The Case That Opened a Void
In Myers-Woodward, LLC v. Underground Services Markham, LLC, No. 22-0878, 2025 WL 4356581 (Tex. May 16, 2025), the Texas Supreme Court resolved two significant issues affecting mineral owners and surface owners: (1) who owns the empty caverns created by salt mining operations, and (2) how to calculate royalty payments on produced salt.
This dispute involved 160 acres in Matagorda County, Texas. In 1947, Myers-Woodward's predecessors retained the surface estate but conveyed the mineral estate to Underground Services Markham's (USM) predecessor through a mineral deed that included "all of the said oil, gas and other minerals in, on and under said land."
In 2008, USM acquired from Texas Brine Company "all of [Texas Brine Company's] right, title and interest, in and to all of the salt and salt formations only" on the property. USM began producing salt from the property, extracting an impressive 2,674,058.90 tons of salt, which created large underground caverns. Despite this substantial production, USM did not pay Myers any royalty.
The dispute arose on two fronts. First, USM claimed ownership of the resulting salt caverns and sought to use them to store oil and gas produced off-site. Second, the parties disagreed over how to calculate Myers's royalty.
Who Owns the Cavern After Mining?
The essential question was whether empty spaces within salt formations were included within the mineral conveyance. The Court relied on numerous prior decisions as establishing a general rule that subsurface spaces generally belong to the owner of the surface estate, absent deed language stating otherwise:
• In Humble Oil & Refining Co. v. West, 508 S.W.2d 812, 815 (Tex. 1974), the Court drew a distinction between the "mineral estate" and "the matrix of the underlying earth, i.e., the reservoir storage space," which "would remain with the surface-estate holder after severance of the mineral estate."
• In Lightning Oil Co. v. Anadarko E&P Onshore, LLC, 520 S.W.3d 39, 49 (Tex. 2017), the Court observed that the mineral estate generally includes the right to "possess the minerals" but "do[es] not include the right to possess the specific place or space where the minerals are located."
• More recently in Regency Field Servs., LLC v. Swift Energy Operating, LLC, 622 S.W.3d 807, 820 (Tex. 2021), the Court reiterated that "the surface owner, and not the mineral lessee, owns the possessory rights to the space under the property's surface."
• The Fifth Circuit similarly held for the surface owner in Dunn-McCampbell Royalty Int., Inc. v. Nat'l Park Serv., 630 F.3d 431, 442 (5th Cir. 2011), stating "Texas law establishes that the holder of a mineral estate has the right to exploit minerals, but does not own the subsurface mass."
• The U.S. Court of Claims also found that subsurface geological structures suitable for underground storage remained the property of the surface owners in Emeny v. United States, 412 F.2d 1319, 1323 (Ct. Cl. 1969).
From this line of cases, the Court concluded that “we consider Texas law reasonably clear that underground storage space generally belongs to the surface owner absent a contrary agreement.”
USM sought to distinguish this precedent as applying only to oil and gas which is subject to the rule of capture under which oil and gas ownership does not reach any specific molecules, but instead only provides a “fair chance to recover the oil and gas.” According to USM, a different rule should apply to hard minerals. USM cited to precedents from coal-mining states supporting its position. USM also relied heavily on Mapco, Inc. v. Carter, 808 S.W.2d 262, 274 (Tex. App.—Beaumont), rev'd in part on other grounds, 817 S.W.2d 686 (Tex. 1991), where a Texas court of appeals held that "the continued ownership interest [of] the mineral estate in an underground storage facility is acknowledged and harmonious with the decisional law of our state.”
The Court acknowledged that USM's position was "not without intuitive appeal" and that such a rule would not be “altogether unjust or unreasonable.” Nevertheless, the Court rejected this distinction for two main reasons. First, the Court found Mapco unpersuasive, citing little Texas authority in support, and seldom being cited over the years. As a result, the Court explicitly overruled Mapco on this ruling. Second, the Court stated a preference for “simple bright-line rules” that would “apply…consistently across a variety of fact patterns,” rather than to introduce “greater complexity and uncertainty” by drawing “ever finer distinctions” to account for “factual vagaries that so often test the edges of bright-line rules.”
Why this Surface Owner Still Won - Despite Intuitive Appeals
Applying that holding in this case, Court rejected USM's ownership claim for two primary reasons. First, USM did not own the salt formations—only the salt itself. The Court explained that, although USM’s deed purported to convey to USM the and the “salt formation,” USM’s predecessor in title had only obtained ordinary ownership of the mineral estate. Given the “axiomatic” rule that a grantor can only convey what he owns, the Court concluded that USM never obtained title to the salt formations themselves.
Second, the Court bluntly stated its view that "[e]mpty space is not a mineral, no matter how economically valuable it becomes," and later stated “despite its apparent complexity, much of this case boils down to the elementary observation that empty space is not salt." The Court concluded that "[n]o matter who created the underground empty space or where it is located, the space itself is not salt, which means the mineral estate generally does not entail physical ownership of it (absent some indication to the contrary in the conveyance, which we do not see here)."
Regardless of Ownership Could the Caverns Be Used for Storage?
Although the Court established that Myers owned the caverns, that did not yet resolve USM's claimed right to use them in connection with its implied easement as an owner of a of the mineral estate. The Court said that, while USM's mineral estate gives it a qualified right to use Myers's surface estate (including subsurface space like the disputed salt caverns), that right is limited to uses "reasonably necessary to recover [USM's] minerals."
The Court ultimately rejected USM’s claimed right to use the caverns for storing off-site hydrocarbons, holding that it was not a reasonably necessary use that fell within its implied easement. The Court offered two primary rationales:
- USM had not demonstrated that storage of hydrocarbons was reasonably necessary to recover its salt. In fact, in the court's view, such storage would likely hinder, rather than facilitate, further production of salt.
- Storage of hydrocarbons produced elsewhere introduced an additional problem for USM, because ownership of the mineral estate does not entitle "the mineral owner to increase the burden on the surface estate for the benefit of additional lands."
Because USM's proposed use of the caverns had "no connection to the production of salt on the property," the Court affirmed that USM had no right to use the caverns for storing off-site hydrocarbons.
Royalty on Salt - Market Value or Net Proceeds?
As for royalties on the salt, the key issue was whether the deed reserved an in-kind royalty (payable on net proceeds) or a market-value royalty. This distinction was remarkably impactful in this case, given that USM contended the salt's market value warranted a royalty of only about $260,000, while Myers calculated its entitlement to net proceeds at more than $2,000,000—over seven times greater.
There were two reservation deeds at issue: an original deed and a correction deed entered a few months later. Myers and USM agreed that the original 1947 deed, which reserved a royalty only in oil, provided an in-kind royalty. Specifically, USM conceded that in-kind royalties were due on oil given the deed’s statement that oil royalties were “to be delivered at the wells or to the credit of Grantors... into pipe line to which the wells may be connected."
But the correction deed, which later corrected the reservation to include “gas and other minerals,” did not repeat the delivery language. USM contended that meant royalties on other minerals (such as salt) would not be due in-kind.
The Court rejected that argument. In the Court’s view, royalties on gas and other minerals were also due on an in-kind basis. The Court focused on language in the correction deed indicating the parties intended to correct an “inadvertent” failure to include gas and other minerals in the original reservation. In addition, the correction deed used materially similar language to describe the reservation, and then closed by summing up the parties’ intent "that [the royalty holders] shall receive a total royalty interest of 1/8 of all the oil, gas, or other minerals (except sulphur) produced from said land."
Given these features, the Court concluded that "the parties intended to create identical royalties for all three categories—oil, gas, and other minerals.” The Court found "nothing in these documents supporting the notion that the royalty on 'other minerals' should not be treated just like the in-kind oil royalty to which the parties unquestionably agreed."
The Court therefore held that Myers was entitled to an in-kind royalty—which meant Myers was entitled to either physical possession of a 1/8th share of the salt produced or payment of 1/8th of the net proceeds from the sale of that salt. Because the trial had "proceeded from the mistaken premise that market value was the only appropriate measure of Myers's royalty," the Court reversed and remanded for further proceedings on this issue.
Strategic Takeaways and Doctrinal Signals
What This Means for Operators, Drafting Lawyers, and Storage Developers
This decision is notable for a few reasons. Perhaps most directly, it provides additional clarity for both surface and mineral owners regarding their respective rights in the increasingly valuable underground storage space created by mining operations. Those in favor of the decision will argue that the Court's self-titled “bright-line rule”—that surface owners own subsurface spaces absent agreement otherwise—will promote certainty and consistency in property rights.
The ruling is also potentially notable for its guidance on interpreting calculation of fee royalties derived from mineral conveyances or reservations. Although the Court attributed much of its discussion of the in-kind interpretation of the oil royalties to the parties’ mutual concession, the case arguably lends support to the notion that language requiring physical delivery of the royalty strongly suggests that the royalty is payable in-kind. The case also affirms that in-kind royalties are payable both through actual physical possession, or through a cash payment on the basis of net proceeds.
Of interest are two policy rationales the Court relied upon which arguably pull in opposite directions. On one hand, the Court cautioned that “[n]ot all mineral estates are created equal,” and that courts should “begin with the text of the conveyance-not with generalizations about the default nature of a ‘surface estate’ or a ‘mineral estate.’”
A Court That Prefers Simplicity - Until It Doesn’t
The Texas Supreme Court's opinion in Myers-Woodward reveals a fascinating tension between competing jurisprudential approaches to property rights. On one hand, the Court emphasizes textual specificity and the uniqueness of individual conveyances; on the other, it champions bright-line property rules that intentionally avoid complex nuances to take into account distinctions presented by edge cases. This tension merits careful examination, as it illuminates the Court's broader approach to resolving complex property disputes.
Early in its analysis, the Court cautions that "not all mineral estates are created equal" and that resolving disputes over the scope of mineral conveyances "should therefore begin with the text of the conveyance—not with generalizations about the default nature of a 'surface estate' or a 'mineral estate.'" This admonition places primacy on the specific unique language chosen by parties to a particular conveyance, suggesting a contract-centric approach that treats each deed as potentially unique.
Yet immediately after this observation, the Court acknowledges that "doctrinal labels such as these—and the caselaw from which they derive—are of course very useful, indeed essential, when courts are confronted with questions not fully answered by the text of the conveyance.” This qualification suggests that despite the primacy of text, general rules remain necessary for resolving ambiguities or addressing matters the parties failed to contemplate explicitly.
The most revealing tension emerges later when the Court confronts USM's argument that solid minerals like salt deserve different treatment than migratory minerals like oil and gas. Despite acknowledging that USM's position has "intuitive appeal" and that a rule favoring mineral owners' rights to caverns they created "would strike few observers as altogether unjust or unreasonable,” the Court rejects this distinction in favor of a bright-line rule that surface owners generally own subsurface spaces.
The Court's justification for this approach is particularly notable:
[W]e should always prefer, where possible, to stick with simple, bright-line rules and to apply them consistently across a variety of fact patterns. And we should always avoid, where possible, inviting greater complexity and uncertainty into the law by drawing ever finer distinctions in an effort to account for the factual vagaries that so often test the edges of bright-line rules.
This statement of philosophy reveals the Court’s preference for simplicity, consistency, and predictability in the context of general rules applicable to property law concepts, which stands in notable contrast with the Court’s contract-centric approach emphasized earlier where each unique deed is to be read as a whole to understand the objective intent.
The Court's reasoning implicitly recognizes a hierarchical relationship between these competing approaches. On one hand, the Court begins by suggesting that deed language remains primary and can override general property rules ("absent some indication to the contrary in the conveyance"). Yet, on the other hand, the Court states that general rules are “very useful, indeed essential” when deed language does not “fully answer” the question before the court. In this case, the absence of express language governing ownership of subsurface salt caverns gave way for the Court to ultimately embrace a generalized default rule. Moreover, when it comes to that general rule, the Court favored a simple “bright-line” rule, and stated that it should not create specialized property rules for different categories of minerals in the absence of specific textual direction.
Putting this together, perhaps it could be said that a deed’s unique language will uniquely govern, but when a deed is silent on a particular issue, the Court favors broad, generally applicable property rules over nuanced, context-specific ones.
This jurisprudential approach could have significant implications for practitioners. First, it underscores the paramount importance of precise drafting in mineral conveyances. If parties wish to allocate ownership of subsurface caverns created by mineral extraction, they should do so through express language, as the default rule will likely assign them to the surface owner. Second, it signals when it comes to general rules, attempts to argue for exceptional treatment for edge cases or nuanced facts may face an uphill battle absent textual support.
The Court's preference for bright-line rules in property law while maintaining textual specificity in contract interpretation arguably represents a pragmatic balance between competing values. While contract terms should be interpreted according to the parties' specific intent, the Court apparently believes that property law benefits from clear, consistently applied rules that promote certainty and consistency in land titles.
The author anticipates that these aspects of the Court's reasoning in Myers-Woodward will likely prove influential in future oil and gas cases, well beyond those involving subsurface ownership. The Court's emphatic endorsement of bright-line rules and its explicit rejection of fact-specific distinctions in property law principles will undoubtedly be cited whenever litigants seek specialized treatment for particular categories of minerals or novel subsurface uses. Meanwhile, its recognition that "not all mineral estates are created equal" will continue to remind courts that textual analysis must precede application of general rules when interpreting mineral conveyances.
