Pennsylvania Supreme Court finds that Rule of Capture May Bar Trespassing Claims
On January 22, 2020, the Pennsylvania Supreme Court announced its decision in Briggs, et al. v. Southwestern Energy Production Company, No. 63 MAP 2018 (Penn. Jan. 22, 2020), vacating a Superior Court opinion and holding that the rule of capture applies to fracking and protects fracking companies from trespass liability when a well taps into oil and gas below a neighboring property so long as there is no actual physical invasion. The rule of capture is a common law principle stating that the first person to “capture” a resource owns that resource, regardless of whether it is drained from below adjacent land. With this decision, Pennsylvania joins Texas as one of two states with cases holding that fracking, in and of itself, does not constitute trespass. In limiting its holding to situations where there is no physical invasion, the Supreme Court leaves an opening for landowners who can prove actual physical invasion, difficult though that may be.
In Briggs, the Briggs Family sued Southwestern Energy, an energy company conducting fracking operations on neighboring land. Southwestern Energy did not have leasehold interests on the Briggs Family's land. The Briggs Family sued for trespass and conversion, alleging that Southwestern Energy’s wells illegally drained natural gas from beneath their land. Southwestern Energy argued that it did not physically invade the Briggs Family’s property and, to the extent it produced any gas drained from that property to its lease, it was protected by the rule of capture. In response, the Briggs Family argued that the rule of capture should not apply in circumstances where gas has been captured by fracking, because (1) “artificially stimulating” the cross-boundary flow of oil and gas renders the rule of capture inapplicable and (2) “any time natural gas migrates across the property lines resulting, directly or indirectly, from hydraulic fracturing, a physical intrusion into the plaintiff’s property must necessarily have taken place.”
In its opinion, the Supreme Court rejected the Briggs Family’s arguments. The Supreme Court noted that the characterization of fracking as “artificial stimulation” was a distinction without a difference—all drilling is artificial. Even more to the point, the Supreme Court stated that early decisions had upheld application of the rule of capture to well-shooting and other forms of well stimulation. The Supreme Court held that the rule of capture protects fracking companies from trespass liability when a well taps into oil and gas below a neighboring property unless there is a physical invasion. Since the Briggs Family had not actually alleged physical intrusion into their subsurface property and the record did not support the conclusion that physical intrusion had occurred, the Supreme Court remanded the case for further factual development. Had the Briggs Family alleged actual invasion by fracture, fluid, or proppant, the Supreme Court indicated that a claim for trespass would have been viable, at least at the pleading stage.
Briggs has been viewed as a split decision by landowners and fracking companies. Although it upholds the rule of capture’s applicability to fracking, it does not fully foreclose liability for drainage resulting from fracking. Ultimately, the Supreme Court’s ruling places the burden on landowners to prove that a physical intrusion onto their property actually took place—a pricey and complicated proposition.
Democratic Lawmakers Introduce Bill to Ban Fracking Nationwide
On January 28, 2020, presidential candidate Senator Bernie Sanders (D-VT) and Senator Jeff Merkley (D-OR) introduced Senate Bill 3247, which, if enacted as proposed, would ban hydraulic fracturing nationwide by 2025. The Bill, known as the “Ban Fracking Act” is Congress’ first-ever proposal to ban fracking across the United States and would achieve a total ban in three phases.
First, the Bill would institute an immediate ban on all new federal permits for fracking-related infrastructure. This includes pipelines, natural gas import and export terminals, natural gas storage, ethane cracker plants, natural gas power generation plants, among other fracking infrastructure. The Bill also calls for an immediate national survey of all oil and natural gas wells in the United States where fracking has been or is being used. The survey will gather data on well location, proximity to homes and schools, production rates, and health and safety violations.
Second, using data gathered in the national survey, the Bill would revoke federal permits for fracking within 2,500 feet of homes and schools in 2021. Finally, the Bill would ban all fracking in the United States, both offshore and onshore, in 2025.
The Bill directs the Department of Labor to partner with other federal agencies and stakeholders to develop recommendations for ensuring the “health and safety of individuals residing in, and the prosperity of natural gas- and oil-producing regions” during the fracking phaseout. However, the Bill does not authorize any federal funds to implement any recommendations that the Department of Labor and other federal agencies may develop.
The Bill has been referred to the Senate Energy and Natural Resources committee but will face an uphill battle in the currently Republican-controlled Senate. The Bill has several ambiguities and gaps. For example, the Bill does not specify what “federal permits for fracking” will be revoked in 2021 nor does it address any takings issues that would likely arise from banning fracking on private property. If adopted as written, the Bill will likely suffer setbacks due to legal challenges.
Although unlikely to become law this year, the Bill may be a sign of how a progressive Democratic administration may approach energy policy as Democratic presidential candidates Senator Bernie Sanders and Senator Elizabeth Warren have both pledged to ban fracking.
Read the full text of Senate Bill 3247 here.
California Announces “Independent Reviews” for New Hydraulic Fracturing Permits, Audit of Current Permit Approval Process
On November 19, 2019, the California Department of Conservation’s Division of Oil, Gas and Geothermal Resources (“DOGGR”) announced that all new permits for well stimulation operations such as hydraulic fracturing must be reviewed by third-party, independent scientists “to ensure the state’s technical standards for public health, safety and environmental protection are met prior to approval of each permit.” These reviews will be conducted by experts at the Lawrence Livermore National Laboratory in Livermore, California.
The requirement for independent reviews is a temporary measure pending a broader overhaul of California’s well stimulation permitting regime, which arises out of recent legislation that revised the name and mission of DOGGR, which will be renamed the Geologic Energy Management Division, or “CalGEM,” effective January 1, 2020. Similar to Colorado’s S.B. 19-181, California’s A.B. 1057, which was signed into law in October 2019, also specifically requires that CalGEM’s mission include “protecting public health and safety and environmental quality, including reduction and mitigation of greenhouse gas emissions associated with the development of hydrocarbon and geothermal resources in a manner that meets the energy needs of the state.” DOGGR began a review of its process for approving well stimulation permits in July 2019, after it was reported that the issuance of such permits had doubled since Governor Newsome took office in January 2019. More recently, DOGGR requested an independent audit of its permitting processes for well stimulation and underground injection control by the California Department of Finance’s Office of State Audits and Evaluations.
In addition to this ongoing review of well stimulation permitting procedures, DOGGR announced a new rulemaking effort aimed at strengthening protections for public health and safety near oil and gas extraction facilities. The rulemaking process will begin in 2020 with “a series of pre-rulemaking workshops with interested parties to seek input on the best ways to protect human health through new rules.” A variety of environmental and public health authorities are expected to consult on the forthcoming rulemaking, including the California Department of Public Health and the California Environmental Protection Agency. Finally, DOGGR also announced a moratorium on new extraction wells that use high-pressure cyclic steaming to break apart underground geological formations to extract oil, a process that has been linked to recent oil leaks in Kern County, California.
It remains to be seen how the independent panel will implement its new authority to evaluate well stimulation permits pending California’s continuing review of its permitting processes. To the extent that this review recommends regulatory changes to California’s permitting regime, such changes would require a future notice and comment rulemaking. In the meantime, operators should prepare to engage in the forthcoming rulemaking effort relating to protections for public health and safety near oil and gas extraction facilities. As Colorado’s failed Initiative 97/Proposition 112 demonstrated in 2018, measures as simple as increased setback distances can have devastating effects on the percentage of surface lands available for production.
Read DOGGR’s announcement in full here.