Pennsylvania court opens door to claims of trespass by fracking

TRENDS

(by Steven B. Silverman)

In the first decision of its kind, Pennsylvania’s intermediate appellate court has rejected the rule of capture in favor of recognizing trespass claims where hydraulic fracturing (fracking) extends to adjoining unleased lands. If the court’s decision stands, it could pave the way for a wave of trespass claims based on fracking, as well as changes to fracking operations themselves.

The dispute

In Briggs v. Southwestern Energy Production Co., 2018 Pa. Super. 79 (2018), the Briggs family owned an unleased, 11-acre parcel in Susquehanna County, in Pennsylvania’s far northeast corner. The parcel was adjacent to a parcel on which Southwestern Energy Production Company was undertaking fracking operations. The family claimed that Southwestern trespassed on their land through its fracking operations, resulting in the conversion of Briggs’ natural gas.

Southwestern countered that, as a matter of law, it could not be liable for trespass or conversion under the well settled rule of capture, which insulates operators who capture hydrocarbons draining from adjacent lands, even when those lands are not leased.

The trial court agreed with Southwestern, and the family appealed.

Rejecting the rule of capture

In rejecting Southwestern’s defense and overturning the trial court, the Superior Court of Pennsylvania held that the rule of capture did not apply to fracking of unconventional wells. The court opined that the rule was the product of geological practicality because, with historical conventional drilling, a pool of gas or oil will naturally flow to adjacent land. In contrast, with unconventional wells and shale gas, it is necessary for fracking to first reach the shale to release its hydrocarbons. Thus, the court held that the extension of that fracking to release the gas from the Briggs’s shale could be deemed a trespass. Accordingly, the Superior Court remanded the case to the trial court to allow the plaintiffs to try to prove their case, including damages—a task that the court noted could be a complicated undertaking.

Procedural status

Southwestern, as well as a number of amici curiae, asked for rehearing of the case before an en banc panel of the Superior Court. The court rejected that request on June 8, 2018. Southwestern has since filed a Petition for Allowance of Appeal to the Pennsylvania Supreme Court, which as of the date of publication of this article remains pending. Those joining in that petition through amicus briefs included the American Petroleum Institute, the American Exploration and Production Council, the Independent Petroleum Association of America, the Marcellus Shale Coalition, and the Pennsylvania Chamber of Commerce.

What’s at stake

If the Briggs decision stands, the repercussions could be significant. The case is being closely watched in many oil and gas producing jurisdictions because only one other state, Texas, has definitively ruled on these issues. In Coastal Oil & Gas Corp. v. Garza Energy Trust, 268 S.W. 3d 1 (Tex. 2008), the Texas Supreme Court upheld the rule of capture as a bar to trespass by fracking claims. But the Briggs court rejected Garza and, in fact, explicitly adopted its dissent.

For operators, the concern is that Briggs opens the door for trespass claims by any unleased landowner with land next to, or even within, a drilling unit. What remains unresolved is how the plaintiffs in such cases would prove their claims, how operators would defend against them, what experts would be needed, and how damage models would have to be utilized and critiqued. Clearly, the law of trespass by fracking would take years to develop, as cases are litigated in the trial courts and then wind their way through the appellate courts.

The practical operational effects of Briggs could be just as significant. To avoid trespass by fracking claims, operators may feel forced to limit the area to which their fracturing extends.  Similarly, operators may also limit the lengths of their laterals to provide more of a buffer to unit boundaries. They may even be forced to limit the number of laterals in a particular drilling unit due to self-imposed spacing limitations. The ultimate effect could be to reduce oil and gas recovery, thus straining the economics of their operations.

For the full article, click here.