The Oil and Gas Addendum

On January 22, 2020, the Pennsylvania Supreme Court issued a much-anticipated ruling in Briggs v. Southwestern Energy Production Company regarding the interplay between the “rule of capture” and subsurface trespass claims. Although the Supreme Court vacated the Superior Court decision in favor of the Briggs and remanded the case for further proceedings, the Supreme Court’s Opinion is a “win” for landowners because it recognizes that the “rule of capture” does not automatically shield a driller from subsurface trespass liability.

The critical issue before the Pennsylvania Supreme Court in Briggs was whether the “rule of capture” allowed a driller to avoid liability if its hydraulic fracturing operations crossed property lines and drained hydrocarbons from neighboring lands. Given the importance of this issue to landowners across the Commonwealth, the Pennsylvania Chapter of the National Association of Royalty Owners (“PA NARO”) engaged Robert J. Burnett of Houston Harbaugh to prepare and file a “friend of the court” brief in support of the Superior Court’s opinion. A copy of the amicus curiae brief filed by Houston Harbaugh can be found here.

During the hydraulic fracturing process, sand and other materials (“proppants”) are injected into the shale formations with high pressure fluids. When the rock is cracked and fractured, the proppants remain in place to keep these fractures and fissures open to allow gas to flow to the well bore. In the amicus curiae brief filed by Houston Harbaugh on behalf of NARO, it was stressed that the injection of these proppants into an un-leased subsurface estate is effectively the same thing as a well bore that physically invades another property – they are both man-made parts of a drilling operation that are designed and placed below ground to create a conduit for gas to move from high pressure (below ground) to low pressure (at the surface).

Ultimately, the Pennsylvania Supreme Court rendered its decision in Briggs based on what it saw as an overreach by the Pennsylvania Superior Court. The Supreme Court observed that:

“. . . at least part of the Superior Court’s opinion can reasonably be construed as setting forth a per se rule foreclosing application of the rule of capture in hydraulic fracturing scenarios . . . the [Superior Court] appears to have indicated that one litmus for whether the rule of capture applies is whether the defendant’s gas extraction methodology relies only on the natural drainage of oil or gas within a conventional pool or reservoir, or whether instead those methods utilize some means of artificial stimulation to induce drainage.”

The Supreme Court also concluded that the pleadings in the trial court did not clearly assert that there had been an actual physical intrusion into the Briggs’ subsurface estate. Based on this, the Pennsylvania Supreme Court remanded the case back to the Superior Court for further proceedings.

The Supreme Court’s decision is a measured and prudent approach to this important issue. In effect, the Briggs decision preserves the “rule of capture”. If a well is located on property that the driller owns or leases, there is no liability for drainage if that well produces hydrocarbons from nearby properties. Just the same, if a well bore traverses into property that the driller does not own or lease, liability for the driller can arise. Crucially, the Briggs decision did not expand or change the “rule of capture” to immunize drillers from liability if their wells penetrate into un-leased land:

“…if there is such a physical invasion the rule of capture will not insulate a developer engaged in hydraulic fracturing from trespass liability.”

See, Briggs (Justice Dougherty concurring opinion).

Rather than a per se rule one way or the other, the Briggs decision makes clear that “frac trespass” cases are to be decided on their individual facts and circumstances – notably, whether there is proof that the hydraulic fracturing process actually caused the placement of proppants in frac fissures located under an un-leased parcel. In this author’s view, that is the best and most pragmatic approach. While Briggs makes clear that landowners will have the burden of demonstrating that there has been an actual physical intrusion into their subsurface estate, it is submitted that this has always been the law in Pennsylvania.

Although the Supreme Court remanded the matter, its decision in Briggs clarifies and confirms the status of subsurface trespass law in Pennsylvania – drillers do not enjoy blanket immunity from subsurface trespass claims under the guise of the “rule of capture”. If the plaintiff-landowner can establish that the driller injected “proppants” into and under his un-leased land and that those same “proppants” allowed and facilitated the movement of hydrocarbons from frac fissures located under the landowner’s land, the “rule of capture” will not operate as an automatic affirmative defense. As such, the Briggs opinion preserves and recognizes the ability of a landowner to assert a claim for subsurface trespass.