See yesterday’s post on Iskandia Operating, LLC v. SWEPI, LP

SWEPI’s motion for summary judgment alleged that Iskandia presented no evidence of one or more elements of its trespass claim, noting that the Supreme Court of Texas has never recognized a cause of action for trespass based on deep subsurface water migration (to which some might respond, not yet).

The court observed that the parties disagreed on the elements required for a plaintiff to prevail on a trespass claim.

The court noted that in Coastal Oil & Gas Corp. v. Garza Energy Trust, the Supreme Court made several pronouncements that could affect Iskandia’s claim: a trespass against a possessory interest does not require actual injury to be actionable, and the rules for trespass on the surface of the earth are different from those that apply above or below it.

The court concluded that a trespass claim based on unauthorized interference with a lessee’s right to develop minerals was recognized in Lightning Oil v. Anadarko E&P Onshore, and Regency Field Services v. Swift Energy Operating as long as the injury is not outweighed by competing interests in the oil and gas context. The parties did not address that issue in this appeal.

Causation

The court discussed causation-in-fact as an element of Iskandia’s claim. To establish that an event is the cause-in-fact of damages the plaintiff must establish that the defendant’s act or omission was a substantial factor in bringing about the injuries and without it the harm would not have occurred.

The court determined that in order to survive summary judgment on the element of causation Iskandia had to demonstrate exposure of its wells to water originating from SWEPI at levels sufficient to cause the loss claimed by its pleading. Iskandia presented evidence of exposure to excessive amounts of saltwater by several means established by its experts.  

An expert’s failure to rule out other causes of the damage could render his opinion little more than speculation; however, alternative causes need not necessarily be ruled out entirely. The expert’s analysis of alternative causes must be sufficient for the factfinder to reasonably conclude that the defendant’s conduct was a substantial factor in causing the injury. Dr. Meehan considered and accounted for plausible alternatives before reaching his conclusions.

Damages

Meehan applied the income approach to calculate damages. Using the discounted cash flow method to determine the fair market value of Iskandia’s property he calculated the net present value of future cash flows and ultimately calculated Iskandia’s damages by comparing the fair market value of the leases in question before and after SWEPI’s alleged trespass.  His opinion on damages was $29.9 million.

The result

Iskandia’s only burden at summary judgment was to present more than a scintilla of evidence creating material fact issues. The testimony of Meehan and Bintu was more than a scintilla of evidence creating a material fact issue that SWEPI’s wastewater damaged Iskandia’s wells.

The trial court erred in granting SWEPI’s no evidence motion. Is it time for the Supreme Court to weigh in? Otherwise, its back to the trial court.

Your musical interlude.

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