Texas Supreme Court Reverses Subsurface Trespass Judgment

Gray Reed
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Regency Field Services LLC v. Swift Energy Operating LLC, draws one’s attention to the difficult analyses that should be made before bringing a subsurface trespass claim.

A mineral estate lessee (Swift) alleged that H2S (“brimstone” if you follow the Old Testament) injected into the Wilcox formation by an injection well (owned by Regency) migrated and injured its interests in the minerals underlying nearby properties. The issue for the court was when the lessee’s claims accrued. We will ignore parts of the decision discussing pleadings and summary judgment evidence (trial lawyers, pay attention!).

The facts, condensed

Regency’s well was permitted by the Railroad Commission to inject a particular amount of a H2S/CO2 mix into the Wilcox.  Injectate will spread horizontally (but not vertically into other formations due to impermeable barriers) over time. Regency’s 2011 application for an amended permit predicted that the injectate plume created by increased disposal would take 30 years to migrate 2,900 feet from the injection point. That prediction turned out to be woefully inaccurate. (See my report on the court of appeals decision for more facts)

Swift has nine leases on different portions of the Quintanilla Ranch in the vicinity of Regency’s injection well.  The injectate is alleged to have physically migrated to the Ranch and may have crossed under the surface of parts of the ranch as early as 2009. This suit was filed in 2014 when Quintanilla sued Regency. Swift intervened in 2015, more than three years after H2S was first discovered in another operator’s wellbore. The statute of limitations required Swift to sue Regency within two years after its claims accrued.

The Legal Injury Rule

This Rule determines when an injured party’s claims accrue. Generally, a claim accrues when a defendant’s wrongful conduct causes a claimant to suffer a legal injury giving the claimant the right to seek a judicial remedy. The limitation period begins to run even if the claimant:

  1. doesn’t yet know that a legal injury has occurred;
  2. hasn’t yet experienced, or doesn’t yet know the full extent of the injury;
  3. doesn’t yet know the specific cause of the injury or the party responsible;
  4. the wrongful conduct later causes additional legal injuries; or
  5. the claimant hasn’t yet sustained or can’t yet ascertain any or all of its damages.

This standard imposes a high burden on mineral owners to be diligent in protecting their interests and, some would say, be clairvoyent.

The Single Action Rule

This Rule requires a party to bring all claims arising from the defendant’s wrongful conduct in a single legal action. The problem is that a defendant’s wrongful conduct may breach multiple legal duties, produce multiple legal injuries, or cause multiple types of damages, and thus give rise to multiple causes of action.

Each claim or cause of action could, at least in theory, accrue at different times even though they arise from the same wrongful conduct. But under the single action rule, wrongful conduct gives rise to a single indivisible action in which the claimant must pursue all claims for all damages resulting from all injuries that arise from the wrongful conduct, and those claims all accrue when the first such injury occurs. Another high burden for an aggrieved mineral owner.

Swift’s causes of action are for trespass, negligence, gross negligence and nuisance, all of which ordinarily accrue at different times.

The result

The Court deferred ruling on application of either of the Rules or possible exceptions, instead deciding that the pleadings and summary judgment evidence did not conclusively establish Regency’s limitations defense. Summary judgment for Regency for one of the Quintanillia leases was reversed.

Look for much more to come on these topics. For the sake of clarity that might be gained from additional Supreme Court rulings, we encourage the parties to make some more law.

Your musical interlude for a Monday.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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