Oil and Gas Lawyer Blog
Last week the Texas Supreme Court granted petitions to hear appeals of two cases that could significantly affect the rights of Texas land and mineral owners: Atmos Energy Corp v. Town of DISH, 15-0613, and Lightning Oil Co. v. Anadarko E&P Onshore LLC, 15-0910. Last month, the court agreed to hear Sabine Oil & Gas Corporation’s appeal in Forest Oil Corp. v. El Rucio Land and Cattle Company, 14-0979, a case in which the court had previously denied the petition for review. Oral argument in the Forest Oil case is set for February 8. Dates for oral argument in Atmos v. DISH and Lightning Oil v. Anadarko have not yet been set.
In Atmos v. DISH, the town of DISH and residents of the town are seeking damages for injuries they claim are caused by noise and emissions from defendants’ gathering and compression facilities located in and near the town. The trial court dismissed plaintiffs’ claims, but the Amarillo Court of Appeals held that the plaintiffs had stated causes of action and were entitled to trial. For a more detailed description of the case, read my post here. Among other arguments, the pipeline companies assert that plaintiffs’ claims are barred because their activites were authorized by governmental regulations and imposing liability for lawful activities would allow judicial regulation of activities sanctioned by statute and regulation. The Amarillo court disagreed: “Just because Appellees are operating their natural gas compression facilities within the applicable regulatory guidelines does not mean that Appellants have not suffered compensable injuries as a result of those operations.”
Sabine Oil & Gas makes a similar argument in Forest Oil v. El Rucio. (My prior posts on this case can be found here and here.) Sabine (formerly known as Forest Oil) argues that Jimmy McAllen’s $20 million arbitration award for damages caused by pollution of his ranch should be reversed because the case interferes with the Railroad Commission’s jurisdiction over oil field contamination. The RRC has jurisdiction over cleanup of environmental contamination related to oil and gas activities and has an open proceeding relating to Sabine’s efforts to remediate contamination on McAllen’s ranch. The Corpus Christi Court of Appeals held that Texas law expressly grants a landowner a private cause of action for damages caused by violation of Texas conservation laws and that McAllen’s claims should not be barred or stayed by the ongoing remediation activities supervised by the RRC. The court made reference to sections 85.321 and 85.322 of Texas Natural Resources Code, the first of which expressly grants a private cause of action for damages for violation of Texas conservation laws, and the second of which provides that nothing in the law governing Railroad Commission jurisdiction “shall impair or abridge or delay a cause of action for damages or other relief that an owner of land …. may have or assert against any party violating any rule or order of the commission or any judgment under this chapter.”
A similar case concerning RRC jurisdiction was recently decided by the El Paso Court of Appeals. In Ring Energy v. Trey Resources, Inc., 01-16-00080-CV, that court held that Ring Energy was not barred from seeking an injunction to prevent injection of fluids into an oil reservoir on the ground that such injection would harm its own wells, even though Trey Resources had obtained permits from the RRC to operate its injection wells. The court of appeals held that, in Natural Resources Code sections 85.321 and 85.322, the Legislature had expressly allowed for a cause of action to enjoin activity that would cause waste to natural resources, and that exclusive jurisdiction of such activities was not vested in the RRC.
In all three of these cases, the oil and gas industry defendants are asking the court to bar plaintiffs from seeking private remedies for damages on the ground that their activities should be subject to regulation solely by the Railroad Commission. In each case, the defendants are trying to use regulation by the Railroad Commission as a shield to protect them from private causes of action seeking damages for their misconduct.
The third case to be heard by the Supreme Court, Lightning Oil v. Anadarko, will decide whether Anadarko’s use of the Briscoe Ranch to drill horizontal wells that produce from Anadarko’s adjacent lease of oil and gas under the adjacent Chaparral Wildlife Management Area constitutes a trespass on Lightning Oil’s oil and gas leasehold estate in the Briscoe lands. See my prior post on Lightning here. The San Antonio court of appeals held that Lightning Oil had failed to prove a probable, imminent and irreparable injury from Anadarko’s operations and refused to grant an injunction to prevent drilling of the wells, but the court did not decide whether the drilling of Anadarko’s well could constitute a trespass on Lightning’s mineral leasehold estate under the Briscoe ranch. This case is important because of the increasingly common practice of placing the surface location of horizontal wells on lands adjacent to the oil and gas lease from which the wells will produce. The commonly accepted view in the industry is that the operator of such a well need only obtain permission from the surface owner of the adjacent tract to use his surface estate to drill and operate the well and does not need an easement from the owner of the mineral estate. The Supreme Court’s decision to hear the case raises the possibility that this view may not be accurate.