Wednesday, November 21, 2018

PA Supreme Court Agrees To Review Superior Court Rule Of Capture Decision Saying Taking Natural Gas Without Permission Is Trespass

On November 20, the PA Supreme Court agreed to review the PA Superior Court ruling in April saying Southwestern Energy drilling company trespassed on the property of Susquehanna County landowners by taking natural gas from an adjacent property without permission through its unconventional drilling operations.
The PA Supreme Court specifically rephrased the issue it was reviewing this way--”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?”
The PA Superior Court ruling overturned the rule of capture practice that has been in place for as long as companies have been drilling for oil and gas and developing natural resources.
Members of the Briggs family own about 11 acres of land adjacent to an unconventional natural gas well operated by Southwestern Energy since 2011 in Harford Township, Susquehanna County.
The Briggs family did not lease their mineral rights to Southwestern for development.
Southwestern Energy argued and a lower court agreed there was no trespass because of the “rule of capture.”  Rule of capture means the first person to capture a natural resources owns that resource under English common law.  It can be applied to groundwater or natural resources like oil and gas. Click Here for a Penn State Law presentation on the issue.
The Court ruled prior cases involving the rule of capture do not apply to unconventional natural gas drilling because hydraulic fracturing is not the same as oil and natural gas freely migrating from a reservoir and across property lines.
The Court said--
“Unlike oil and gas originating in a common reservoir, natural gas, when trapped in a shale formation, is non-migratory in nature.  Shale gas does not merely “escape” to adjoining land absent the application of an external force.
“Instead, the shale must be fractured through the process of hydraulic fracturing; only then may the natural gas contained in the shale move freely through the “artificially created channel[s].”
“Further, we are not persuaded by the Coastal Oil Court’s rationale that a landowner can adequately protect his interests by drilling his own well to prevent drainage to an adjoining property.
“Hydraulic fracturing is a costly and highly specialized endeavor, and the traditional recourse to “go and do likewise” is not necessarily readily available for an average landowner.
Additionally, while we are cognizant that establishing the occurrence of a subsurface trespass determining the value of natural gas drained through hydraulic fracturing will present evidentiary difficulties, see Coastal Oil, 268 S.W.3d at 16, we do not believe that such difficulty, in itself, is a sufficient justification for precluding recovery.
“We additionally echo the concern raised in both the Coastal Oil dissent and Stone that precluding trespass liability based on the rule of capture would effectively allow a mineral lessee to expand its lease by locating a well near the lease’s boundary line and withdrawing natural gas from beneath the adjoining property, for which it does not have a lease.
“In light of the distinctions between hydraulic fracturing and conventional gas drilling, we conclude that the rule of capture does not preclude liability for trespass due to hydraulic fracturing.
“Therefore, hydraulic fracturing may constitute an actionable trespass where subsurface fractures, fracturing fluid and proppant cross boundary lines and extend into the subsurface estate of an adjoining property for which the operator does not have a mineral lease, resulting in the extraction of natural gas from beneath the adjoining landowner’s property.
The Court remanded the case to lower court to allow for the Briggs family to fully develop their trespass claim, including any estimates of the extent of the trespass and how far the subsurface fractures extended from the unconventional gas well.
Click Here for a copy of the PA Superior Court opinion.
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