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 the adjoining land of a different owner.
On January 22, 2020, the Pennsylvania Supreme Court issued its ruling in the matter of Briggs v. Southwestern Energy Production Company holding that the “rule of capture” applies to development of oil and gas by hydraulic fracturing.
The Briggs plaintiffs, who did not lease their land for oil and gas development, filed suit asserting that Southwestern’s extraction of oil and gas on neighboring land by hydraulic fracturing; boosting the natural gas extraction from the Marcellus Shale formation and thus resulting in the drainage of oil and gas from the Briggs property, constituted a trespass and conversion. Overturning the opinion of the Superior Court and remanding the matter back to the Superior Court, the Supreme Court held that:
The mere act of drilling interferes with nature and stimulates the flow of the minerals toward artificially created low pressure areas, most notably, the wellbore. This Court has held that the rule of capture applies although the driller uses further artificial means, such as a pump, to enhance production from a source common to it and the plaintiff – so long as no physical invasion of the plaintiff’s land occurs. [citations omitted]. There is no reason why this precept should apply any differently to hydraulic fracturing conducted solely within the driller’s property.
The “[r]ule of capture remains extant in Pennsylvania, and developers who use hydraulic fracturing may rely on pressure differentials to drain oil and gas from under another’s property, at least in the absence of a physical invasion. The Superior Court panel erred to the extent it assumed that either (a) the use of hydraulic fracturing alters this rule, or (b) where hydraulic fracturing is utilized, such physical invasion is a necessary precondition in all cases for drainage to occur from underneath another property. More broadly, insofar as the panel’s decision may be construed to suggest that a natural-versus-artificially-induced-flow litmus should be employed to determine whether the rule of capture applies in a given situation, that standard rests on a false distinction and is disapproved.
Opinion, pp. 22.
Discussing the plaintiffs’ claims in the Complaint, the Court opined that allegations of trespass by invasion of property must aver something more than mere drainage of minerals from the subject property, which by itself implicates the rule of capture. A plaintiff must use at least some words alleging physical intrusion and not merely by inference based on generalized characteristics of a particular drilling method because Pennsylvania is a fact pleading state. Opinion, p. 28.
If you have questions about this ruling or other Litigation concerns, contact Alisa N. Carr. Alisa is a Partner in Leech Tishman’s Litigation, Real Estate and Energy Practice Groups. Alisa is based in the Pittsburgh office and can be reached at 412.261.1600 or firstname.lastname@example.org.
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