ELG Oil, LLC v. Stranco Servs., LLC, No. 04-19-00088-CV, 2019 Tex. App. LEXIS 8946 (Tex. App.—San Antonio Oct. 9, 2019, no pet.)
In this case, the San Antonio Court of Appeals held that a mineral subcontractor claiming a mineral lien must conclusively establish that its labor, materials, machinery, and supplies were “used in” mineral activities, not merely “related to” mineral activities.
ELG entered into a contract with Turn-Key Specialists, Inc. to add natural gas bullet storage tanks to a treatment facility. Turn-Key then subcontracted to Stranco. Stranco was presumably not paid for its work, and Turn-Key filed for bankruptcy. Stranco filed suit against ELG, and moved for a partial summary judgment on its claim to foreclose on its alleged mineral lien. The trial court granted Stranco’s motion and awarded Stranco attorney’s fees.
Stranco contended that it was only required to prove that its labor and services were “related to” mineral activities. The court acknowledged that Section 56.002 of the Texas Property Code provides for mineral liens “to secure payment for labor or services related to the mineral activities.” However, the appellate court pointed out that Stranco must qualify as a “mineral subcontractor” in order to claim a lien, and the statutory definition of “mineral subcontractor” requires a mineral subcontractor “conclusively establish the labor and services it provided were ‘used in’ mineral activities.” The court also pointed out that “mineral activities” is defined, in pertinent part, as certain types of work “on oil or gas pipelines.”
The appellate court then turned to Stranco’s summary judgment evidence. Stranco primarily relied upon an affidavit from its owner, stating that Stranco performed mineral activities on ELG’s property, including work on the “pipelines and the pipeline terminal station” and furnishing materials “used in connection with … pipelines and the pipeline terminal station.”
The appellate court characterized Stranco’s affidavit as conclusory because it failed to provide any facts showing how Stranco’s work and materials on the bullet storage tanks were connected to the oil and gas pipelines. The court acknowledged that, to be “used in” mineral activities, the work did not have to be performed directly on the pipelines themselves, but Stranco’s summary judgment evidence failed to establish a link between the bullet storage tanks and the pipelines.
The failure to link Stranco’s work to the pipelines themselves was further exacerbated by ELG’s summary judgment evidence. ELG submitted two affidavits which described the work Stranco performed as being limited to the addition of bullet storage tanks within the facility, and not work on pipelines themselves. ELG’s affidavits further indicated that no pipelines that combine in the facility and the pipelines were actually segregated from the facility. The court explained that “we must resolve all doubts in favor of ELG.”
As a result, the San Antonio Court of Appeals held that the trial court erred in granting summary judgment in favor of Stranco, reversed the trial court’s judgment, and remanded the cause to the trial court for further proceedings.