On April 2, 2018, the Pennsylvania Superior Court found that the rule of capture did not preclude liability for a mineral lessee’s trespass on neighbors’ land because the lessee’s hydraulic fracturing could constitute an actionable trespass if the operations resulted in the extraction of natural gas from underneath a neighbor’s property. The rule of capture is a “fundamental 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.” Rule of Capture, Black’s Law Dictionary (10th ed. 2014).
The appellants in this case were Adam Briggs and Paula Briggs, husband and wife, and Joshua Briggs and Sarah Briggs (Appellants). Appellants are property owners of an 11.07-acre parcel (Subject Land) in Harford Township, Susquehanna County, Pennsylvania. Southwestern Energy Production Company (Southwestern) was the appellee and lessee of an oil and gas on a parcel of land adjacent to the Subject Land. Southwestern used hydraulic fracturing to elicit natural gas from the Marcellus Shale formation under the adjoining property. Southwestern did not obtain an oil and gas lease in connection with the Subject Land.
On November 5, 2015, Appellants filed a Complaint against Southwestern on the basis of trespass and conversion, seeking punitive damages. Appellants purported that Southwestern had illegally removed natural gas from underneath the Subject Land during its operation of drilling units on the adjacent property. On December 23, 2015, Southwestern filed an Answer and New Matter claiming that the Appellants’ claims were forbidden by the rule of capture and filed a counterclaim for declaratory relief, seeking that the trial court affirm that Southwestern did not trespass on the Subject Land.
On April 24, 2017, Southwestern filed a Motion for Summary Judgment contending that Appellant’s trespass claim should be denied because Southwestern did not physically invade the Subject Land and the rule of capture prohibits compensation for the seepage of natural gas.
On May 15, 2017, Appellants filed a Motion to Stay, asserting that the case was not yet “ripe” because Southwestern had failed to answer their Interrogatories adequately. On June 14, 2017, Appellants filed a Motion for Partial Summary Judgment.
The trial court subsequently granted Southwestern’s Motion for Summary Judgment, denied Appellants’ Motion for Partial Summary Judgment, and denied as moot Appellants’ Motion to Compel. Further, the trial court held that the rule of capture prohibited recovery by Appellants. Appellants filed an appeal.
On appeal, Appellants argued that the removal of natural gas under the Subject Land without a lease or their consent constituted a trespass. Further, Appellants differentiated the situations in which the rule of capture would apply to natural gas operations, stating that the rule of capture applies when natural gas is located in an “underground pool.” In the case at hand, however, Southwestern was drilling for natural gas found in shale formations that “would remain trapped there forever if not for the ‘forced extraction’ through hydraulic fracturing.” Appellants contended that Southwestern could calculate the amount of natural gas extracted from various shale formations utilizing the hydraulic method.
Southwestern asserted the rule of capture prohibited liability for trespass and that the rule should also be applied to natural gas obtained through the hydraulic fracturing method. Southwestern described hydraulic fracturing “as a mechanical method of increasing the permeability of rock, and, thus, increasing the amount of oil and gas produced from it.”
The superior court looked to past precedent in making their decision. The court recognized that “the rule of capture, which precludes liability for drainage of oil and gas from under another’s land, has long been applied in the context of conventional oil and gas extraction” (citing Westmoreland & Cambria Natural Gas Co. v. DeWitt, 130 Pa. 235 (1889)). Additionally, the court agreed that “the property of the owner of lands in oil and gas is not absolute until it is actually within his grasp, and brought to the surface” (citing Jones v. Forest Oil Co., 194 Pa. 379 (1990)). Further, the court acknowledged that “under Pennsylvania law, oil and gas resources are subject to the ‘rule of capture,’ which permits an owner to extract oil and gas even when extraction depletes a single oil or gas reservoir lying beneath adjoining lands” (citing Minard Run Oil Co. v. United States Forest Service, 670 F.3d 236 (3d Cir. 2011)). Despite past precedent, Appellants argued that hydraulic fracturing was significantly different from the conventional types of drilling that previous courts had taken into considerations and therefore, the rule of capture should not apply.
Next, the court thoroughly analyzed the dissent in Coastal Oil & Gas Corp. v. Garza Energy Trust, 268 S.W.3d 1 (Tex. 2008) and the majority opinion in Stone v. Chesapeake Appalachia, LLC, 2013 U.S. Dist. LEXIS 71121 (N.D. W.Va. 2013). The majority in Coastal Oil opined that “a landowner can adequately protect his interest by drilling his own well to prevent drainage to an adjoining property.” The dissent, however, discussed that not all landowners have the capability to drill for oil and gas to protect their rights. When making their decision, the court in Stone, agreeing with the dissent in Coastal Oil, found for the plaintiffs stating, “the Coastal Opinion gives oil and gas operators a blank check to steal from the small landowner. Under such a rule, the companies may tell a small landowner that either they sign a lease on the company’s terms or the company will hydraulicly fracture under the property and take the oil and gas without compensation. In the alternative, a company may just take the gas without even contacting a small landowner.”
With these decisions in mind, the Pennsylvania Superior Court held that hydraulic fracturing is discernible from the traditional practices of oil and gas extraction, which are shielded from the rule of capture because operators are not only removing gas available in pools under the ground. Therefore, if an operator obtains natural gas from an unleased neighboring parcel of land utilizing this method of extraction, an actionable trespass has occurred. The summary judgment Order was overturned and the case was remanded to the trial court for further proceedings.
The Briggs decision is relatively new, and its effects are unknown. Southwestern has the opportunity to appeal the superior court’s ruling to the Pennsylvania Supreme Court. This ruling opens the door for potential actionable trespass claims against natural gas companies. Operators should take into consideration that viable trespass claims could be brought against them when they are drilling near unleased parcels of land.
Sources Referenced:
Briggs v. Southwestern Energy Prod. Co., No. 1351 MDA 2017 (Pa. Super. Ct. Apr. 2, 2018).