Round Three: The Pennsylvania Supreme Court Agrees to Review Briggs in Deciding Whether the Rule of Capture Defeats a Claim of Trespass for Drainage Arising from Hydraulic Fracturing
On November 20, 2018, the Pennsylvania Supreme Court agreed to review the April 2018 intermediate appellate court decision, Adam Briggs et al. v. Southwestern Energy Production Company, which held that the “rule of capture” did not bar a claim for trespass when an operator’s hydraulic fracturing activity resulted in the drainage of gas from an adjoining tract that was not a part of the operator’s lease. This latest development represents round three, with the Susquehanna County Court of Common Pleas deciding in August 2017 that the rule of capture prevailed, cutting off any claim of trespass, and the Superior Court of Pennsylvania holding in April 2018 that an actionable claim of trespass may apply. With the Pennsylvania Supreme Court agreeing to review the case, drillers and oil and gas producers in the state are hopeful that the court can “right the ship” and reaffirm the dominance of the rule of capture.
The intermediate appellate court’s April 2018 decision turned what was believed to be a bedrock principle of oil and gas law on its side, in deciding that the rule of capture does not preclude trespass liability for the drainage of oil and gas resulting from hydraulic fracturing. The rule of capture has been a well-settled tenet under oil and gas law, holding that there is no liability for a mineral rights owner’s drainage of oil and gas from another person’s land so long as the oil and gas is produced from a well bottomed on the mineral rights owner’s property and all relevant statutes and regulations have been observed. With the appellate court’s finding that the rule of capture does not bar claims of trespass, Briggs runs in direct conflict with a Texas Supreme Court case, Coastal Oil & Gas Corp v. Garza Energy Trust, which is one of the very few cases — and the only other known ruling by a state high court — to have considered this issue. In Coastal, the Texas Supreme Court held that that a plaintiff seeking to assert a claim of trespass for the drainage of oil and gas from beneath its property as a result of hydraulic fracturing was precluded from making such a claim under the rule of capture. A full discussion of the April 2018 decision was previously made and may be found here.
The question before the Pennsylvania Supreme Court is the following:
Does the rule of capture apply to oil and gas produced from wells that were completed using hydraulic fracturing and preclude trespass liability for allegedly draining oil or gas from under nearby property, where the well is drilled solely on and beneath the driller’s own property and the hydraulic fracturing fluids are injected solely on or beneath the driller’s own property?
In reversing the trial court’s finding, the appellate court was swayed by what it considered to be a distinction in removal of gas through free movement under conventional oil and gas extraction techniques as opposed to the liberation of the gas from trapped areas by means of “forced extraction” methods such as hydraulic fracturing. The appellants seek to remove this distinction between voluntary and forced flow by means of the Pennsylvania Supreme Court’s determination that the rule of capture applies to bar claims of trespass under either scenario.
The dates for submission of briefs or oral argument before the Pennsylvania Supreme Court have not yet been established. If left unchanged, Briggs represents a seismic shift regarding actionable claims for drainage of another party’s gas, by serving notice to oil and gas producers in Pennsylvania, and perhaps in other areas outside of Texas, that there may be an alternative outcome regarding whether liability may be applied when hydraulic fracturing is used to produce oil and gas. The bell will soon ring to begin round three and the oil and gas industry, both in Pennsylvania and in the nation, awaits the outcome.
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.