Briggs v. Sw. Energy Prod. Co.

• Decision Date: 22 January 2020
• Docket Number: No. 63 MAP 2018,J-48-2019,63 MAP 2018
• Parties: ADAM BRIGGS, PAULA BRIGGS, HIS WIFE, JOSHUA BRIGGS AND SARAH H. BRIGGS, Appellees v. SOUTHWESTERN ENERGY PRODUCTION COMPANY, Appellant
• Court: Pennsylvania Supreme Court

ADAM BRIGGS, PAULA BRIGGS, HIS WIFE,JOSHUA BRIGGS AND SARAH H. BRIGGS, Appellees v. SOUTHWESTERN ENERGY PRODUCTION COMPANY, Appellant

J-48-2019

No. 63 MAP 2018

SUPREME COURT OF PENNSYLVANIA MIDDLE DISTRICT

ARGUED: September 12, 2019

January 22, 2020

SAYLOR, C.J., BAER, TODD, DONOHUE, DOUGHERTY, WECHT, MUNDY, JJ.

Appeal from the Order of the Superior Court dated 4/2/18, reconsideration denied on 6/8/18 at No. 1351 MDA 2017 reversing the order of the Susquehanna Court of Common Pleas, Civil Division, dated 8/8/17 at No. 2015-01253

OPINION

CHIEF JUSTICE SAYLOR

In this appeal by allowance, we consider whether the rule of capture immunizes an energy developer from liability in trespass, where the developer uses hydraulic fracturing on the property it owns or leases, and such activities allow it to obtain oil or gas that migrates from beneath the surface of another person's land.

I. Background

A. The rule of capture

Oil and gas are minerals, and while in place they are considered part of the land. See Hamilton v. Foster, 272 Pa. 95, 102, 116 A. 50, 52 (1922). They differ from coal and other substances with a fixed situs in that they are fugacious in nature - meaning they tend to seep or flow across property lines beneath the surface of the earth. See Huntley & Huntley, Inc. v. Borough Council of Oakmont, 600 Pa. 207, 228, 964 A.2d 855, 867 (2009). Such underground movement is known as "drainage." See Hague v. Wheeler, 157 Pa. 324, 337, 27 A. 714, 718 (1893). Drainage stems from a physical property of fluids in that they naturally move across a pressure gradient from high to low pressure. See Coastal Oil & Gas Corp. v. Garza Energy Trust, 268 S.W.3d 1, 42 (Tex. 2008) (Johnson, J., concurring and dissenting) (recognizing that hydrocarbons flow from high pressure to low pressure and do not respect property lines). Indeed, the extraction of oil or gas by drilling is based, at least in part, on creating a low-pressure pathway from the mineral's subterranean location to the earth's surface. See Wettengel v. Gormley, 160 Pa. 559, 567, 28 A. 934, 935 (1894).

Oil and gas have thus been described as having a "fugitive and wandering existence," Brown v. Vandergrift, 80 Pa. 142, 147 (Pa. 1875), and have been compared to wild animals which move about from one property to another. See Westmoreland & Cambria Nat. Gas Co. v. DeWitt, 130 Pa. 235, 249, 18 A. 724, 725 (1889) ("In common with animals, and unlike other minerals, [oil, gas, and water] have the power and the tendency to escape without the volition of the owner."). Accordingly, such minerals are subject to the rule of capture, which is

[a] fundamental principle of oil-and-gas law holding that there is no liability for drainage of oil and gas from under the lands of another so long as there has been no trespass . . ..

BLACK'S LAW DICTIONARY 1358 (8th ed. 2004)); accord Brown v. Spilman, 155 U.S. 665, 669-70, 15 S. Ct. 245, 247 (1895).¹ A corollary to this rule is that an aggrieved propertyowner's remedy for the loss, through drainage, of subsurface oil or gas has traditionally been to offset the effects of the developer's well by drilling his or her own well, often termed an "offset well." See Barnard v. Monongahela Gas Co., 216 Pa. 362, 365, 65 A. 801, 803 (1907) ("What then can the neighbor do? Nothing; only go and do likewise.").

The reference to "the lands of another" in the above quote does not suggest a developer may invade the subsurface area of a neighboring property by drilling at an angle rather than vertically (referred to as slant drilling or slant wells),² or by drilling horizontally beneath the surface.³ This is because the title holder of a parcel of land generally owns everything directly beneath the surface. See Chartiers Block Coal Co. v. Mellon, 152 Pa. 286, 295, 25 A. 597, 598 (1893); Jones v. Wagner, 425 Pa. Super. 102, 107, 624 A.2d 166, 168 (1993) (quoting Gostina v. Ryland, 199 P. 298, 300 (Wash. 1921)). Rather, and as suggested by the "no trespass" predicate, it refers to the potential for oil and gas to migrate from the plaintiff's property to the developer's land when extracted from a common pool or reservoir spanning both parcels. See Barnard, 216 Pa. at 365-66, 65 A. at 803; Minard Run Oil Co. v. United States Forest Serv., 670 F.3d 236, 256 (3d Cir. 2011) ("Under Pennsylvania law, oil and gas resources are subject to the 'rule of capture,' which permits an owner to extract oil and gas even when extraction depletes a single oil or gas reservoir lying beneath adjoining lands."); Jones v. Forest Oil Co., 194 Pa. 379, 383, 44 A. 1074, 1075 (1900) (recognizing that oil andgas belong to the surface property owner while they are in his land, but when they migrate to his neighbor's land they belong to his neighbor).

Finally, the rule of capture applies even where devices such as pumps are used to bring the mineral to the surface and thereby reduce the production of neighboring wells. See Jones, 194 Pa. at 384-85, 44 A. at 1075.

B. Hydraulic fracturing

One of the central questions in this matter involves how these principles apply where hydraulic fracturing is used to extract oil or gas from subsurface geological formations. Drillers have enhanced the output of oil and gas wells by fracturing the geological formations for over a century. Initially they used explosives. See Roberts v. Dickey, 20 F. Cas. 880 (W.D. Pa. 1871) (gunpowder explosives); Kepple v. Pa. Torpedo Co., 7 Pa. Super. 620 (1898) (nitroglycerine explosives). Hydraulic fracturing was developed in the 1940s, see U.S. Steel Corp. v. Hoge, 503 Pa. 140, 144 n.1, 468 A.2d 1380, 1382 n.1 (1983), and has been used in Pennsylvania since 1954. See N.Y. Nat. Gas Corp. v. Swan-Finch Gas Dev. Corp., 173 F. Supp. 184, 198 (W.D. Pa. 1959). Although it would be impractical to set forth a comprehensive description of the technique in the context of the present controversy, there are certain material aspects which are not in dispute. According to the federal government, hydraulic fracturing is

used in "unconventional" gas production. "Unconventional" reservoirs can cost-effectively produce gas only by using a special stimulation technique, like hydraulic fracturing . . .. This is often because the gas is highly dispersed in the rock, rather than occurring in a concentrated underground location.

United States Environmental Protection Agency (the "EPA"), The Process of Unconventional Natural Gas Production, https://www.epa.gov/uog/process-unconventional-natural-gas-production (viewed Oct. 22, 2019).⁴ In terms of how the technique works, the EPA continues:

Fractures are created by pumping large quantities of fluids at high pressure down a wellbore and into the target rock formation. Hydraulic fracturing fluid commonly consists of water, proppant and chemical additives that open and enlarge fractures within the rock formation. These fractures can extend several hundred feet away from the wellbore. The proppants - sand, ceramic pellets or other small incompressible particles - hold open the newly created fractures.

Id.

After injection, fluid is withdrawn from the well while leaving the proppants in place to hold the fissures open. This enhances the drainage of oil or gas into the wellbore where it can be captured. See id.; Trent v. Energy Dev. Corp., 902 F.2d 1143, 1147 n.8 (4th Cir. 1990); Coastal Oil, 268 S.W.3d at 6-7. See generally Jason B. Binimow, Liability for Trespass or Nuisance in Hydraulic Fracturing, Hydro-fracturing, or Hydro-fracking, 41 A.L.R. 7th Art. 1, §2 (2019).

C. Factual and procedural history of this case

(i) Introduction

This appeal comes to us in a somewhat unusual posture. The parties presently favor essentially the same rule of law: they both, in substance, argue that the traditional rule of capture should apply, subject to the common-law standard for trespass of real property based on physical intrusion onto another's land. See RESTATEMENT (SECOND) OF TORTS §158 & cmt. i (1965) (indicating liability follows from the defendant's entry ontothe plaintiff's property, and noting this includes throwing, propelling, or placing a thing on the land or above or beneath its surface).⁵ Each party, moreover, depicts the other as erroneously suggesting that an exception to this framework should pertain where hydraulic fracturing is used to obtain oil or natural gas. In particular, the plaintiffs suggest that Southwestern wishes to convert the rule of capture into a precept whereby energy developers may physically invade the property of others to capture natural gas so long as they are using hydraulic fracturing. See, e.g., Brief for Appellees at 6; see also id. at 26 (arguing that Southwestern seeks a "license to plunder" others' resources (internal quotation marks and citation omitted)). For its part, Southwestern portrays the plaintiffs and the Superior Court decision from which it appeals as positing that the rule of capture simply does not apply when hydraulic fracturing is used for energy development on one's own land. See, e.g., Brief for Appellant at 15 (arguing that "there is no basis to create an exception to the rule of capture" where hydraulic fracturing is used).

To maintain these positions, the parties proceed from a different understanding of the relevant factual and procedural history. We therefore review that history in some detail, as it will become relevant in determining the nature of the issues before us and how the case should proceed upon resolution of those issues. In so doing, we will attend to whether the plaintiffs have alleged (and can potentially demonstrate) a claim that Southwestern physically intruded into their land through the use of hydraulic fracturing.

(ii) Undisputed facts

Adam, Paula, Joshua, and Sarah Briggs ("Plaintiffs") own a parcel of real estate consisting of approximately eleven acres in Harford Township, Susquehanna County. During all relevant times, Plaintiffs have not leased their property to any entity for natural gas production. Plaintiffs' property is...