Reed Smith Client Alerts

The Pennsylvania Supreme Court issued a favorable decision for the oil and gas industry yesterday in Briggs v. Southwestern Energy Production Co. Although the ultimate resolution of the case remains to be seen, the Pennsylvania Supreme Court reversed the Superior Court’s previous opinion and held that the use of hydraulic fracturing, without more, does not alter the rule of capture and that physical invasion cannot be assumed simply because hydraulic fracturing is employed and drainage occurs.

Authors: Lucas Liben Thomas J. Galligan Nicole A. Jensen

Landowners Adam, Paula, Joshua, and Sarah Briggs (Plaintiffs) brought claims of trespass and conversion against Southwestern Energy Production Company (Southwestern) for allegedly extracting gas from their 11-acre property through drilling and hydraulically fracturing a well on an adjacent property. The trial court granted summary judgment in favor of Southwestern, citing the rule of capture, recognized in Pennsylvania and the majority of oil and gas producing jurisdictions to permit an owner to extract oil and gas even when extraction depletes a single oil or gas reservoir lying beneath adjoining lands. Upon review, a two-judge panel of the Superior Court reversed the trial court in a published decision. The panel held 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.” The panel noted the distinction between traditional oil reservoirs and gas located in a shale formation, which it characterized as “non-migratory.” The court noted, however, that the record did not indicate whether Southwestern’s operations had resulted in a subsurface intrusion into Plaintiffs’ property. Regardless, the panel found that Plaintiffs’ “allegations” were sufficient to preclude summary judgment by “rais[ing] an issue as to whether there has been a trespass.”

The single issue for the Supreme Court’s review, as framed by Southwestern, was whether “the rule of capture appl[ies] to oil and gas produced from wells that were completed using hydraulic fracturing and preclude[s] trespass liability for allegedly draining oil or gas from under nearby property, where the well is drilled solely on and beneath the driller’s own property and the hydraulic fracturing fluids are injected solely on or beneath the driller’s own property.” The Supreme Court highlighted that Plaintiffs asserted that Southwestern had physically intruded upon their subsurface property for the first time in their brief to the Supreme Court, and that Plaintiffs made no such allegation in their pleadings, brief to the trial court, or brief to the Superior Court. Further, the Supreme Court explained that Plaintiffs’ position was based on the assumption that it is physically impossible to cause drainage of oil and gas from a neighboring property through hydraulic fracturing without a physical intrusion onto that property. Conversely, Southwestern denied it injected any physical substance into Plaintiffs’ property and argued that no one can determine the direction and extent of underground fissures created by hydraulic fracturing miles beneath the surface.