Whiteman v. Chesapeake Appalachia, L.L.C.

• Decision Date: 04 September 2013
• Docket Number: No. 12–1790.,12–1790.
• Citation: 729 F.3d 381
• Parties: Martin WHITEMAN; Lisa Whiteman, Plaintiffs–Appellants, v. CHESAPEAKE APPALACHIA, L.L.C., Defendant–Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

729 F.3d 381

Martin WHITEMAN; Lisa Whiteman, Plaintiffs–Appellants,

v.CHESAPEAKE APPALACHIA, L.L.C., Defendant–Appellee.

No. 12–1790.

United States Court of Appeals,Fourth Circuit.

Argued: March 21, 2013.

Decided: Sept. 4, 2013.

ARGUED:Joseph Mark Lovett, Appalachian Mountain Advocates, Lewisburg, West Virginia, for Appellants. Timothy Minor Miller, Robinson & McElwee, PLLC, Charleston, West Virginia, for Appellee. ON BRIEF:Isak J. Howell, Law Office of Isak Howell, Lewisburg, West Virginia, for Appellants. Joseph K. Merical, Robinson & McElwee, PLLC, Charleston, West Virginia, for Appellee.

Before TRAXLER, Chief Judge, SHEDD, Circuit Judge, and DAVID A. FABER, Senior United States District Judge for the Southern District of West Virginia, sitting by designation.

Affirmed by published opinion. Senior Judge FABER wrote the opinion, in which Chief Judge TRAXLER and Judge SHEDD joined.

FABER, Senior District Judge:

The plaintiffs below, Martin and Lisa Whiteman (Whitemans), appeal from a final order of the United States District Court for the Northern District of West Virginia that granted summary judgment to the defendant, Chesapeake Appalachia, L.L.C. (Chesapeake), upon the Whitemans' claim for common law trespass. We find no error in the district court's decision and affirm for the reasons that follow.

I.

A.

The Whitemans own the surface rights to approximately 101 acres in Wetzel County, West Virginia, pursuant to a general warranty deed dated March 2, 1992. See JA at 93–94. Chesapeake owns lease rights to minerals beneath the Whitemans' surface property. See JA at 608. The property rights of both the Whitemans and Chesapeake ultimately flow from two severance deeds that originally split the surface and mineral estates of the 101 acres relevant here. The two severance deeds effected severance by granting the respective surface estates to grantees while “reserving and excepting” the mineral estate to the grantor. Specifically, both deeds contain the following language:

THERE IS RESERVED AND EXCEPTED unto the said Ellis O. Miller, the grantor, all of his interest in and to the oil and gas within and underlying the above-described parcels as well as all of the coal not heretofore conveyed, and all other minerals within and underlying the above described property, with the necessary rights and privileges appertaining thereto.

JA at 95, 99. Notably, the severance deeds neither reserve any specific surface rights to the mineral estate owner nor mention permanent waste disposal resulting from mineral extraction.

Today, the Whitemans live on and farm their 101 acres, primarily raising sheep and, relatedly, using part of the land to produce hay for the sheep. See JA at 22–23. Conversely, Chesapeake operates three natural gas wells on approximately ten acres of the Whitemans' property that was formerly used for hay production. JA at 22, 417. The Whitemans can no longer produce hay on those ten acres because Chesapeake's well operations and permanent drill waste disposal on the surface have rendered that portion of the Whitemans' property unusable for any suitable purpose.¹ JA at 258, 264, 420.

Nevertheless, for each of their gas wells located on the Whitemans' surface property, Chesapeake obtained valid well work and pit waste discharge permits from the West Virginia Department of Environmental Protection (WVDEP). JA at 227, 237, 241, 608. As part of the permitting process, Chesapeake gave the Whitemans notice of Chesapeake's intent to drill and dispose of drill waste in on-site waste pits. See JA at 230, 244, 246. Chesapeake attached its WVDEP application for well work and pit waste discharge permits to the notice it gave the Whitemans. JA at 232, 247. The permit application included spaces for Chesapeake to describe anticipated pit waste as well as proposed disposal methods. Id. On each permit application, Chesapeake listed anticipated pit waste to include drill water, frac blow back, and various formation cuttings. ²Id. Chesapeake also noted that it intended to dispose of pit waste by “land application,” or in the case of the pits located on the Whitemans' property, by treating water, applying waste to the land, and burying cuttings. Id.

After the permitting process was complete, Chesapeake began drilling. While drilling on the Whitemans' property, Chesapeake used a water-based drilling fluid, known in the oil and gas industry as “mud,” ³ to remove drill cuttings during the drilling process.⁴See JA at 142, 592. Once removed from the wells' boreholes, Chesapeake disposed of the drill cuttings in accord with the waste disposal method listed on their well work and pit waste discharge permit applications, namely by depositing the drill cuttings into open pits located near the wellheads on the Whitemans' surface property.⁵See JA at 608. At the conclusion of the drilling process, Chesapeake removed the plastic liners from the waste pits, mixed the drill waste with clean dirt, and compacted and covered the pits. Sediment control barriers surround the pits. See JA at 235.

The pit or “open” system of drill waste disposal was the common method employed in West Virginia at the time the wells were drilled on the Whitemans' property, although alternative disposal methods were used in other areas of the country. See JA at 119–20, 322, 703. One such alternative is a “closed-loop” system. The closed-loop system of drill waste disposal is a relatively recent development in the oil and gas industry. Under the closed-loop system, drill cuttings and other waste are removed from the well site and placed in off-site landfills. See JA at 116. Closed-loop systems have some advantages over on-site disposal. They better preserve expensive drilling mud for future drilling operations, eliminate the possibility of a pit failure, and create a smaller drilling operation footprint at a well site. See JA at 116, 120, 572. Nevertheless, closed-loop systems are expensive and often cost $100,000 or more per well than open systems, depending on the well location. See JA at 120, 130. Chesapeake began using the closed-loop system in some of its Oklahoma and Texas operations in 2004 and 2005, and, in December 2009, began preparing to implement the system in West Virginia. See JA at 112, 119.

The Whitemans have admitted that, at present, their monetary damages are “trivial” and “not real significant.” JA at 628. Indeed, the only expert testimony offered in the case regarding the value of the Whitemans' land opined that Chesapeake's drilling operations caused no diminution in value thereto. See JA at 267. Rather, the core of the Whitemans' prayer for relief is vindication of their right to exclude others from their land and affirmative injunctive relief to remove the waste pits in order to alleviate the Whitemans' fears of possible future liability that might stem from the waste pits. See JA at 421, 628, 629.

B.

This civil action was filed originally in the Circuit Court of Wetzel County, West Virginia, and removed to federal district court on the basis of diversity of citizenship under 28 U.S.C. § 1332(a). The Whitemans are citizens and residents of West Virginia; Chesapeake is an Oklahoma corporation with its principal place of business in Oklahoma. JA at 21. The amount in controversy exceeds $75,000.⁶

In their complaint, the Whitemans asked for an injunction and damages based on claims arising from the drilling and operation by Chesapeake of three natural gas wells on surface property owned by the Whitemans. JA at 33. The complaint alleged claims under West Virginia common law only, namely nuisance, trespass, negligence, strict liability, recklessness or gross negligence, intentional infliction of emotional distress, and negligent infliction of emotional distress. JA at 25–32. Cross motions for summary judgment were filed. JA at 90, 211. By order entered on June 7, 2012, the district court denied the Whitemans' motion and granted Chesapeake's motion on the trespass claim only. JA at 760, 765. Thereafter, with the court's approval, the Whitemans voluntarily dismissed all their other claims. JA at 770–71. A final order was entered on June 11, 2012, from which the Whitemans took a timely appeal to this court pursuant to 28 U.S.C. § 1291. JA at 773. The only issue on appeal is whether the district court erred when it granted summary judgment in favor of Chesapeake upon the Whitemans' claim for common law trespass.

II.

A.

In reviewing a grant of summary judgment, we apply de novo the same standard that the district court was required to apply for granting the motion for summary judgment. Ray Commc'ns, Inc. v. Clear Channel Commc'ns, Inc., 673 F.3d 294, 297 n. 1 (4th Cir.2012). Specifically, summary judgment is warranted if, from the totality of the evidence, including pleadings, depositions, answers to interrogatories, and affidavits, the court believes no genuine issue of material fact exists for trial and the moving party is entitled to judgment as a matter of law. SeeRule 56(c) of the Federal Rules of Civil Procedure; Sylvia Dev. Corp. v. Calvert Cnty., Md., 48 F.3d 810, 817 (4th Cir.1995). When an appeal arises from a grant of summary judgment, the reviewing court must view the evidence, and draw all reasonable inferences therefrom, in the light most favorable to the non-moving party. See Laing v. Fed. Exp. Corp., 703 F.3d 713, 714 (4th Cir.2013).⁷

B.

The substantive legal issue before the court on appeal is whether Chesapeake's permanent disposal of drill waste upon the Whitemans' surface property is “reasonably necessary” for the extraction of minerals.⁸ Here, the only relevant substantive law stems from West Virginia common law. Accordingly, we look to that state's law for a controlling principle. See Erie R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938).

1.

As noted above, the district court below granted summary judgment in favor of Chesapeake as to the Whitemans' common law trespass claim only.⁹ In West Virginia,...