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

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