Herein, highlights from the Pennsylvania Supreme Court in Briggs, et al. v. Southwestern Energy Production Company. The rule of capture applies to oil and gas produced from wells completed using hydraulic fracturing and precludes trespass liability for drainage from under nearby property, where the well is drilled solely on and beneath the driller’s own property and frack fluids are injected solely beneath the driller’s own property.

Why is this a big deal?

This decision is only the second application by a state supreme court of the rule of capture to hydraulic fracturing (from Texas, Coastal Oil & Gas Corp. v. Garza Energy Trust was the first). The Pennsylvania Supreme Court has reached a similar result – drainage resulting from hydraulic fracturing does not itself constitute trespass.

The trial court

Briggs owns an 11 acre unleased parcel in Susquehanna County adjacent to a tract leased by Southwestern, which has wellbores that employed hydraulic fracturing. The family sued for trespass and conversion, alleging Southwestern unlawfully produced gas from under their land. Southwestern argued the claims were barred by the rule of capture. The trial court held that the rule of capture denied Briggs’ right to recover under trespass or conversion.

Superior Court

The Superior Court reversed, acknowledging Briggs’ position that Southwestern’s actions amounted to trespass despite the lack of physical intrusion. Nevertheless, the panel suggested that “gas located in a shale formation is non-migratory”, and characterized the issue in terms of whether a trespass occurs when the defendant employed fracking in a manner “which extends into an adjoining landowner’s property and results in the withdrawal of natural gas from beneath that property.”

The Superior Court resolved the issue based on the premise that Briggs alleged a physical intrusion. The court held that “hydraulic fracturing may give rise to liability in trespass, particularly if subsurface fractures, fluid or proppants cross boundary lines, resulting in the extraction of natural gas from beneath an adjoining landowner’s property.”

Supreme Court

Reversing the reversal, the Supreme Court generally condensed the Superior Court’s analysis into this:

• “whenever ‘artificial means,’ such as hydraulic fracturing, are used to stimulate the flow of underground resources, the rule of capture does not apply because drainage does not occur through the operation of ‘natural agencies'”.
• “summary judgment was premature in light of certain unspecified allegations relating to cross-boundary intrusions into Briggs’ land.”

To which we add another: The majority held that Briggs never alleged a physical intrusion and that the Superior Court sua sponte addressed that issue.

The Supreme Court also held that the Superior Court’s creation of a per se rule “foreclosing application of the rule of capture in hydraulic fracturing scenarios” rested on these faulty grounds:

• “the act of artificially stimulating the cross-boundary flow through the use of hydraulic fracturing solely on the developer’s property in and of itself renders the rule of capture inapplicable”; and
• “any time natural gas migrates across property lines resulting, directly or indirectly, from hydraulic fracturing, a physical intrusion into the plaintiff’s property must necessarily have taken place.”

The Supreme Court reasoned that all drilling for subsurface fugacious minerals involves in some way or another the artificial stimulation of the flow of that substance. And there is no reason why the rule of capture should be applied differently to hydraulic fracturing conducted solely within the driller’s property, rejecting the Superior Court’s notion to the contrary.

The court did not progress on the theory that Southwestern physically intruded on their subsurface because it was not in Briggs’ pleadings at the lower courts or argued as a basis to deny Southwestern’s motion for summary judgment. The court acknowledged that there must have been some basis for the Superior Court to dispose of the appeal on the presupposition that Southwestern was alleged to have physically invaded Briggs’ subsurface property, and Southwestern didn’t challenge the intermediate court’s action in that respect.

The Supreme Court wouldn’t reinstate the trial court’s summary judgment order, but it made apparent that the Superior Court’s opinion suffered from “multiple infirmities.”  The court remanded for reconsideration because it wasn’t clear if the Superior Court’s incorrect assumptions about the rule of capture were integral to its ultimate ruling.

Takeaways:

• Fracking does not alter the rule of capture.
• Where fracking is utilized in Pennsylvania, a physical invasion is not a necessary precondition in all cases for drainage to occur from underneath another property (Drainage can occur without a physical invasion).
• “Natural-versus-artificially-induced-flow litmus” to determine whether the rule of capture applies in a given situation was disapproved.

For more information on this topic and fracking generally, Gray Reed co-authored the 2019 update to the treatise: Hydraulic Fracturing Law and Practice, which discusses Briggs at the trial and Superior Court levels (see Davis Graham & Stubbs LLP; Gray Reed & McGraw LLP, & Vorys, Sater, Seymour and Pease LLP, Hydraulic Fracturing Law and Practice § 36.04(b)(4), Lexis Nexis (2019)).

A European musical interlude to shake off the cobwebs after this long post.

And who do they resemble!

[View source.]