WHEN IS FRACKING A TRESPASS?

By TONI ELLINGTON

Under Coastal Oil & Gas v. Garza Energy Trust, 268 S.W. 3d 1 (Tex. 2008), a Texas Supreme Court case on which the oil and gas industry frequently relies, extracting oil or natural gas from underneath a neighboring property is not a trespass because of the rule of capture.  In Garza, the court overturned a multimillion dollar verdict awarded to families in Hidalgo County, Texas.  The families were landowners who sued the oil and gas company which had drilled a well near their property, alleging that the company’s hydraulic fracturing was draining the natural gas from their property.  The Texas Supreme Court found that the rule of capture protected drillers from trespass claims when the drillers obeyed Texas state law and did not deliberately drill a “slant well” to steal oil and gas from under a neighboring property.

According to the Texas Supreme Court in Garza, when a well is drilled legally using hydraulic fracturing, “some drainage is virtually unavoidable.”  The solution for adjacent landowners who may be affected, according to the Texas Supreme Court, is for the landowners to simply drill their own well.

However, in a 2013 decision, a federal court in West Virginia disagreed.  The plaintiffs in the West Virginia case, Stone, et al. v. Chesapeake Appalachia, LLC, et al., Case No. 5:12-cv-00102, were a mother and son who owned a farm in Brooke County, West Virginia.  Chesapeake Appalachia, LLC, Statoil USA Onshore Properties Inc., and Jamestown Resources, LLC owned and/or operated a well approximately 200 feet away from the plaintiffs’ property.  The defendants had sought the right to pool or unitize the Marcellus shale formation under the plaintiffs’ property, but the plaintiffs refused.  The plaintiffs claimed that the well drained natural gas from underneath their property, and filed a lawsuit for breach of contract, trespass, and failing to protect their property from drainage.

The defendants filed a motion for summary judgment, claiming that the plaintiffs’ trespass claim was barred by the rule of capture, which was recognized in the state of West Virginia.  U.S. District Judge John Preston Bailey of the Northern District of West Virginia considered the Texas Supreme Court’s ruling in Garza and found the oil and gas company’s actions in that case to be more like “theft.”  Writing in the case of Stone, et al. v. Chesapeake Appalachia, LLC, et al., Case No. 5:12-cv-00102, Judge Bailey found:  “The Garza opinion gives oil and gas operators a blank check to steal from the small landowner.”  The court reasoned that the West Virginia Supreme Court of Appeal would find that “hydraulic fracturing under the land of a neighboring property without that party’s consent is not protected by the ‘rule of capture’ but rather constitutes an actionable trespass.”

The court’s order was later withdrawn by joint motion after the parties reached a settlement in the case.  See Order Granting Joint Motion, Stone, et al. v. Chesapeake Appalachia, LLC, et al., Case No. 5:12-cv-00102 (Jul. 30, 3013)(Rec. Doc. 69) (available on PACER).

With the expansion in hydraulic fracturing and the continuing improvements in drilling techniques, issues like the ones presented in Garza and Stone will continue to come up between landowners and drillers.

For more information, or for assistance with your oil and gas leasing or litigation matters, contact Toni Ellington at (504) 599-8500.