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The Texas Supreme Court recently declined to reach a question of significant interest to energy companies and landowners—whether deep subsurface wastewater migration can give rise to trespass liability when the wastewater crosses lease lines. See Envt’l Processing Sys., L.C. v. FPL Farming Ltd., No. 12-0905 (Tex. Feb. 6, 2015). Instead, in reversing the court of appeals and reinstating the trial court’s take-nothing judgment, the Court ruled narrowly that the jury instructions appropriately placed the burden of proving lack of consent on the plaintiff. Given that the jury found no trespass in a correctly-framed question, the Court did not need to reach the issue of whether trespass liability should exist at all. That issue, which had attracted a flood of amicus briefs from energy industry participants, will continue to play out in the lower courts for the time being.

Background of the Case

FPL Farming, Ltd., a Liberty County landowner, was in the rice farming business. FPL did not own mineral rights to its tract, but did have groundwater rights. EPS, an adjoining landowner, operated two wastewater injection wells on its land. The wastewater was considered “non-hazardous,” but contained organic compounds such as acetone and naphthalene. The wells injected water about 7,000 feet below the surface into the Frio formation, a saltwater aquifer, well below the fresh water horizons.

In 2006, FPL sued EPS in Liberty County, asserting trespass and other claims. The jury returned a defense verdict, and FPL appealed. In 2009, the Beaumont Court of Appeals ruled as a threshold matter that no trespass occurred because EPS had obtained a state permit to operate its wastewater wells. In 2011, the Texas Supreme Court, concluding that a “permit is not a get out of tort free card,” reversed this holding and remanded the case back to the court of appeals without deciding whether subsurface wastewater migration can constitute a trespass. See FPL Farming Ltd. v. Envt’l Processing Sys., L.C., 351 S.W.3d 306 (2011) (“FPL I”).

On remand, the Beaumont Court held that FPL had a property interest in subsurface brine and that FPL could sue for trespass to protect that property interest. The court further held that the jury charge had improperly shifted the burden of proving lack of consent to the plaintiff, FPL, and ordered a new trial.

The Texas Supreme Court’s Decision

EPS appealed, and on February 6, 2015, the Texas Supreme Court reversed the Beaumont Court again. The Court held that because a plaintiff must prove lack of consent for trespass, the jury charge had notimproperly shifted the burden. The Court reasoned that despite some conflicting language in the courts of appeals, the well-established definition of trespass has always required plaintiffs to prove that entry was unauthorized. The Court rejected FPL’s argument that a trespass plaintiff would have difficulty proving a negative, reasoning that a plaintiff is in the best position to prove that it did not authorize the entry.

Because the jury’s finding of no trespass liability was dispositive, the Court did not need to reach the subsurface trespass issue raised by EPS and numerous industry amici. The Court explicitly stated that it was neither approving nor disapproving of the Beaumont Court’s analysis of subsurface trespass.

Questions for Another Day

In its landmark ruling in Coastal Oil & Gas Corp. v. Garza, 268 S.W.3d 1 (Tex. 2008), the Texas Supreme Court held that the rule of capture precluded damages for drainage by fracturing under a subsurface trespass theory. The FPL litigation raised the hopes of many in the oil and gas industry that the Texas Supreme Court might provide clarification on the issues left open in Garza. Instead, the Court’s decision leaves unaddressed a number of questions related to subsurface trespass, such as:

• Will other courts of appeals or the Texas Supreme Court adopt or reject the Beaumont Court’s analysis in recognizing a trespass claim for deep subsurface wastewater migration?
• Would such trespass claims be limited to injection wells not associated with oil and gas production?
• Would Texas recognize a trespass claim for hydraulic fracturing if other damages besides drainage can be proven? If so, what proof of injury would be required? What if a plaintiff seeks only injunctive relief?
• What is the extent of an owner’s subsurface property rights at various depths?

These issues will continue to play out in the lower courts, and the Texas Supreme Court’s clarification of subsurface trespass apparently will have to wait for another day.

If you have any questions, please feel free to contact one of the attorneys listed below or visit our Oil and Gas Litigation page.

Donald D. Jackson 713.547.2026 [email protected]	Robert (Bob) P. Thibault 713.547.2646 [email protected]	Mark Trachtenberg 713.547.2528 [email protected]
Mike Stewart 713.547.2113 [email protected]	Liz E. Klingensmith 713.547.2592 [email protected]	Thomas E. Kurth 214.651.5621 [email protected]
Pierre Grosdidier, Ph.D. 713.547.2272 [email protected]		Ricky Torlincasi 817.347.6628 [email protected]

 

 

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