By Kurt Valentine, Web Editor
On August 27, 1859, the first commercial oil well in the United States, drilled by Edwin Drake, struck oil along the banks of Oil Creek near Titusville, Pennsylvania.[1] Drake’s well “forever changed America’s economy, standard of living, and culture.”[2] The gas and oil industry is now a critical part of the United States economy, which as of 2015 supported 10.3 million jobs and contributed more than $1.3 trillion to the economy.[3]
Thirty years after Drake’s well struck oil, the Pennsylvania Supreme Court adopted the rule of capture with regard to oil and gas extraction.[4] In Westmoreland v. Dewitt, the court articulated the rule as follows:
[Gas and oil] belong to the owner of the land, and are part of it, so long as they are on or in it, and are subject to his control; but when they escape, and go into other land, or come under another’s control, the title of the former owner is gone. Possession of the land, therefore, is not necessarily possession of the gas. If an adjoining, or even a distant, owner, drills his own land, and taps your gas, so that it comes into his well and under his control, it is no longer yours, but his.[5]
As advances in technology increased the efficiency of the oil and gas extraction process, the Westmoreland rule of capture continued to be reinforced by Pennsylvania courts.
A decade after the Westmoreland decision, the Pennsylvania Supreme Court held that the use of mechanical devices like gas pumps to bring oil to the surface was permissible even when the use of the devices affected the production of a neighboring well.[6]
The Court revisited the Westmoreland rule again in 1907.[7] In Barnard v. Monongahela, the Monongahela Natural Gas Company had oil and gas leases to two adjoining farms and drilled a well located 35 feet from the property line, which entitled that landowner to the proceeds of that well.[8] Monongahela then drilled another well 1,350 feet away, on the other landowner’s property, but that well failed to produce any gas.[9] The landowner with the nonproducing well brought suit claiming that Monongahela fraudulently deprived them of their royalty or annual gas rental by drilling a well in close proximity to the property line.[10] They sought an injunction or an accounting for damages from the draining of gas under their farm.[11] The court held that “every landowner or his lessee may locate his wells wherever he pleases regardless of the interests of others.”[12] It further noted that it is permissible for a landowner to “crowd the adjoining farms so as to enable him to draw the oil and gas from them.”[13]
Since the Westmoreland rule was established in Pennsylvania 130 years ago, the rule of capture has protected gas and oil drillers from “liability for drainage of oil and gas from under the land of another so long as there has been no trespass and all relevant statutes and regulations have been observed.”[14] However, a recent decision by the Pennsylvania Superior Court may “[unsettle] the legal landscape for the entire industry.”[15]
In Briggs v. Southwestern Energy Prod. Co., the Briggs family filed a complaint against Southwestern Energy Production Company alleging that Southwestern’s fracking operations on an adjoining property constitutes a past and continuing trespass.[16] They took the position that fracking constituted a trespass because, unlike oil and gas located in underground pools, natural gas contained in shale formations would remain trapped there forever if not for the ‘forced extraction’ through hydraulic fracturing.”[17] Southwestern filed a motion for summary judgment arguing that “[the Briggs’] trespass claim must fail because Southwestern had not entered the Briggs’ property and the rule of capture bars damages from drainage of natural gas due to hydraulic fracturing.”[18] The trial court held that the rule of capture precluded recovery for trespass and granted summary judgment in favor of Southwestern.[19] The Briggses appealed.[20]
Like the Briggses,the Superior Court distinguished fracking from conventional methods of oil and gas extraction. It stated, “Unlike oil and gas originating in a common reservoir, natural gas, when trapped in a shale formation, is non-migratory in nature.”[21] The rule of capture applies to conventional extraction because the gas and oil “originates in subsurface reservoirs . . . and can migrate freely within the reservoirs and across property lines, according to pressure changes.”[22] On the other hand, the rule of capture would not apply to natural gas extracted by fracking because the natural gas would “remain trapped in shale formations forever if not for the forced extraction.”[23]
Based on that distinction, it held that the rule of capture did not preclude liability for trespass “where subsurface fractures, fracturing fluid and proppant [(sand)] cross boundary lines and extend into the subsurface estate of an adjoining property for which the operator does not have a mineral lease. . ..”[24] The court reversed and remanded the case to determine whether Southwestern’s fracking operations resulted in a subsurface trespass.[25] Southwestern filed a petition for rehearing, which was denied. [26] On July 9, 2018, Southwestern filed a petition for allowance of appeal to the Pennsylvania Supreme Court.[27]
Following the Superior Court’s decision, the Briggs family attorney, Laurence Kelly of Kelly Law Office, said, “the decision was a thorough, thoughtful consideration of the issue and should not be disturbed.”[28] Naturally, the gas and oil industry does not feel the same way. According to Southwestern, if the decision is not disturbed, “[o]il and gas producers will face an uncertain quandary regarding the thousands of existing wells that currently contribute to the economic viability of [Pennsylvania], as well as future wells that may never be drilled.”[29] Southwestern also stated that the ruling could “inspire many more lawsuits that would require judges and juries to address unanswerable questions about how far fractures spread and where fluids flow underground – ‘something science has not been able to do with any precision.’”[30]
There is no doubt that Briggs decision opens the door to more lawsuits, but it also gives property owners “greater discretion in their decision to develop (or not) and avoid a race to the bottom.”[31] In Barnard, the court posed the question, “What then can the neighbor do?”[32] To which it responded, “Nothing, only go and do likewise. He must protect his own oil and gas. . .. This may not be the best rule, but neither the legislature nor our highest court has given us better.”[33]
The Briggs court was not persuaded that a landowner can protect his interests by drilling his own well.[34] It noted that a hydraulic fracturing well, which costs approximately $6.1 million, is not a readily available remedy for the average landowner.[35] However, until the Pennsylvania Supreme Court makes a decision on Southwestern’s petition for allowance of appeal, the oil and gas industry will remain in a state of uncertainty.
Sources
[1] Am. Oil & Gas Hist. Soc’y, First American Oil Well, AOGHS.org, https://aoghs.org/petroleum-pioneers/american-oil-history/ (last visited Nov. 6, 2018).
[2] Am. Oil & Gas Hist. Soc’y, First Oil Discoveries, AOGHS.org, https://aoghs.org/petroleum-discoveries/ (last visited Nov. 6, 2018).
[3] PricewaterhouseCoopers LLP, National Factsheet, Am. Petroleum Inst., https://www.api.org/~/media/Files/Policy/Jobs/National-Factsheet.pdf (last visited Nov. 6, 2018).
[4] Westmoreland v. Dewitt, 18 A. 724 (Pa. 1889).
[5] Id. at 725.
[6] Briggs v. Southwestern Energy Prod. Co., 184 A.3d 153, 157 (Pa. Super. 2018) (citing Jones v. Forest Oil Co., 44 A. 1074, 1075 (Pa. 1900)).
[7] Barnard v. Monongahela Natural Gas Co., 65 A. 801 (Pa. 1907).
[8] Id.
[9] Id.
[10] Id.
[11] Id.
[12] Id.
[13] Id.
[14] Briggs v. Southwestern Energy Prod. Co., 184 A.3d 153, 155 n. 2 (Pa. Super. 2018) (quoting Rule of Capture, Black’s Law Dictionary (10th ed. 2014)).
[15] Christine Powell, Energy Co. Seeks Redo On Pa. Fracking Well Trespass Claims, Law 360 (April, 17, 2018, 8:42 PM ET), https://www.law360.com/articles/1034257/energy-co-seeks-redo-on-pa-fracking-well-trespass-claims.
[16] Briggs, 184 A.3d at 154.
[17] Id. at 156-57.
[18] Id. at 154-55.
[19] Id. at 155.
[20] Id.
[21] Id. at 162
[22] Id.
[23] Id. at 157.
[24] Id. at 164.
[25] Id.
[26] Briggs v. Southwestern Energy, 2018 Pa. Super. LEXIS 632 (Pa. Super. June 8, 2018).
[27] Pet. for Allowance of App., Briggs v. Southwestern Energy Production Company, https://ujsportal.pacourts.us/DocketSheets/AppellateCourtReport.ashx?docketNumber=443+MAL+2018&dnh=WBSDbLnfZJa6fhdL6dLfKA%3d%3d, (Pa. July 9, 2018) (No. 443 MAL 2018).
[28] Powell, supra note 5.
[29] Id.
[30] Laura Legere, Southwestern Energy asks Pa. high court to restore the ‘rule of capture’ for shale drilling, Pitt. Post-Gazette (July 11, 2018, 8:30 AM ET), http://www.post-gazette.com/business/powersource/2018/07/11/Southwestern-Energy-Pa-Supreme-Court-restore-rule-of-capture-shale-drilling/stories/201807100131.
[31] Siarra Rogers, Note, The Influence of Property in the Law of Energy Development: How the United States As a Landowner Can Limit Environmental Degradation on Federal Lands, 36 Va. Envtl. L.J. 386, 392 (2018).
[32] Barnard, 65 A. at 801.
[33] Id.
[34] Briggs, 184 A.3d at 163.
[35] Id. (citing U.S. Energy Information Administration Trends in U.S. Oil and Natural Gas Upstream Costs, 1, 19 March 2016), http://www.eia.gov/analysis/studies/drilling/pdf/upstream.pdf).
