supreme.Court of

Texas: $61300, c. For rap~cn\ation at the rnctit! briotlng amge In me, SUprcmc Coun. of Texas:

$12-,600. d. For rop.rcsentation throUgh ond arsument ~d the completion of proceedings

in 1hc Supra.me Conrt of Tees: $8,400.

IT TS ORDERED, ADJUDOBb, and DfiCREf.D that Plaintifh •hall rw nothing by

their brooch of contract cl.aim agafolt Dof.endant&

IT IS OR.DER.ED, ADruDOED, and DECREED that Defendants shall take t10thing by

their count~claim against Plaintif&.

Defendants, VirTex Operating Co., lnc. end Vit'fex Producing ('..ampahy, L.P., shall bo

jointly and severally Hable for all monetary awards in tbfs Fina.I Jud1mcnt

~judgment for aotual damages. 1rM 11ttorney11:1 fees flnd costs ahaJI bw- inte.rc!t at tlie

1'8le of five percent (3%) per llllDum ftom. the dat8 of cmry of this Amended Final Judgment until

fully paid. Appellate attorney's fot.a shcl.I bcilr iotere,,t at th.e rel6 of five petCMl (5%) per annum

fTom ti~ data Qf entry of the ~spectivo appellate court judgments, IUI applic•blc, untll fully pald.

PlAi.ntiffs shall have aU rights of exccmion and o.ll otber Wries and prneesses f.or the

en1brcmtent and collection of this Amended fjnaJ Judgment ogaiost Defcodants as may bo

ncGCl&Sal)' '

Thia Amended Fina.l Judgment 1'1nally d\:tpose.s of all pertios UJd claimt .in this (AW!Wl

and is a final judgment subjec:t to ~l.

29


~a SIGNED on~-' 20J6.

~2~4=1• 1~~ ~ notablo Donna S. Rayes, PJ.lridi

30


AOREED AS TO SUBSTANCE AND FORM:

Byron T. Stnn& State Bar No. 00797.505 bONN St.m'H, LLP 755 East Mulberry, Suite 200 San Antonio, Tona ?l'.21 2 210·7'.J6~999l 210-1)6-9992 (fltX) AN<J1m.1ys for PlafMt(tfi·

AGREED AS TO FORM ONLY AND NOT SUBSTANCE:

Lance K. BrUWI Srate Bar No. 03262600 THB l.AW Ol'rlCUS OF l.ANCB K. BRUUN 7 J l North CatQ.cahua, Suite 1660 Corpus Chri1tl, Texas 78401-0573 36lwS84..flJOO J6HJ84·8301 (fbx) Alrorlffl>'S for f)ll/tn4an1s

31


Fourth Court of Appeals San Antonio, Texas

MEMORANDUM OPINION

No. 04-16-00549-CV

VIRTEX OPERATING CO., INC. and VirTex Producing Company, L.P.,

Appellants

v.

Robert Leon BAUERLE and Cynthia Bauerle, Appellees

From the 81st Judicial District Court, Frio County, Texas

Trial Court No. 12-10-00365-CVF Honorable Donna S. Rayes, Judge Presiding

Opinion by: Marialyn Barnard, Justice Sitting: Karen Angelini, Justice

Marialyn Barnard, Justice Luz Elena D. Chapa, Justice Delivered and Filed: November 8, 2017 AFFIRMED

This is an oil and gas case concerning the application of the accommodation doctrine.

Appellees, Robert Leon Bauerle and Cynthia Bauerle (collectively, “the Bauerles”), filed suit

against appellants, VirTex Operating Co., Inc. and VirTex Producing Company, L.P. (collectively,

“VirTex”), seeking a declaration that VirTex’s proposal to install overhead power lines across their

ranch was prohibited under the accommodation doctrine. In addition to their declaratory judgment

action, the Bauerles also alleged VirTex breached a surface use agreement. A jury returned a

verdict in favor of the Bauerles as to each of their claims; the trial court then rendered judgment

33


04-16-00549-CV

on the jury’s verdict and awarded the Bauerles attorney’s fees. On appeal, VirTex raises several

issues, arguing the evidence is legally and factually insufficient as to all three elements of the

accommodation doctrine and the Bauerles were not entitled to attorney’s fees. VirTex also argues

the trial court abused its discretion with regard to the admissibility of certain evidence. We affirm

the trial court’s judgment.

BACKGROUND

This appeal arises from a dispute between the Bauerles and VirTex concerning the

installation of overhead power lines across the Bauerles’ ranch property — known as the Todos

Santos Ranch — in Dilley, Texas. The Todos Santos Ranch comprises approximately 8,500 acres

in Frio and Zavala Counties. It is undisputed that the Bauerles own the surface estate of the 8,500-

acre tract as well as a 2% royalty interest in the property. The Bauerles primarily use the ranch

property to run a commercial hunting business and a cattle operation. The ranch is equipped with

a hunting lodge, cookhouse, three bunkhouses, and a man-made lake. The Bauerles lease the ranch

and its facilities to hunters on a yearly basis, and under these leases, hunters have the opportunity

to hunt deer, turkey, and quail. In addition to the hunting leases, the Bauerles also maintain cattle

on the ranch; however, the main source of income for the ranch stems from the hunting leases.

Under the hunting leases, hunters use helicopters several times throughout the year on the

ranch for a number of game operations, including brush and predator control, game surveys, and

deer captures. Of these operations, deer captures are arguably the most important. In an effort to

manage the number of Whitetail deer on the ranch, hunters use helicopters to locate and capture

deer quickly. Once pilots locate a deer, they are able to push the deer into an open area, where the

deer can be captured with a net gun. The operation requires pilots to fly alongside the deer —

approximately 4 to 5 feet above ground — weaving in and out of brush, while at the same time,

dodging trees and other obstacles. The process has been described as one of “the most extreme

34


04-16-00549-CV

[forms of] flying that you can possibly do.” According to several hunters, this method of deer

capture is less stressful for the deer and more cost efficient for hunters. Additionally, this method

has, to date, eliminated injuries to the deer. Ultimately, the captured deer are relocated to a fenced

enclosure for breeding or to another nearby ranch in the event the Bauerles’ ranch has a surplus of

deer.

In addition to the deer capture operations, hunters also use helicopters for maintaining

brush operations and predator control. Equipped with a tank and sprayers for brush control,

helicopters fly over certain areas of the ranch and spray in order to enable taller brush to grow in

a more favorable way for the deer. Hunters also use helicopters to hunt predators, such as coyotes,

on the ranch.

As indicated above, it is undisputed the Bauerles own the entire surface estate and a 2%

royalty interest in the ranch property. ExxonMobil owns the full mineral fee estate underlying the

property and executed an oil and gas lease — known as the Mars Mclean Lease — to VirTex. The

Mars Mclean Lease covers approximately 3,000 acres of the Bauerles’ ranch. Although there was

no oil and gas activity on the property when the Bauerles first acquired the property, a VirTex

landman informed Mr. Bauerle that VirTex was interested in drilling a well to determine whether

there was oil and gas on the property. Because the well was productive, VirTex drilled several

more wells, paying monthly royalties to the Bauerles. By the fall of 2008, the Bauerles had entered

into a surface use agreement with VirTex, allowing VirTex to install tank batteries. Currently,

VirTex operates nine wells on approximately 2,000 acres of the leased acreage.

Each of the existing wells on the property is equipped with a pumpjack, which extracts

crude oil from the ground so that the oil can be refined and placed on the market. VirTex currently

operates each of the pump jacks with four portable diesel generators that it rents. According to

VirTex, the generators were intended to be a temporary means of generating power to the pump

35


04-16-00549-CV

jacks until the installation of permanent overhead power lines. In 2012, VirTex approached the

Bauerles and asked them to sign an easement for the installation of power lines. Currently, the

property has a single power line that runs alongside a black paved road to the hunting lodge and

other facilities on the ranch. VirTex’s proposed power line configuration consists of a box with

overhead power lines running to the individual wells; overall, the design would create a perimeter

the Bauerles describe as a spiderweb. It is undisputed VirTex would pay for the costs of the

proposed power lines.

Due to a concern that the overhead power lines would interfere with the helicopter

operations, the Bauerles refused to sign the easement. The Bauerles also asked VirTex to halt any

construction plans concerning the installation of the overhead power lines. VirTex agreed. The

Bauerles then filed a declaratory judgment action, requesting the trial court to render judgment

declaring that VirTex’s installation of the proposed overhead power lines would substantially

impair their preexisting use of the “lateral surface and super-adjacent airspace” of the property,

which included use of the helicopters for game operations. The Bauerles also alleged VirTex

breached the surface use agreement by failing to install tank batteries within a specified distance

of F.M. #117 in accordance with the terms of the Agreement. In response, VirTex counterclaimed,

asserting the Bauerles were unreasonably interfering with its right to extract the minerals by

prohibiting the installation of the overhead power lines. According to VirTex, the installation of

the overhead power lines is a reasonable and customary practice operators use to generate power

to wells, and there is no other industry accepted method available.

The parties proceeded to trial, and the jury returned a verdict in favor of the Bauerles as to

each of their claims. VirTex subsequently filed numerous post-trial motions, including a motion

for judgment notwithstanding the verdict as to the Bauerles’ breach of contract claim, which was

based on the surface use agreement. The trial court granted the JNOV as to the breach of contract

36


04-16-00549-CV

claim, but denied all other requested relief.1 The trial court subsequently rendered an amended

final judgment, deleting the Bauerles’ recovery on their breach of contract claim. VirTex then

perfected this appeal.

ANALYSIS

On appeal, VirTex raises several issues, arguing the evidence is legally and factually

insufficient to support the jury’s findings as to all three elements of the accommodation doctrine,

the Bauerles were not entitled to attorney’s fees, and the trial court erred in admitting and excluding

certain evidence. With respect to its accommodation doctrine argument, VirTex specifically

argues the Bauerles failed to prove: (1) the proposed power lines would completely preclude or

substantially impair their existing hunting and cattle operations; (2) there was no reasonable

alternative method available by which they could continue their existing hunting and cattle

operations; and (3) there was a reasonable, customary, and industry-accepted method available to

VirTex by which it could recover the minerals. With regard to attorney’s fees, VirTex argues the

trial court erred in awarding attorney’s fees to the Bauerles because although framed as a request

for declaratory relief, the Bauerles sought injunctive relief on their accommodation doctrine claim,

and there is no statute permitting the recovery of attorney’s fees on an accommodation doctrine

claim. VirTex also argues the trial court abused its discretion in admitting testimony from the

Bauerles’ expert, Mike Kramer, and excluding multiple photographs showing helicopter

operations were possible on ranch lands with overhead power lines.

1 The Bauerles do not challenge the trial court’s order granting VirTex’s JNOV as to their breach of contract claim. Therefore, that issue is not before us.

37


04-16-00549-CV

Accommodation Doctrine

Standard of Review

In reviewing the legal sufficiency of the evidence, we view the evidence in the light most

favorable to the verdict, credit favorable evidence if reasonable jurors could, and disregard

contrary evidence unless reasonable jurors could not. Reeder v. Wood Cty. Energy, LLC, 395

S.W.3d 789, 795 (Tex. 2012); SW Loan A, L.P. v. Duarte-Viera, 487 S.W.3d 697, 701 (Tex.

App.—San Antonio 2016, no pet.) (citing City of Keller v. Wilson, 168 S.W.3d 802, 807 (Tex.

2005)). Evidence is legally insufficient when: (a) there is a complete absence of evidence of a

vital fact; (b) the court is barred by rules of law or of evidence from giving weight to the only

evidence offered to prove a vital fact; (c) the evidence offered to prove a vital fact is no more than

a mere scintilla; or (d) the evidence conclusively establishes the opposite of the vital fact. HMC

Hotel Props. II Ltd. P’ship v. Keystone-Tex. Prop. Holding Corp., 439 S.W.3d 910, 913 (Tex.

2013). More than a scintilla of evidence exists when the evidence supporting the finding, as a

whole, “rises to a level that would enable reasonable and fair-minded people to differ in their

conclusions.” Gharda USA, Inc. v. Control Sols., Inc., 464 S.W.3d 338, 347 (Tex. 2015); Strad

Energy Servs. USA, Ltd. v. Bernal, No. 04-16-00116, 2016 WL 6242839, at * (Tex. App.—San

Antonio Oct. 26, 2017, pet. denied) (mem. op.). If the evidence is so weak that it does no more

than create a mere surmise or suspicion of its existence, then its legal effect is that it is no evidence.

Suarez v. City of Tex. City, 465 S.W.3d 623, 634 (Tex. 2015).

In reviewing the factual sufficiency of the evidence, we must consider and weigh all of the

evidence, not just the evidence that supports the verdict. Crosstex N. Tex. Pipeline, L.P. v.

Gardiner, 505 S.W.3d 580, 615 (Tex. 2016). We will set aside the finding only if it is so contrary

to the overwhelming weight of the evidence that the finding is clearly wrong and unjust. Gardiner,

505 S.W.3d at 615; Ellis, 971 S.W.2d at 407.

38


04-16-00549-CV

With regard to either a legal or factual sufficiency review, the factfinder is the sole judge

of witness credibility and the weight to be given to testimony. City of Keller, 168 S.W.3d at 819

(legal sufficiency); Golden Eagle Archery, Inc. v. Jackson, 116 S.W.3d 757, 761 (Tex. 2003)

(factual sufficiency). An appellate court may not substitute its judgment for that of the factfinder

merely because it might reach a different result. City of Keller, 168 S.W.3d at 819; Barker v.

Eckman, 213 S.W.3d 306, 314 (Tex. 2006).

Applicable Law

“Texas law has always recognized that a landowner may sever the mineral and surface

estates and convey them separately.” Coyote Lake Ranch, LLC v. City of Lubbock, 498 S.W.3d

53, 60 (Tex. 2016). The severed mineral estate is known as the dominant estate because it receives

the benefit of an implied right to use as much of the surface estate as reasonably necessary to

produce and remove minerals; however this right must be exercised with “due regard” for the

rights of the surface estate owner. Id. (citing Getty Oil Co. v. Jones, 470 S.W.2d 618, 621 (Tex.

1971)); Merriman v. XTO Energy, Inc., 407 S.W.3d 244, 249–50 (Tex. 2013) (stating dominant

mineral estate owner has not only right to go onto surface to extract minerals, but also all incidental

rights reasonably necessary for extraction). This concept of “due regard” is known as the

accommodation doctrine and is aimed at balancing the rights of the surface owner and the mineral

owner with regard to the use of the surface while at the same time recognizing the dominant nature

of the mineral estate. Coyote Lake Ranch, 498 S.W.3d at 62–63; Tex. Genco, LP v. Valence

Operating Co., 187 S.W.3d 121 (Tex. App.—Waco 2006, pet. denied).

Under the accommodation doctrine, “if the mineral owner or lessee has only one method

for developing and producing the minerals, [then] that method may be used regardless of whether

it precludes or substantially impairs the surface estate owner’s existing use of the surface.”

Merriman, 407 S.W.3d at 248–49. On the other hand, “if the mineral owner has reasonable

39


04-16-00549-CV

alternative uses of the surface, one of which permits the surface estate owner to continue to use

the surface in the manner intended … and one of which would preclude that use by the surface

owner, [then] the mineral owner must use the alternative that allows continued use of the surface

by the surface owner.” Id. Accordingly, under these principles, the mineral owner’s absolute right

to use the surface is preserved if there is only one way to produce the minerals. Tex. Genco, LP,

187 S.W.3d at 121–23.

The Texas Supreme Court has further provided that: To obtain relief on a claim that the mineral lessee has failed to accommodate an existing use of the surface, the surface owner has the burden to prove that (1) the lessee’s use completely precludes or substantially impairs the existing use, and (2) there is no reasonable alternative method available to the surface owner by which the existing use can be continued. If the surface owner carries that burden, he must further prove that given the particular circumstances, there are alternative reasonable, customary, and industry-accepted methods available to the lessee which will allow recovery of the minerals and also allow the surface owner to continue the existing use.

Coyote Lake Ranch, 498 S.W.3d at 62–63 (quoting Merriman, 407 S.W.3d at 249). Each of these

elements of the surface owner’s burden are fact-sensitive and must be established either

conclusively or by appropriate findings in determining the reasonable necessity of the mineral

owner’s surface use. Tex. Genco, LP, 187 S.W.3d at 121–23.

Application

Based on the foregoing principles, the Bauerles had the burden of producing evidence

conclusively establishing that VirTex’s installation of overhead power lines would completely

preclude or substantially impair their existing use of the surface, and there were no reasonable

alternative methods available to them by which their existing use of the surface could be continued.

See Coyote Lake Ranch, 498 S.W.3d at 62; Merriman, 407 S.W.3d at 249. Only after the Bauerles

established these two elements were they required to further prove there were alternative

reasonable, customary, and industry-accepted methods available to VirTex which would allow

40


04-16-00549-CV

VirTex to recover the minerals and them to continue their existing use. See Coyote Lake Ranch,

498 S.W.3d at 62; Merriman, 407 S.W.3d at 249. As indicated above, VirTex contends the

evidence is legally and factually insufficient as to each of these elements.

1. Did the Proposed Power Lines Completely Preclude or Substantially Impair the Bauerles’ Existing Use of the Surface? VirTex first challenges the legal and factual sufficiency of the evidence to support the

finding that the proposed overhead power lines would preclude or substantially impair the

Bauerles’ current use of the surface. VirTex argues that although the evidence shows the overhead

power lines would admittedly make the Bauerles’ use of helicopters more difficult and dangerous,

the evidence did not establish the power lines would make helicopter use impossible. In support

of this contention, VirTex points to the testimony by the Bauerles’ helicopter witness, Freddie

Graf, who conducts much of the ranch work on the property with a helicopter. Graf testified it

would be possible — albiet, more dangerous — to fly a helicopter within the proposed grid.

VirTex also points to testimony from its witness, Ben Ellis, who testified the proposed power lines

did not substantially impair the Bauerles’ use of the surface because many of the power lines would

be in wooded areas, which are areas where deer capture and predator control do not occur.

The Bauerles, however, argue the evidence sufficiently shows the installation of the

proposed power lines would substantially impair their existing use of the lateral surface and super-

adjacent airspace of their property. According to the Bauerles, the evidence establishes that a large

part of the ranch work requires the use of helicopters on the property, and the use of helicopters

would become extremely dangerous once the overhead power lines were installed. The Bauerles

point to Graf’s testimony, as well as testimony from Will Nichols, who also leases use of the ranch

and flies helicopters on the ranch. Both Graf and Nichols testified the proposed power lines would

41


04-16-00549-CV

make the area extremely difficult to fly and drastically hinder their ability to conduct game

operations.

With regard to how the installation of the overhead power lines would impact the existing

use of the property, the jury heard evidence that the proposed power lines would make helicopter

flying “a very dangerous situation.” Nichols, as well as Graf, testified the Bauerles’ property

currently had one power line across the property, and the installation of the proposed grid would

make flying “so extremely dangerous” that neither of them would want to perform game operations

on the property. Both men explained the nature of their flying requires them to fly low to the

ground and they have to fly up and around trees and power lines at an extremely fast pace while

chasing deer. Therefore, the number of power lines on the property significantly impacts the safety

of their operations. Nichols specifically testified that because power lines “blend into the ground,”

a pilot must pay “absolute close attention to where those lines are,” and the proposed power grid

made him personally worried about flying over the ranch. Nichols explained the grid would impair

his ability to fly safely to such an extent that “I probably won’t be flying anymore.” Additionally,

Graf testified the power grid would “creat[e] a bunch — a whole lot more danger to myself and

my passenger,” pointing out the proposed grid increased the amount of obstacles he had to remain

mindful of. Graf explained that the more power lines that were present, the more dangerous it

became for a helicopter to fly over an area. Viewing this evidence in the light most favorable to

the verdict, as well as considering and weighing all the evidence, we conclude such evidence is

legally and factually sufficient to establish that VirTex’s installation of the power lines would

substantially impair the existing use of helicopters over the lateral surface and super-adjacent

airspace of the property. See Reeder, 395 S.W.3d at 795; Crosstex N. Tex. Pipeline, L.P., 505

S.W.3d at 615.

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VirTex, however, argues there is contrary evidence, showing that helicopter usage could

still be possible even with the proposed overhead power lines, and therefore, the Bauerles’ existing

use of the surface would not be substantially impaired or precluded. For support, VirTex points

to its helicopter witness, Ben Ellis, who testified he has flown helicopters on ranches with more

power lines than that proposed and, as noted above, the proposed power lines affected only wooded

areas where deer capture and predator control did not occur. VirTex further points out both Graf

and Nichols testified helicopter flying could still be possible.

In light of this contrary evidence, the jury also heard Graf and Nichols testify that the

proposed grid would hinder their ability to fly safely. Graf specifically qualified his statement that

helicopter operations could still be possible by testifying anything was possible but the proposed

grid would be “hard to keep up with” and “make it much more difficult.” Graf further explained,

“it has fingers coming off of it, you know, one going here, one going here … it’s hard to keep up

with that many power lines in the back of your head.” Because the factfinder is the sole judge of

witness credibility and weight to be given to testimony, the jury was free to believe Nichols and

Graf’s testimony that the proposed overhead power lines would significantly hinder their ability

to fly over the ranch. See City of Keller, 168 S.W.3d at 819; Golden Eagle Archery, Inc., 116

S.W.3d at 761; Barker, 213 S.W.3d at 314.

VirTex further contends the testimony from Nichols and Graf was conclusory because it

was based on mere speculation, and therefore, their testimony did not constitute evidence.

According to VirTex, because the proposed power lines were not yet installed, Nichols and Graf’s

testimony regarding whether the power lines would substantially impair the existing use of the

surface was merely speculative. We disagree. Evidence establishing that a lessee’s proposed use

would completely preclude or substantially impair the surface owner’s existing use is sufficient

evidence to satisfy the first prong of the accommodation doctrine. See Valence Operating Co. v.

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Tex. Genco, LP, 255 S.W.3d 210, 218 (Tex. App.—Waco 2008, no pet.) (holding testimony that

proposed drilling would change geometry of landfill was sufficient evidence to show substantial

impairment) (emphasis added); Tex. Genco, LP, 187 S.W.3d at 121–24 (holding ample evidence

shows landowner’s existing use of cell 20 would be completely precluded or substantially impaired

if lessee drilled well because landowner would have to redesign cell configuration) (emphasis

added). We have found no authority, and VirTex has failed to point to any, that indicates the

substantial impairment prong of the accommodation doctrine can only be established by evidence

showing the surface owner has already been impaired by the lessee’s proposed use of the surface.

Rather, the surface owner need only prove that his existing use would be substantially impaired or

completely precluded by the mineral owner’s proposed use of the surface. See Valence Operating,

255 S.W.3d at 218; Tex. Genco, LP, 187 S.W.3d at 121–24. Here, both Nichols and Graf testified

in detail how the proposed power line configuration would substantially impair — in their own

words, “hinder” — their helicopter usage.

Finally, VirTex points to Coyote Lake Ranch, LLC v. City of Lubbock for the proposition

that the Bauerles must show how all the proposed power lines — as opposed to merely some or

more power lines — would substantially impair their helicopter operations. 498 S.W.3d at 65. In

Coyote Lake Ranch, a ranch conveyed its groundwater rights to the City of Lubbock (“the City”),

expressly providing the City with the full rights of ingress and egress over the property so that the

City could drill water wells. Id. at 56–57. The deed also specifically provided that the City could

install power lines across the property in order to generate power to the wells. Id. at 57. In 2012,

the City proposed plans to increase water extraction efforts on the ranch and began taking action

to prepare additional drill sites. Id. The ranch filed an application for a temporary injunction

enjoining the City from pursuing its efforts. Id. The ranch argued the proposed drill sites would

remove vegetation for cattle on the ranch and the proposed power lines would allow hawks to roost

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and prey on the Lesser Prairie Chicken, threatening its survival. Id. at 57–58. The trial court

granted the injunction, and the City appealed. Id. at 58. On appeal, the court of appeals reversed

the trial court’s order granting the injunction, and the ranch filed its petition for review, arguing

the accommodation doctrine applied to groundwater and the City had to accommodate the ranch.

Id.

The Texas Supreme Court held the accommodation doctrine applied to a severed

groundwater estate just as it does to a severed mineral estate. Id. at 64. The Texas Supreme Court

then considered whether the court of appeals was correct in reversing the trial court’s order

granting a temporary injunction that enjoined the City from installing power lines across the ranch.

Id. at 65. In its analysis, the court pointed out that the deed expressly authorized the City to install

overhead power lines across the property, and, as VirTex points out, the ranch failed to establish

that all the proposed power lines threatened the livelihood of the Lesser Prairie Chicken. Id. The

court then held that the temporary injunction was too broad because it enjoined the City from

engaging in activities that were expressly authorized under the deed. Id. In reaching this

conclusion, the court was not considering the application of the accommodation doctrine. Id.

Rather, the court was deciding whether the temporary injunction was the appropriate means by

which to stop the City from improperly using the surface pending a final resolution of the dispute.

Id. Thus, it considered whether all the proposed power lines threatened the livelihood of the Lesser

Prairie Chicken only in the context of the propriety of the temporary injunction. Id. With regard

to the application of the accommodation doctrine, the court remanded the case to the trial court to

apply the elements of the accommodation doctrine. Id.

After reviewing this case, we conclude VirTex’s contention that Coyote Lake stands for

the proposition that the Bauerles must prove all the power lines substantially impair its existing

use of the surface is misplaced as Coyote Lake is not an application of the elements of the

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accommodation doctrine. Moreover, unlike Coyote Lake, this case does not involve a deed or

lease that gives VirTex the express right to erect overhead power lines across the Bauerles’

property. Furthermore, there is no temporary injunction order enjoining VirTex from installing

overhead power lines; rather, VirTex agreed to halt installation of the power lines. Thus, unlike

the Texas Supreme Court, we need not engage in an analysis regarding whether a temporary

injunction is the appropriate means by which to stop VirTex from improperly using the surface,

and therefore, whether all the power lines are problematic.

Accordingly, we hold the Bauerles produced legally and factually sufficient evidence for

the jury to find that their existing use of the surface and adjacent airspace would be substantially

impaired by the installation of the proposed overhead power lines.

2. Is There Any Reasonable Alternative Method Available to the Bauerles by Which their Existing Use Could Be Continued? VirTex next contends the Bauerles failed to establish that no reasonable alternative

methods existed by which they could continue leasing property to hunters interested in using

helicopters. In support of its position, VirTex argues the evidence shows hunters could continue

using helicopters for game operations in the 5,500 acres of unleased property and could use four-

wheelers to capture and transport deer in the leased acreage with the proposed power lines. Thus,

according to VirTex, the evidence establishes reasonable alternative methods existed by which the

Bauerles could continue its existing use of the surface.

The Bauerles contend, however, the evidence established that no reasonable alternative

methods existed by which they could continue the existing use of the surface. According to the

Bauerles, due to the size of the property and unpredictability of the wild animals, the only

reasonable mechanism available to hunters for their game operations was the use of helicopters.

The Bauerles contend VirTex’s proposed alternative methods were unreasonable because they fail

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to recognize that hunters lease the property because they have the option to use helicopters to

navigate a large amount of terrain in a short period of time as well as quickly capture deer.

Here, the jury heard testimony from hunters, who testified the use of helicopters for game

operations made the Bauerles’ large property possible to manage in an efficient manner. When

given the option of using four-wheelers, Graf and Nichols testified the amount of terrain they had

to cover with a four-wheeler was too large. Furthermore, with regard to the idea of keeping

helicopter operations restricted to the other parts of the ranch, Graf and Nichols testified that due

to the unpredictable nature of deer, there was no guarantee helicopters could successfully capture

deer without flying into VirTex’s leased area. Both Graf and Nichols further testified they would

not lease the property from the Bauerles unless they had the option to use helicopters.

VirTex, however, contends such evidence merely shows the proposed alternative methods

are “more inconvenient or less economically beneficial than the existing method,” and therefore,

it is not evidence that satisfies the Bauerles’ burden of proof. For support, VirTex relies on

Merriman v. XTO Energy, Inc. in which the Texas Supreme Court held the surface owner failed to

meet his burden of proof with respect to the second element because he failed to explain why the

proposed alternative methods — in that case, the use of corrals and pens in other parts of the ranch

— were unreasonable. 407 S.W.3d at 249–50. In Merriman, the Texas Supreme Court stated that

a surface owner fails to meet his burden by producing evidence that the alternative method is, as

VirTex points out, “more inconvenient or less economically beneficial than the existing method.”

Id. at 249. “Rather, the surface owner has the burden to prove that the inconvenience or financial

burden of continuing the existing use by the alternative method is so great as to make the

alternative method unreasonable.” Id.

We disagree with VirTex that the Bauerles failed to meet their burden of proof with respect

to the second element of the accommodation doctrine. Here, unlike Merriman, the testimony

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produced by the Bauerles establishes why the inconvenience and expense of the proposed

alternative methods was so great that it rendered those methods unreasonable. The testimony

showed that the proposed alternative methods of managing the property made the land less likely

to be leased by hunters. Mr. Bauerle testified the primary use of the ranch was to lease it for

hunting, and the evidence showed current hunters would no longer lease the property if VirTex

installed overhead power lines. Nichols specifically testified he would not lease from the Bauerles

if power lines were installed because he could not perform helicopter operations safely, and the

ranch was too large to manage otherwise. The jury also heard evidence from Nichols and Graf,

stating the nature of deer capture was so fast and unpredictable that the use of helicopters was

instrumental in managing the property, and therefore, the option to use helicopters was the primary

reason they leased the land from the Bauerles. The evidence also showed that using four-wheelers

to capture deer resulted in more injuries to the deer and as a result, was not an option hunters were

willing to use. Such evidence establishes that the alternative methods were not merely

inconvenient or less economically beneficial, but that the inconvenience and expense was so great

that it rendered the alternative methods as unreasonable. See id.

Accordingly, when viewing this evidence in the light most favorable to the verdict and

considering and weighing all the evidence, we conclude that the Bauerles met their burden of proof

with respect to the second element of the accommodation doctrine. See Reeder, 395 S.W.3d at

795; Crosstex N. Tex. Pipeline, L.P., 505 S.W.3d at 615. In other words, we hold there was

sufficient evidence establishing no reasonable alternative methods existed by which the Bauerles

could continue leasing the ranch to hunters who managed the property using helicopters.

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3. Is an Alternative Reasonable, Customary, and Industry-Accepted Method Available to VirTex that Will Allow Recovery of the Minerals? Having held the Bauerles produced sufficient evidence establishing the first and second

prongs of the accommodation doctrine, we now turn to whether the Bauerles proved an alternative

reasonable, customary, and industry-accepted method was available to VirTex. See Coyote Lake

Ranch, 498 S.W.3d at 62; Merriman, 407 S.W.3d at 249. VirTex argues the Bauerles did not

produce evidence to support the jury’s finding that reasonable alternatives existed by which VirTex

could recover the minerals in a cost-efficient manner. According to VirTex, the proposed

alternative suggested by the Bauerles to power the pump jacks with natural gas failed to include

the ancillary costs of “sweetening” the gas — a process that was necessary because the acid in

natural gas could destroy the generators for each pump jack. Moreover, according to VirTex, the

Bauerles’ expert, Mike Kramer, presumed VirTex could obtain an easement over neighboring

property for a natural gas line and access to an amine plant. VirTex further points out Kramer

calculated the cost increase of using natural gas as to only the nine existing wells on the property

as opposed to the forty-five proposed wells VirTex planned to drill. As part of its contention,

VirTex argues the trial court abused its discretion in allowing Kramer to testify because Kramer

was not qualified as an expert, nor were his opinions reliable; therefore, his testimony is not

evidence.

The Bauerles assert they produced ample evidence to support the jury’s finding that VirTex

had reasonable alternative methods available to it that would allow it to extract the minerals from

the property and would not interfere with the Bauerles’ current use of the surface. These

alternatives included burying power lines as opposed to installing overhead power lines, fueling

pump jacks by diesel or natural gas as opposed to electricity, or continuing to use rented generators

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to operate the pump jacks. The Bauerles further pointed out natural gas lines were already installed

across their ranch, and VirTex could utilize these lines to power the pump jacks.

A. Exclusion of Mike Kramer’s Testimony

We begin our analysis by determining whether the trial court abused its discretion in

admitting the testimony of the Bauerles’ expert, Mike Kramer. The trial court has broad discretion

in determining the admissibility of expert testimony, and we review the trial court’s ruling for an

abuse of discretion. State v. Petropoulos, 346 S.W.3d 525, 529 (Tex. 2011); Mack Trucks, Inc. v.

Tamez, 206 S.W.3d 572, 578 (Tex. 2006). The trial court’s role is to determine whether the

analysis the expert used to reach his conclusions is reliable, not to determine whether the expert’s

opinion is correct. Exxon Pipeline Co. v. Zwahr, 88 S.W.3d 623, 629 (Tex. 2002); Gammill v.

Jack Williams Chevrolet, Inc., 972 S.W.2d 713, 726 (Tex. 1998).

Under Rule 702 of the Texas Rules of Evidence, the party seeking to admit expert

testimony must establish (1) the expert is qualified to render an opinion on the subject matter, and

(2) the testimony is relevant to an issue in the case. TEX. R. EVID. 702; TXI Transp. Co. v. Hughes,

306 S.W.3d 230, 234 (Tex. 2010). Expert testimony must also rely on sufficient data and proper

methodology. Volkswagen of Am., Inc. v. Ramirez, 159 S.W.3d 897, 905–06 (Tex. 2004); Kerr–

McGee Corp. v. Helton, 133 S.W.3d 245, 257 (Tex. 2004). “An expert’s bare opinion will not

suffice.” Ramirez, 159 S.W.3d at 906. If the analytical gap between the offered opinion and the

underlying data is too great, then the expert testimony is unreliable. Ford Motor Co. v. Ledesma,

242 S.W.3d 32, 39 (Tex. 2007).

Here, VirTex moved to exclude Kramer’s opinions as to the third element of the

accommodation doctrine,2 arguing Kramer was not qualified as an expert because he did not have

2 VirTex also moved to exclude Kramer’s testimony as it related to the Bauerles’ negligence claim; however, the Bauerles ultimately amended its pleadings and dismissed that claim.

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any college experience, nor was he an engineer or geologist. In its motion, VirTex also argued

Kramer’s testimony was unreliable because his testimony was not sufficiently tied to the facts of

the case.

As proponents of the expert testimony, the Bauerles established that Kramer was an oil and

gas supervisor in the area for over forty years, and his opinion was being proffered to establish the

methods used in the oil and gas industry for generating power to wells. The Bauerles were

permitted to show Kramer was qualified based on his experience and skillset regardless of whether

he had a college degree or was an engineer. See Gilley v. State Farm Lloyds, 461 S.W.3d 563, 569

(Tex. App.—San Antonio 2014, pet. denied). Rule 702 specifically states a witness may qualify

as an expert by any one of the following criteria: knowledge, skill, experience, training or

education. TEX. R. EVID. 702 (emphasis added). The evidence shows Kramer worked with

engineers at a variety of oil and gas companies and obtained an extensive knowledge of engines,

pumps, compressors, and other related systems that used natural gas to power wells. In forming

his opinion, Kramer testified that based on his experience and training, natural gas, so long as it

was sweetened, was a reasonable alternative and industry-accepted method VirTex could use to

power the wells on the Bauerles’ property.

With regard to the estimated costs of powering the wells with natural gas, Kramer based

his opinion on bids he obtained from several vendors. In obtaining the bids, Kramer took into

account the fact that the natural gas would have to be piped from the existing wells on the Bauerles’

ranch to a neighboring ranch that had an amine plant, where the gas could be sweetened. After the

gas was sweetened, it would be piped back to the Bauerles’ ranch to power the wells. Thus, the

record shows that Kramer relied on sufficient data and a proper methodology in forming his

opinion as to costs. See Volkswagen of Am., Inc., 159 S.W.3d at 905–06. Although VirTex argues

Kramer’s testimony was not sufficiently tied to the facts of the case, the evidence shows Kramer

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based his calculation of costs by taking into consideration the relevant circumstances surrounding

the Bauerles’ property and how the natural gas would have to be sweetened. Accordingly, because

the evidence shows Kramer was qualified by experience and based his opinion on the facts of the

case, we hold the trial court did not abuse its discretion in admitting Kramer’s testimony. See TEX.

R. EVID. 702; TXI Transp. Co., 306 S.W.3d at 234.

B. Sufficiency of Evidence

With regard to sufficiency of the evidence, the record reflects the Bauerles produced

evidence that other reasonable, customary, and industry-accepted methods existed by which

VirTex could power the wells. The Bauerles produced evidence that the wells could be powered

by natural gas, a method VirTex had used in the other operations across South Texas. Specifically,

the jury heard testimony from Kramer, who opined that although the cheapest option for powering

the pump jacks would be with overhead power lines, powering the wells by natural gas was the

next best alternative at $200–$300 more per month per well. Kramer also opined this method was

industry-accepted, explaining he had worked on past operations in which the pump jacks were

powered by natural gas. As indicated above, Kramer based his opinion on his forty years of

experience working in the oil and gas industry and various bids he obtained, taking into account

the process of sweetening the gas at the neighboring amine plant. In addition to Kramer’s

testimony, the jury also heard testimony from David Urban, the owner of Urban Electrical Service,

Inc., a company that installs power lines. Urban testified that if VirTex chose to use electricity to

power the pump jacks, underground power lines — albeit more costly — could be installed in rural

settings such as the Bauerles’ ranch.

The jury also heard contravening evidence from two designated experts for VirTex. Dale

Phipps, a degreed natural gas engineer and owner and officer of VirTex, testified overhead power

lines would be the “most suitable” for VirTex’s operations. In light of Kramer’s proposal to use

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natural gas, Phipps pointed out that VirTex would need to obtain an easement from the neighboring

property in order to access the closest amine plant, where the natural gas could be sweetened.

Phipps also testified it was unclear whether an easement could be obtained. However, Phipps

admitted VirTex used natural gas to power pump jacks at other operations in South Texas, but

added the gas did not have to be sweetened. Additionally, Phipps testified VirTex had used

temporary generators to permanently power wells in Dimmit and Duval Counties; Phipps added,

however, that the Duval County well became too expensive to run and VirTex planned to plug it.

After viewing this evidence in the light most favorable to the verdict and crediting

favorable evidence and disregarding contrary evidence, we conclude the evidence is legally

sufficient to support the jury’s finding that reasonable and industry-accepted alternatives existed

by which VirTex could power the pump jacks. See Reeder, 395 S.W.3d at 795; Crosstex N. Tex.

Pipeline, L.P., 505 S.W.3d at 615. Here, there was more than a mere scintilla of evidence to show

that burying the power lines or using natural gas were options VirTex could use. See Reeder, 395

S.W.3d at 795; Crosstex N. Tex. Pipeline, L.P., 505 S.W.3d at 615. And although VirTex disputes

the evidence produced by the Bauerles, arguing it presumed an easement could be obtained over

neighboring property and it did not take into account the cost increase with regard to forty-five

wells, it was for the jury to consider and weigh all of the evidence when making its finding. See

City of Keller, 168 S.W.3d at 819; Golden Eagle Archery, Inc., 116 S.W.3d at 761. Here, the jury

heard sufficient evidence to establish reasonable alternative and industry-accepted methods of

powering the wells existed. With respect to these methods, the jury heard evidence that powering

the wells with natural gas was the “next best alternative,” and although it may not have been the

least costly method, under the accommodation doctrine, the Bauerles need only show it was a

reasonable and industry-accepted alternative. See Coyote Lake Ranch, 498 S.W.3d at 62–63.

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Accordingly, we hold the evidence was legally and factually sufficient to support the jury’s finding

with respect to the third element of the accommodation doctrine.3

Attorney’s Fees

In its next issue, VirTex contends the trial court erred in awarding the Bauerles’ attorney’s

fees under the Uniform Declaratory Judgments Act (“UDJA”). VirTex argues the Bauerles framed

their accommodation doctrine “claim”4 as a declaratory judgment action for the sole purpose of

requesting attorney’s fees because there is no statute permitting the recovery of attorney’s fees on

an accommodation doctrine “claim.” However, according to VirTex, the crux of the Bauerles’

request for relief was injunctive in nature as opposed to declaratory. For support, VirTex points

out all of the cases, which concern the accommodation doctrine, are cases in which plaintiffs

request injunctive relief. See, e.g., Coyote Lake Ranch, LLC, 498 S.W.3d at 57; Merriman, 407

S.W.3d at 248–49; Tarrant Cty. Water Control & Imp. Dist. No. One v. Haupt, Inc., 854 S.W.2d

909, 910 (Tex. 1993) (indicating plaintiffs’ action for inverse condemnation damages originated

out of injunction proceeding); Getty Oil Co. v. Jones, 470 S.W.2d 618 (Tex.1971) (stating Jones

sued Getty Oil for injunction, seeking to restrain Getty Oil from using vertical space for pumping

units that prevented Jones’s use of automatic irrigation sprinkler system).

The Bauerles counter that the trial court did not err in awarding attorney’s fees under the

UDJA. According to the Bauerles, VirTex mischaracterizes their petition as seeking injunctive

relief. The Bauerles argue injunctive relief was not sought because VirTex voluntarily ceased

installation of the power lines when confronted by the Bauerles. As a result, they sought a

3 In its brief, VirTex also contends the Bauerles unreasonably interfered with its operations and failed to defend their actions under the accommodation doctrine. Having held the Bauerles produced legally and factually sufficient evidence to support the jury’s finding with respect to the elements of the accommodation doctrine, we need not address this issue. 4 VirTex refers to the Bauerles’ request to apply the accommodation doctrine as a “claim.” However, the accommodation doctrine is not a claim for relief; rather, it is a legal principle used to determine how “conflicting estates should act with due regard for each other’s rights.” See Coyote Lake Ranch, 498 S.W.3d at 60–61.

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declaratory judgment action because there was an active dispute with regard to their rights and

obligations. We agree.

A court may award costs and reasonable and necessary attorney’s fees in a proceeding

brought under the UDJA. TEX. CIV. PRAC. & REM. CODE ANN. § 37.009 (West 2008); Tanglewood

Homes Ass’n, Inc. v. Feldman, 436 S.W.3d 48, 69 (Tex. App.—Houston [14th Dist.] 2014, pet.

denied). However, an award of attorney’s fees is discretionary and will be reversed upon a

showing of an abuse of discretion. Tanglewood Homes Ass’n, 436 S.W.3d at 69. A trial court

abuses its direction if it acts without reference to any guiding rule or principle. Id.

As pointed out by VirTex, “a party cannot use the [UDJA] as a vehicle to obtain otherwise

impermissible attorney’s fees.” Id. (citing MBM Fin. Corp. v. Woodlands Operating Co., 292

S.W.3d 660, 669 (Tex. 2009)); City of Houston v. Texan Land & Cattle Co., 138 S.W.3d 382, 392

(Tex. App.—Houston [14th Dist.] 2004, no pet.). In other words, “fees are not permissible under

§ 37.009 where [the declaration is sought] solely for the purpose of obtaining attorney’s fees.”

Tanglewood Homes Ass’n, 436 S.W.3d at 69 (quoting Kenneth Leventhal & Co. v. Reeves, 978

S.W.2d 253 (Tex. App.—Houston [14th Dist.] 1998, no pet.)). “Furthermore, a declaratory plea

may not be coupled to a damage action simply in order to pave the way to recover attorney’s fees.”

Dallas Area Rapid Transit v. Agent Sys., Inc., No. 02-08-156-CV, 2008 WL 4938097, at *2 (Tex.

App.—Fort Worth Nov. 20, 2008, pet. denied) (mem. op.); see also Tanglewood Homes Ass’n,

436 S.W.3d at 70 (“A party also may not use a declaratory judgment action to seek the same relief

afforded under another of its causes of action in order to obtain attorney’s fees.”). Thus, if the

declarations obtained in the judgment “merely duplicate issues already before the trial court,” then

the party may not recover attorney’s fees. Tanglewood Homes Ass’n, 436 S.W.3d at 70; Mungia

v. Via Metro. Transit, 441 S.W.3d 542, 547 (Tex. App.—San Antonio 2014, pet. denied).

Here, there is nothing in the record to show the Bauerles sought a declaration solely for the

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purpose of recovering their attorney’s fees. VirTex essentially contends the Bauerles should have

sought injunctive relief as opposed to declaratory relief because that is the type of relief past

plaintiffs have sought when considering the application of the accommodation doctrine. However,

on more than one occasion, this court has pointed out that the existence of another adequate remedy

does not preclude a declaratory judgment action. See Mungia, 441 S.W.3d at 547; Zuehl Airport

Flying Cmty. Owners Ass’n, Inc. v. Meszler, No. 04-09-00028-CV, 2010 WL 454931, at *6 (Tex.

App.—San Antonio May 4, 2010, pet. denied) (mem. op.) (citing MBM Fin. Corp. v. Woodlands

Operating Co., L.P., 292 S.W.3d 660, 669 (Tex. 2009)). Moreover, VirTex does not point to any

authority, nor have we found any, holding that injunctive relief is the only remedy permitted when

seeking application of the accommodation doctrine. Thus, we reject VirTex’s contention that the

potential for injunctive relief precluded the Bauerle’ from asserting a claim for declaratory relief

with regard to the accommodation doctrine.

Moreover, the Bauerles’ request for declaratory relief does not duplicate any other claims

asserted in its pleadings as the declaration they sought dealt solely with the determination of rights

with respect to the surface and mineral owners under the accommodation doctrine. Although the

Bauerles also alleged VirTex breached a surface use agreement, that claim focused solely on

whether VirTex installed tank batteries on the Bauerles’ property in accordance with a surface use

agreement. Nothing in that dispute concerned the installation of overhead power lines or

application of the accommodation doctrine. Accordingly, we conclude the Bauerles’ request for

declaratory relief was not used as a vehicle to obtain otherwise impermissible attorney’s fees, nor

did their request concern issues or relief duplicated in their breach of contract claim. We therefore

hold the trial court did not abuse its discretion in awarding attorney’s fees to the Bauerles under

the UDJA.

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Exclusion of Photographic Evidence

In its final appellate issue, VirTex contends the trial court abused its discretion by refusing

to admit multiple photographs depicting the Bauerles’ helicopter pilot witness — Will Graff —

and his team capturing a deer on a ranch with overhead power lines. According to VirTex, these

photographs were relevant because one of the central questions in this case concerned whether the

installation of overhead power lines would preclude or substantially impair the Bauerles’ existing

use of the property. However, the trial court refused to admit the photographs on the basis that the

probative value of the photographs was substantially outweighed by their prejudicial value.

We review a trial court’s decision to admit or exclude evidence for an abuse of discretion.

Gharda USA, Inc., 464 S.W.3d at 348; Rodriguez v. JPMorgan Chase Bank, N.A., No. 04-14-

00342-CV, 2015 WL 3772110, at *8 (Tex. App.—San Antonio June 17, 2015, pet. denied) (mem.

op.). A trial court abuses its discretion if it acts without reference to any guiding rules or principles.

U-Haul Int’l, Inc. v. Waldrip, 380 S.W.3d 118, 132 (Tex. 2012); Rodriguez, 2015 WL 3772110,

at *8 (citing Carpenter v. Cimarron Hydrocarbons Corp., 98 S.W.3d 682, 687 (Tex. 2002)). We

must uphold a trial court’s decision to exclude evidence if there is any legitimate basis for it.

Enbridge Pipelines (East Tex.) L.P. v. Avinger Timber, LLC, 386 S.W.3d 256, 264 (Tex. 2012).

Under Rule 403 of the Texas Rules of Evidence, relevant evidence may be excluded “if its

probative value is substantially outweighed by the danger of unfair prejudice, confusion of the

issues, or misleading the jury, or by considerations of undue delay, or needless presentation of

cumulative evidence.” TEX. R. EVID. 403. If the appellant can show the trial court’s evidentiary

ruling was erroneous, then in order to obtain a reversal, it must also show the error “probably

(though not necessarily) resulted in improper judgment.” Nissan Motor Co. Ltd. v. Armstrong,

145 S.W.3d 131, 144 (Tex. 2004); see TEX. R. APP. P. 44.1. In determining if excluded evidence

probably resulted in the rendition of an improper judgment, we look at the entire record, and,

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04-16-00549-CV

“typically, a successful challenge to a trial court’s evidentiary rulings requires the complaining

party to demonstrate that the judgment turns on the particular evidence excluded.” Interstate

Northborough P’ship v. State, 66 S.W.3d 213, 220 (Tex. 2001).

Here, although the photographs depicted Graf and his team conducting helicopter

operations on a property with overhead power lines, the photographs did not depict whether the

layout of the overhead power lines was similar to VirTex’s proposed power grid over the Bauerles’

property. One of the disputes in this case centered on whether helicopter operations would be

precluded or substantially impaired by the installation of a specific grid-like structure. Moreover,

even assuming it was error to exclude the photographs, such error would have not resulted in the

rendition of an improper judgment because the jury heard Graf testify he had flown over other

ranch properties with overhead power lines. As indicated above, Graff testified helicopter

operations over ranches with overhead power lines was possible, but due to the spiderweb design

of VirTex’s proposed grid, helicopter operations over the Bauerles’ ranch would be unsafe.

Accordingly, we conclude the trial court did not err in excluding the photographic evidence, and

even assuming there was error, we hold the exclusion of the photographs was harmless and did not

cause the rendition of an improper judgment.

CONCLUSION Based on the foregoing, we overrule VirTex’s issues and affirm the trial court’s judgment.

Marialyn Barnard, Justice

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