The U.S. Court of Appeals for the Eighth circuit issued an opinion on May 22nd which illustrates the difficulty for an oil and gas producer to win a subsurface claim without having to go to trial, even when the plaintiff has relatively weak facts to support its claim.
The case involved the disposal of fracking wastes from producing shale oil in the Eastern District of Arkansas. Because the plaintiffs’ property contained an abandoned oil and gas well, the company had attempted to lease the property to dispose of fracking waste from nearby operations. Negotiations failed to result in a disposal lease. The company then leased 3.29 acres on an adjoining property on which it drilled a well only 180 feet from the plaintiffs’ property. The well was drilled into a porous geologic horizon thousands of feet below the surface which extended beneath the plaintiffs’ land. The company then pumped 7.6 million barrels of fracking waste into the well. When sued for subsurface trespass, the company conceded that its leased property could not contain that volume of material. It opposed the plaintiffs’ allegation only on the grounds that certain geologic features may have prevented the movement from the well onto the property. Discovery was limited and both sides relied extensively on experts’ opinions. Nevertheless, the trial court granted the company’s motion for summary judgment.
The Court of Appeals reversed on the basis of the burden of proof, which the District Court wrongly assigned to the plaintiffs. The Court of Appeals found that the plaintiffs had presented sufficient evidence to support a reasonable inference of the waste migrating onto their property. “This reasonable inference creates a genuine issue of material fact, precluding summary judgment.” In short, the company could be right that the geologic conditions prevented the migration, but this was a factual question that the plaintiffs were permitted to take to a jury.
The decision is not remarkable, but it is a cautionary tale about how difficult it is for a company defending a subsurface trespass claim to prevail without having to go to trial.
The case is Stroud, et al v. Southwestern Energy Co., U.S. Court of Appeals for the Eighth Circuit, No. 15-3458 (May 22, 2017).
This article was authored by Blair M. Gardner, Jackson Kelly, PLLC.