Client Alert: Energy, Utilities & Mineral Rights

Rule of Capture Does Not Preclude Subsurface Trespass Claims in Pennsylvania
In a case of first impression, the Pennsylvania Superior Court ruled on April 2, 2018, that the “rule of capture” principle does not preclude property owners from pursuing subsurface trespass claims resulting from the hydraulic fracturing of unconventional wells on neighboring properties. This holding in Briggs v. Southwestern Energy Production Company comes after a decade of Pennsylvania precedent refusing to recognize such claims in the context of conventional oil and gas extraction. A full copy of the opinion can be found here.

In Briggs, the owners of 11.07 acres of unleased land in Susquehanna County, Pennsylvania (the “Briggs”) filed a complaint against Southwestern Energy Production Company (“Southwestern”) for claims of trespass and conversion, arguing that Southwestern’s hydraulic fracturing on adjacent land resulted in the unauthorized drainage of oil and gas from the Briggs’ property.[1] Southwestern argued that the rule of capture barred the Briggs’ claims.[2] The trial court agreed with Southwestern and granted its motion for summary judgment, holding that the rule of capture precludes subsurface trespass and conversion claims based on hydraulic fracturing originating from adjacent land.[3] As stated by the court, “the rule of capture is a longstanding ‘principle of oil and gas law holding that there is no liability for drainage of oil and gas from under the lands of another so long as there has been no trespass and all relevant statutes and regulations have been observed.'”[4]
On appeal to the Superior Court, the Briggs questioned whether the rule of capture precludes trespass claims when gas is extracted from property through hydraulic fracturing.[5] The Pennsylvania Superior Court answered in the negative, concluding that the rule of capture does not preclude liability for trespass due to hydraulic fracturing.[6] In its discussion, the Superior Court analyzed the jurisprudence on the rule of capture,[7]the process of hydraulic fracturing,[8] and two seminal decisions from other jurisdictions addressing claims of trespass for hydraulic fracturing: Coastal Oil & Gas Corporation v. Garza Energy Trust, 268 S.W.3d 1 (Tex. 2008); and Stone v. Chesapeake Appalachia, LLC., Civil Action No. 5:12-CV-102, 2013 U.S. Dist. LEXIS 71121 (N.D.W. Va. Apr. 10, 2013).[9]

The Superior Court based its decision on the underlying purpose of the rule of capture and the fundamental differences between conventional mineral extraction and hydraulic fracturing.[10] The Court explained that the rule of capture traditionally applies to the conventional extraction of oil and gas from subsurface reservoirs in which oil and gas migrate freely across property lines according to changes in pressure.[11] Hydraulic fracturing, on the other hand, targets non-migratory oil and gas trapped inside shale formations.[12] The Court concluded that the rule of capture should only preclude liability for oil or gas drained from a neighboring property to the extent such flow occurs naturally, not for drainage caused by artificial means such as hydraulic fracturing.[13] The Superior Court noted 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 unleased adjoining property.[14]
In its opinion, the Superior Court refused to follow the majority opinion in Coastal Oilwhich held the rule of capture precludes hydraulic fracturing trespass claims. Instead, the Superior Court found the dissenting opinion more convincing. Likewise, the Court agreed with the holding in Stone, which distinguished hydraulic fracturing from conventional production and held hydraulic fracturing beneath neighboring property without consent to be an actionable trespass.[15]

While the Superior Court has ruled hydraulic fracturing may give way to claims for subsurface trespass, a plaintiff still must prove (i) that fracturing fluid or other materials entered the plaintiff’s property and (ii) the value of any oil and gas drained from the property because of the subsurface trespass.[16] Both requirements present significant evidentiary difficulties for the plaintiff. Nonetheless, the Superior Court’s ruling in Briggs represents a new risk for energy companies seeking to navigate the ever-evolving legal landscape in Pennsylvania.

 


[1] Briggs v. Sw. Energy Prod. Co., No. 1351 MDA 2017, 2018 Pa. Super. LEXIS 299, *1 (Pa. Super. Ct. April 2, 2018).
[2] Id. at *2.
[3] Id. at *4.
[4] Id. (quoting Rule of Capture, Black’s Law Dictionary (10th ed. 2014)).
[5] Id. at *4-5
[6] Id. at *25.
[7] Id. at *8-10.
[8] Id. at *11-14.
[9] Id. at *14-21.
[10] Id. at *21-25.
[11] Id. at *21.
[12] Id. at *22.
[13] Id. at *23.
[14] Id. at *24-25.
[15] Id. at *14-21.
[16] Id. at *26.

This material is for informational purposes only.  It is not and should not be solely relied on as legal advice in dealing with any specific situation.