Briggs v. Southwestern Energy Production Company

Facts

Oil and gas are minerals, and while in place they are considered part of the land. They are fugacious in nature in that they seep or flow across property lines beneath the surface of the earth (drainage). Drainage naturally occurs across a pressure gradient from high to low pressure. Oil and gas have a 'fugitive and wandering existence' and have been compared to wild animals which move about from one property to another. Such minerals are subject to the rule of capture. There is no liability for drainage of oil and gas from under the lands of another so long as there has been no trespass. An aggrieved property owner's remedy for drainage, of subsurface oil or gas is to drill his or her own well, often termed an 'offset well.' A neighbor developer may not invade the subsurface area of a neighboring property by drilling at an angle rather than vertically or by drilling horizontally beneath the surface. But that developer is free to make changes to his land that create pressure gradients forcing the oil or gas to flow onto his land and be captured. This is true even when an extraction depletes a single oil or gas reservoir lying beneath adjoining lands. 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. Drillers enhance the output of oil and gas wells by fracturing the geological formations. Fractures are created by pumping large quantities of specially formulated fluids at high pressure down a wellbore and into the target rock formation. These fractures can extend several hundred feet away from the wellbore. The components of the fluids left over after drainage hold open the newly created fractures. This enhances the drainage of oil or gas into the wellbore where it can be captured. Ps own eleven acres of real estate. Ps have not leased their property to any entity for natural gas production. Adjacent to Ps' tract is land leased by D for natural gas extraction. D maintains wellbores on the land and has used hydraulic fracturing to boost natural gas extraction. Ps commenced an action against D in trespass. Ps alleged that, through its drilling activities, D had deprived Ps of their possession and use of the natural gas and converted it to D's use. Ps did not expressly allege that Southwestern's activities had caused a physical intrusion into Ps' property. D denied that it had trespassed or converted Ps' natural gas. D alleged that Ps' claims were barred by the rule of capture. D requested declaratory relief confirming its immunity from liability. Ps claimed that D had acted with a purpose to extract natural gas from underneath the surface of Ps' property. D filed a motion for summary judgment to the extent that it had recovered any gas through drainage from that property to the Production Parcel. Ps moved for partial summary judgment asserting that courts should not apply the rule of capture in circumstances where gas has been captured through the use of hydraulic fracturing. Ps claimed that D's hydraulic fracturing activities may have caused a disturbance of the subsurface area of their land in the form of rock fractures propagating horizontally from the wellbore. The court granted D's motion for summary judgment. Ps appealed. A two-judge panel of the Superior Court reversed. The panel expressed that gas located in a shale formation is non-migratory and characterized the issue before it in terms of whether a trespass occurs when the defendant uses hydraulic fracturing in a manner 'which extends into an adjoining landowner's property and results in the withdrawal of natural gas from beneath that property.' The panel indicated that the salient litmus, in determining whether the rule of capture applies in a given situation, is whether the flow of oil or gas occurs naturally or is artificially induced. If natural, the rule of capture applies. If not natural, the rule does not apply. It held that hydraulic fracturing is distinguishable from conventional drilling because it does not involve tapping into reservoirs within which gas flows freely, but instead, extracts gas trapped in a shale formation by using artificial means to stimulate the flow of the resource. It held that employing the rule of capture would permit a developer to locate a well near the leased property's boundary line and withdraw gas from beneath the adjoining property - which in turn would diminish the developer's incentive to negotiate mineral leases with small property owners. It ruled that hydraulic fracturing may give rise to liability in trespass, particularly if subsurface fractures, fluid, or proppant[s] cross boundary lines, resulting in the extraction of natural gas from beneath an adjoining landowner's property. It then stated that Ps' 'allegations' were sufficient to preclude summary judgment by 'raising an issue as to whether there has been a trespass.' It reversed and D appealed.

Issues

Rule of Law

Holding and Decision

Legal Analysis

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