Wednesday, June 20, 2018

Pennsylvania Superior Court Denies Request for Rehearing in Trespass by Hydraulic Fracturing Case

Ross H. Pifer, Clinical Professor of Law and Director of the Center for Agricultural and Shale Law at Penn State Law

On June 8, 2018, the Pennsylvania Superior Court denied a petition for rehearing en banc filed by Southwestern Energy Production Company (“Southwestern”) following an earlier decision of the court, issued on April 2, 2018, that a claim of trespass by hydraulic fracturing is not foreclosed by application of the rule of capture.  Southwestern must now file a petition for allowance of appeal with the Pennsylvania Supreme Court if it wishes to further challenge this April 2, 2018, opinion.  Briggs, et al. v. Southwestern Energy Production Company, 2018 PA Super 79, No. 1351 MDA 2017.  In the April 2, 2018, opinion, the Superior Court concluded that a Pennsylvania landowner may present an actionable trespass claim where oil and gas are drained from his or her property as a result of “subsurface fractures, fracturing fluid and proppant” that extend onto the landowner’s subsurface property interest.  In so ruling, the Briggs court rejected the reasoning of the Texas Supreme Court in the landmark case of Coastal Oil & Gas Corp. v. Garza Energy Trust, 268 S.W.3d 1 (Tex. 2008), which denied a claim of damages resulting from drainage due to hydraulic fracturing.    

Factual and Procedural Background

Adam Briggs, Paula Briggs, Joshua Briggs, and Sarah Briggs (collectively referred to as “the Briggs”) own an 11.07-acre parcel of real estate in Susquehanna County.  According to the Superior Court, Southwestern holds a gas lease and operates gas wells on property that is adjacent to the Briggs property.  Southwestern does not hold a lease to the Briggs property, and the court opinion does not indicate whether there were any attempts to negotiate an oil and gas lease on the property.

On November 5, 2015, the Briggs filed a complaint against Southwestern asserting conversion and trespass claims due to the alleged drainage of natural gas from their property resulting from hydraulic fracturing activities conducted at Southwestern wells on adjacent property.  Southwestern responded by arguing that the rule of capture barred the Briggs’ claims.  On August 8, 2017, the Susquehanna County Court of Common Pleas granted Southwestern’s Motion for Summary Judgment opining that the rule of capture did not allow for damages caused by drainage that occurs pursuant to hydraulic fracturing.  The Briggs then appealed this ruling to the Pennsylvania Superior Court.

Prior Case Law Addressing Trespass by Hydraulic Fracturing

After reciting the arguments of the parties and briefly reviewing the application of the Rule of Capture in Pennsylvania, the Briggs court noted that it had discovered only two opinions nationally that had addressed the applicability of the rule of capture to hydraulic fracturing.  The earliest of these court opinions is the Texas Supreme Court ruling in Coastal Oil & Gas Corp. v. Garza Energy Trust, 268 S.W.3d 1 (Tex. 2008).  More recently, the United States District Court for the Northern District of West Virginia addressed this issue in Stone v. Chesapeake Appalachia, LLC, 2013 WL 2097397 (N.D.W.Va. Apr. 10, 2013).  Stone is an unreported case that was subsequently vacated by agreement of the parties pursuant to a settlement.  Stone v. Chesapeake Appalachia, LLC, 2013 WL 7863861 (N.D.W.Va. July 30, 2013).  Nevertheless, the Briggs court placed great reliance upon the Stone opinion.

In Coastal Oil v. Garza, the Texas Supreme Court was presented with, but declined to address, the issue of whether hydraulic fracturing could form the basis of a trespass.  Instead, the Coastal Oil court found that the rule of capture prevented plaintiff landowners from demonstrating the requisite injury necessary to prevail on their trespass claim.  The Coastal Oil court relied upon four bases for its ruling: (1) available self-help remedies, such as drilling an offset well or enforcement of an implied covenant, are adequate; (2) the administrative agency overseeing oil and gas activities, the Texas Railroad Commission, is the preferred entity to address the relative rights between competing oil and gas interest owners; (3) litigation is a poor method for determining the value of hydrocarbons drained as a result of hydraulic fracturing; and (4) none of the groups involved with oil and gas development, including regulators and landowners, want to impose liability for drainage due to hydraulic fracturing.

The Coastal Oil v. Garza case generated three separate opinions with Justice Johnson authoring an opinion that dissented from the court’s decision on the issue of trespass.  Justice Johnson and two other justices believed that, before determining whether the rule of capture prevented the imposition of liability, it was necessary to determine if a trespass had occurred.  While Justice Johnson disagreed with “some of the four reasons” expressed by the Coastal Oil court, his dissenting opinion was based upon his belief that the court’s opinion was changing the rule of capture as he believed that a trespass by hydraulic fracturing should be treated in the same manner as a trespass by a well bore.

The dissent of Justice Johnson was cited extensively by the federal district court in Stone v. Chesapeake Appalachia, LLC, which opined that the West Virginia Supreme Court would rule “that hydraulic fracturing under the land of a neighboring property owner without that party’s consent is not protected by the ‘rule of capture,’ but rather constitutes an actionable trespass.”  Stone at *8.  The federal district court in Stone v. Chesapeake Appalachia, LLC, disputed each of the four reasons provided by the Coastal Oil majority, but placed special emphasis upon the impact that precluding trespass liability would have upon small landowners who lack the resources to utilize self-help remedies and the leverage to negotiate a lease with an unfair or unwilling gas company.  

Ruling of the Superior Court

Just as did the Stone court, the Briggs court found Justice Johnson’s dissent in Coastal Oil to be persuasive.  The Briggs court “conclude[d] that hydraulic fracturing is distinguishable from conventional methods of oil and gas extraction.”  Briggs at *20.  The court cited authority for the proposition that the rule of capture is based upon the rationale that hydrocarbons have a “fugitive nature,” while opining that shale gas was “non-migratory in nature.”  Again, in conformity with the Stone court, the Briggs court opined that the average landowner could not use self-help remedies to protect his or her interest and that companies would have no incentive to negotiate with small landowners if trespass liability was precluded. 


While once again noting “the distinctions between hydraulic fracturing and conventional gas drilling,” the Briggs court reached its ultimate conclusion that “the rule of capture does not preclude liability for trespass due to hydraulic fracturing.”  Briggs at *23.  As such, the court reversed the grant of summary judgment in favor of Southwestern and remanded the case for further consideration of both the trespass and conversion claims.  The court noted that there was no evidence as to the distance that the fractures had traveled from Southwestern’s well, but it believed that a genuine issue had been raised as to whether a trespass had occurred.     

This material is based upon work supported by the National Agricultural Library, Agricultural Research Service, U.S. Department of Agriculture

Tuesday, June 19, 2018

Shale Law Weekly Review - June 19, 2018


Written by:
Brennan Weintraub - Research Assistant
Jackie Schweichler – Education Programs Coordinator

The following information is an update of recent local, state, national, and international legal developments relevant to shale gas.

Pipelines: PUC Allows Mariner East 1 Pipeline to Restart
On June 14, 2018, the Pennsylvania Public Utilities Commission issued an order allowing Sunoco Pipeline, L.P. to continue some, but not all, pipeline construction operations within West Whiteland Township, located in Chester County. The order dissolves the operation injunction against Mariner East 1, but affirms the injunction prohibiting construction of Mariner East 2 and Mariner East 2X. The pipeline had previously been ordered to suspend construction activities in May 2018 when the Commission determined that continued construction could pose a risk to public safety. The order states that to seek continued construction on the Mariner East 2 and East 2X, Sunoco must file information on leak detection, repairs, inspection frequency, testing, preventative inspection and maintenance, and submit a comprehensive emergency response plan.

State Regulation: Ohio Legislature Passes Bill Modifying Sales and Use Tax Exemption for Oil and Gas
On June 7, 2018, the Ohio state legislature passed HB 430 which, if signed by Governor John Kasich, would modify current legislation governing the sales and use tax exemption applicable to the oil and gas industry in the state. According to the bill’s sponsor, Tim Schaffer, the purpose of HB 430 is to clarify and narrow the scope of existing exemption. The bill specifies which oil and gas activities will be exempt including, but not limited to, drilling services, equipment and rigging, equipment trailers, pressure pumping equipment, reservoir stimulation and hydraulic fracturing services. The bill passed in the Senate with a vote of 32 to 1 and in the House with a vote of 73 to 13.

Water Quality: Study Examines Groundwater Quality in Marcellus Shale
On May 22, 2018, a study conducted by Penn State researchers that was published in Environmental Science & Technology, found few instances of groundwater contamination from hydraulic fracturing and a general trend of improving water quality in Bradford County, Pennsylvania. Bradford County is host to a large number of drilling operations, but the study found instances of possible contamination in the vicinity of only seven of nearly 1400 wells. According to the researchers, the improved groundwater quality could be due to “decreased acid rain (pH, sulfate) since the imposition of the Clean Air Act or decreased steel production (Fe, Mn).” The study is entitled, Big Groundwater Data Sets Reveal Possible Rare Contamination Amid Otherwise Improved Water Quality for Some Analytes in a Region of Marcellus Shale Development.

Wastewater Treatment/Disposal: Study Examines Potential Health Impacts from Use of Drilling Fluid on Roadways
On May 30, 2018, a study conducted by Penn State researchers, Environmental and Human Health Impacts of Spreading Oil and Gas Wastewater on Roads, was published in the online Environmental Science and Technology journal. Researchers found that the application of oil and gas wastewater to roadways could potentially harm aquatic life and pose health risks to humans. The researchers first evaluated the mobility of oil and gas wastewater used on roads and then measured the aquatic and human toxicity potential. Drilling fluid has been used in Pennsylvania for deicing and to suppress dust emissions from unpaved roads.  The researchers found that from 2008 to 2014, drilling fluid spread on Pennsylvania roads “released over 4 times more radium to the environment (320 millicuries) than O&G wastewater treatment facilities and 200 times more radium than spill events.” Last month, the Pennsylvania Department of Environmental Protection suspended its permit program for wastewater spreading on unpaved roads across northern and western Pennsylvania.

Pipelines: South Dakota Supreme Court Dismisses Keystone XL Pipeline Appeal
On June 14, 2018, the South Dakota Supreme Court dismissed an appeal by opponents of the Keystone XL pipeline, finding that a lower court did not have jurisdiction to hear the case. The case revolved around the construction permit issued for the Keystone XL by the South Dakota Public Utilities Commission. Construction did not begin on the pipeline within the four years specified in the permit and as a result, TransCanada had to submit new certification. The Commission conducted an evidentiary hearing and eventually accepted the certification. The Commission’s decision was appealed to the Sixth Judicial Circuit Court for Hughes County, which, according to the South Dakota Supreme Court, did not have subject-matter jurisdiction. The proposed pipeline expansion would carry crude oil from Canada through the states of Montana, South Dakota, and Nebraska before connecting to the existing Keystone pipeline system.

Oil and Gas Leasing: Federal Court Reverses BLM Oil and Gas Leases in New Mexico
On June 14, 2018, the United States District Court for the District of New Mexico overturned the grant of several oil and gas leases in northwestern New Mexico, saying that the Bureau of Land Management (BLM) had not adequately considered the potential environmental impacts of the developments. In her decision, Judge Armijo wrote that BLM had violated the National Environmental Policy Act by not studying the effects of fossil fuel combustion on the San Juan Basin.

Pennsylvania Legislation
Environmental Resources and Energy (H)
Bill 2485 referred to Environmental Resources and Energy (would amend Title 27 enabling legislation to fund projects and programs for a Growing Greener III program) (June 12, 2018)

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Friday, June 15, 2018

Shale Law in the Spotlight – FERC Seeks Comment on Proposed Policy Changes Regarding Natural Gas Pipeline Certification Process

Written by Chloe Marie – Research Fellow

The Federal Energy Regulatory Commission (FERC) announced in a News Release dated April 19, 2018, the issuance of a Notice of Inquiry seeking public comment on whether to review its 1999 Statement of Policy addressing the Certification of New Interstate Natural Gas Pipeline Facilities.  The Notice of Inquiry was published in the Federal Register on April 25, 2018, and the public has until June 25, 2018, to provide comments to FERC.

FERC is currently looking at a revision of the policy “to appropriately consider the enhancement of competitive transportation alternatives, the possibility of over building [sic], the avoidance of unnecessary disruption of the environment, and the unneeded exercise of eminent domain” in balancing the public benefits and adverse consequences of a proposed natural gas pipeline project. Thus, FERC is requesting public input on four key points.

First, FERC questions whether it should further define the conditions for determining the need for a proposed pipeline project and whether it should consider the following factors in that regard, including the natural gas market situation, to what extent precedent agreements can support such project, the end-use of natural gas, whether it should base its determination on a regional approach, and the level of demand for infrastructure.

Second, FERC inquires whether it should look at different ways to consider the potential exercise of eminent domain in reviewing project applications, including how it could minimize the use of eminent domain without affecting the pipeline routing process, and how to weigh the potential use of eminent domain against the need for the proposed project. Furthermore, FERC is looking for comment on whether landowner interests are adequately protected in the existing certification process.

Third, FERC highlights its willingness to avoid “unnecessary disruption of the environment.” Thus, FERC questions, among other things, whether it should provide additional alternatives to the proposed project and if other environmental impacts should be considered during the cumulative impact analysis. In addition, FERC seeks input regarding the importance of calculating potential GHG emissions from the downstream consumption of natural gas and how this information would affect FERC’s environmental analysis.

Fourth and lastly, FERC asks how it could improve the certificate application review process in a more effective way and whether it should shorten certain aspects of the review process in order to do so, especially at the pre-filling stage.


Until the review is completed, FERC “intends to continue to process natural gas facility matters before it consistent with the [existing] Policy Statement, and to make determinations on the issues raised in those proceedings on a case-by-case basis.”

This material is based upon work supported by the National Agricultural Library, Agricultural Research Service, U.S. Department of Agriculture

Wednesday, June 13, 2018

Shale Law in the Spotlight - Overview of State Critical Infrastructure Protection Statutes and Related Legislation

Written by Chloe Marie – Research Fellow

The U.S. Department of Homeland Security has identified 16 critical infrastructure “assets, systems, and networks” that are “considered so vital to the United States that their incapacitation or destruction would have a debilitating effect on security, national economic security, national public health or safety, or any combination thereof.” The energy sector is considered to be one of these critical infrastructure sectors. Since 2017, a number of states have taken legislative action to protect critical infrastructure. While some media reports have linked the various legislative proposals and enactments to recent pipeline protests, such legislation generally does not explicitly mention ongoing protest as a motivation behind the legislation.

This article will address critical infrastructure protection and related legislation that has been enacted in the states of Iowa, Oklahoma, North Dakota, South Dakota, and Louisiana, as well as legislation that was vetoed in Wyoming. Some other states, including Pennsylvania, Ohio, and Washington, have pending legislation on the topic. 

Enacted Critical Infrastructure Protection Legislation

Iowa

Senate File 2235 was introduced in the Iowa Senate in February 2018 and was signed into law by Governor Kim Reynolds on April 17, 2018.

The bill makes anyone who commits sabotage – also defined as an “unauthorized and overt act” with the intent to cause “substantial and widespread interruption or impairment” of a critical infrastructure – guilty of a Class B felony punishable by a fine of at least $85,000 but not greater than $100,000.

Oklahoma

House Bill 1123 was introduced in the Oklahoma House of Representatives in February 2017 and was signed into law by Governor Mary Fallin on May 3, 2017.

The bill establishes punishment for trespassing on property containing a critical infrastructure facility and creates three new penalties in this regard. Critical infrastructure facilities include pipelines, natural gas processing plants and compressor stations, among others. The bill provides that any person entering a property containing a critical infrastructure facility without permission is guilty of a misdemeanor with punishment of up to 6 months’ imprisonment and/or monetary penalty of up to $1,000.

The bill also states that anyone who enters a property containing a critical infrastructure facility with the intent to “willfully damage, destroy, vandalize, deface, tamper with equipment, or impede or inhibit operations of the facility” is guilty of a felony and liable for one year’s imprisonment and/or a monetary penalty of up to $10,000. The bill further specifies that “willfully damag[ing], destroy[ing], vandaliz[ing], defac[ing], or tamper[ing] with equipment in a critical infrastructure facility is a felony punishable by ten years’ imprisonment and/or monetary penalty of $100,000. These new provisions can be found in Section 1792, Title 21 of the Oklahoma Statutes.

North Dakota

During the month of January 2017, three pieces of proposed legislation – HB 1293, 1304 and 1193 – addressing protection of highly secured premises in North Dakota were introduced. After advancing through the legislature, House Bills 1293 and 1304 were signed into law by Governor Doug Burgum on February 3, 2017. House Bill 1193 died in the Senate.

Among other things, HB 1293 provides that an individual trespass in a highly secured premises with full knowledge of the illegality of this action will be guilty of a class B misdemeanor and liable for up to 30 days of imprisonment and subject to a $1,000 fine. HB 1304 criminalizes the wearing of a “mask, hood or other device that covers, hides, or conceals any portion of [the] face” with the intent to “intimidate, threaten, abuse, or harass any other individual” when committing a criminal offence.

Governor Burgum signed into law these two bills and declared them as emergency measures. He did so around the time that protests were ongoing against the construction of the Dakota Access Pipeline.

South Dakota

On March 13, 2017, South Dakota Governor Dennis Daugaard signed into law Senate Bill 176 designed to preserve and protect school and public lands from rallies of large group of people, as an emergency measure. Section 5 of this legislation provides that anyone disobeying an order not to enter school or public lands will be guilty of a class 1 misdemeanor.

Louisiana

The Louisiana State Legislature passed and sent to Governor John Bel Edwards for executive approval House Bill 727 specifying criminal offenses involving trespass on critical infrastructure on May 23, 2018. The Bill provides that the trespassing of a critical infrastructure is punishable by up to 5 years of imprisonment with or without hard labor and/or a fine up to $1,000.

In addition, the bill specifies that anyone who intentionally damages a critical infrastructure is liable for up to 15 years of jail time with or without hard labor and/or up $10,000 in fines. If it turns out that human life could be threatened or the operation of a critical infrastructure could be hindered during the commission of intentional damage, then the sentence will be up to 20 years of imprisonment and up to $25,000 in fines. Governor Edwards signed the legislation on May 30, 2018.

Vetoed Critical Infrastructure Protection Legislation

Wyoming

On March 10, 2018, both the House of Representatives and the Senate passed Act No. 65 establishing new crimes relating to the protection of critical infrastructure; however Wyoming Governor Matt Mead vetoed the legislation four days later. In a letter dated March 14, Governor Mead, despite his support for protecting critical infrastructure, pointed out concerns that this legislation failed to appropriately consider. The Senate overrode the Governor’s veto, but the House of Representatives did not.

The Act would have punished anyone intentionally or knowingly impeding critical infrastructure with a misdemeanor conviction and up to 6 months’ imprisonment and/or a fine of up to $1,000. In the case of intentionally or negligently caused damage, such an offense would have been considered to be a felony punishable by up to 10 years of imprisonment and a fine up to $10,000, or both. With regard to trespass, the Act would have provided that the trespass of a critical infrastructure was considered to be a misdemeanor with no more than one year of imprisonment and a fine of not more than $1,000, or both.

Pending Critical Infrastructure Protection Legislation

Pennsylvania

In Pennsylvania, Senator Mike Regan introduced Senate Bill 652 on April 25, 2017, that would extend the scope of criminal trespass to include the trespassing upon a critical infrastructure facility. According to the bill, an individual is prohibited from entering or attempting to enter a critical infrastructure facility unless properly authorized to do so; otherwise, it will constitute a second-degree felony and the trespasser will be liable for less than one year of imprisonment and subject to a fine up to $5,000.

If an individual enters the critical infrastructure premises with the intent to “willfully damage, destroy, vandalize, deface, tamper with equipment or impede or inhibit operations of the facility,” he or she will commit a first-degree felony with punishment of imprisonment of up to two years and a fine up to $10,000. This same offense and punishment also applies to any individual assisting another to commit trespass of a critical infrastructure facility as well as anyone who enters and remains in the critical infrastructure facility despite an order to leave personally communicated to the trespasser.

The bill clarifies, however, that it is a defense to prosecution that someone entered the premises in order to prevent a potential dangerous threat to public health and safety or any police officer entered in order to pursue of a suspect or because he has reasonable grounds to believe evidence of criminal conduct within the facility needs to be protected from destruction. The Senate agreed to final passage of the bill on May 23, 2018. It is now pending in the House of Representatives.

Ohio

On January 24, 2018, Senate Bill 250 was introduced in the Ohio Senate, which prohibits criminal trespass of critical infrastructure, and also creates new crimes, namely criminal mischief and aggravated trespass on a critical infrastructure facility. The bill is now pending before the Senate Judiciary Committee.

Washington

On January 8, 2018, Senate Bill 5009 relating to offenses involving economic disruption was reintroduced in the Senate for the fifth time and is now pending in the Senate Committee on Law & Justice. SB 5009 was originally introduced on January 9, 2017.


SB 5009 proposes to hold criminally liable anyone who causes economic disruption by “interfer[ing] with, tamper[ing] with, damages, or obstruct[ing] any pipeline facility, bulk oil terminal, marine terminal, tank car, waterborne vessel or barge, or power plant.”


This material is based upon work supported by the National Agricultural Library, Agricultural Research Service, U.S. Department of Agriculture