With surface ownership of salt caverns confirmed, wealth managers and mineral owners must review agreements and seek new opportunities.
In May, the Texas Supreme Court issued a landmark ruling in Myers-Woodward, LLC v. Underground Services Markham, LLC, clarifying ownership of subsurface voids created by salt mining operations.
In this case, the Court resolved a dispute over ownership of caverns left after salt mining on a Matagorda County tract with separated estates. USM, the mineral rights holder, claimed rights to use the caverns, while Myers-Woodward, the surface owner, argued the spaces were part of the surface estate.
The Court determined that surface owners—not mineral owners—hold title to these caverns, reshaping the legal standards for mineral estate management.
Why This Ruling Matters
This decision carries significant implications for mineral owners and their wealth managers, including:
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Consistency Across Subsurface Rights: The Court applied a uniform principle across subsurface formations rather than a salt-specific rule, aligning with prior decisions such as Humble Oil & Refining Co. v. West and Lightning Oil Co. v. Anadarko E&P Onshore, LLC.
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Economic Considerations: With caverns increasingly utilized for storing hydrocarbons or carbon, mineral owners must recognize that rights to these voids belong to surface owners unless explicitly negotiated.
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Need for Contractual Precision: Existing deeds, leases, and operating agreements should be reviewed to determine whether they include cavern rights. Proactive drafting or renegotiation may be necessary to secure these rights.
Wealth managers can help clients assess current agreements, identify potential revenue opportunities, and develop strategies to navigate the updated legal landscape.
The Legal Landscape
The Court reinforced a Texas law principle that states the mineral estate allows for the extraction and necessary use of the surface, but not ownership of spaces once containing those minerals.
This means that:
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Empty space is not a mineral: No matter how valuable a cavern becomes, it is not part of the mineral grant unless explicitly stated.
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Storage rights must be negotiated: Mineral owners seeking to use caverns for storage must obtain rights from surface owners.
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Royalty disputes may arise: Disagreements over royalty calculations on extracted minerals, such as salt, can become contentious, making clear contractual terms essential.
Navigating This New Reality
For mineral owners, the Myers-Woodward ruling highlights the importance of working with a knowledgeable mineral management team. Trust Services from SS&C Black Diamond Wealth Solutions delivers a comprehensive suite of services designed to help clients protect and maximize the value of their subsurface assets in light of this legal shift:
1. Contract Review and Negotiation: Our specialists can review existing deeds, leases, and operating agreements to determine whether cavern rights are explicitly included and assist in negotiating new agreements when needed.
2. Asset Valuation and Strategy: Black Diamond provides detailed valuations and strategic guidance, helping mineral owners assess the economic potential of salt caverns and plan partnerships or leasing opportunities with surface owners.
3. Royalty Auditing and Compliance: Our team offers royalty auditing services to ensure fair compensation, verify operator compliance with lease terms, and reduce the risk of disputes.
4. Litigation Support and Expert Testimony: When disputes escalate, Black Diamond professionals provide expert analysis and testimony, supporting mineral owners in complex cases involving subsurface rights and storage issues.
5. Education and Advocacy: We educate mineral owners on their rights, advocate for fair treatment during negotiations, and help advisors stay informed on evolving legal and market considerations.
With these capabilities, mineral owners and advisors can confidently meet the Myers-Woodward changes and ensure that subsurface assets are managed efficiently.
Strategic Action for Mineral Owners
This ruling reshapes the expectations, leverage points, and negotiation dynamics between surface and mineral owners, and those who respond thoughtfully will be at an advantage.
Black Diamond is uniquely positioned to guide mineral owners and their wealth management team through this shift by combining technical expertise, asset-level analysis, and deep experience with complex subsurface ownership structures. Mineral owners who take steps now to update agreements, clarify cavern rights, and evaluate future storage potential can protect economic value today and unlock new revenue pathways tomorrow.
For more information on how SS&C Black Diamond Wealth Solutions can help you navigate business complexities, request your personal demo, call 1-800-727-0605, or email info@sscblackdiamond.com today.
