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Pennsylvania Supreme Court Confirms Rule of Capture Applies to Horizontal Development

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The Supreme Court of Pennsylvania issued its much-awaited opinion Wednesday in the case of Briggs v. Southwestern Energy Production Company—a case presenting the question of whether the rule of capture applies to horizontal drilling in Pennsylvania.  The Supreme Court decided in its opinion that the rule of capture applies “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 Court did not, however, address whether the rule of capture insulates a developer from trespass liability where hydraulically induced fractures cross lease lines, finding that the Briggs plaintiffs failed to plead such a physical invasion at the trial court level.

Briggs v. Southwestern Energy began when the Briggs sued Southwestern Energy for trespass and conversion, alleging that Southwestern Energy had extracted gas from underneath their 11-acre parcel of land.  Plaintiffs did not, however, specifically allege in their complaint that Southwestern Energy’s drilling and completion activities had physically intruded the subsurface of their property.   

Southwestern alleged in its responsive pleading that the Briggs’ claims were barred by the rule of capture and sought declaratory relief confirming its immunity from the Briggs’ claim for trespass.  After the parties engaged in discovery, Southwestern moved for summary judgment and argued that it did not physically invade the Briggs’ property, and to the extent that it had recovered any gas through drainage, it was entitled to summary judgment based on the rule of capture.  The trial court granted Southwestern Energy’s motion and denied the Briggs’ counter-motion seeking a declaration that the rule of capture should not apply to gas recovered through hydraulic fracturing.

On appeal, the Superior Court reversed the trial court’s decision, characterizing the issue before it as whether a trespass occurs when the defendant uses hydraulic fracturing in a manner which intrudes into an adjoining landowner’s property and results in the withdrawal of gas.  The Superior Court held that the rule of capture did not apply to hydraulic fracturing in these instances, and that trespass liability may be found.  In doing so, the Superior Court rejected the opposite holding of the Texas Supreme Court in Coastal Oil v. Garza Energy Trust, and instead pinned their holding on the policy rationale for not extending the rule of capture set forth in Justice Johnson’s dissent in Coastal Oil.

The Supreme Court of Pennsylvania vacated the Superior Court’s opinion based primarily on its determination that the issue of trespass liability was never before the Superior Court because the Briggs never alleged in their complaint that Southwestern Energy physically intruded into the subsurface of their tract.  The Supreme Court did, however, disapprove of the Superior Court’s “per se rule foreclosing application of the rule of capture in hydraulic fracturing scenarios,” explaining that it “rests on faulty assumptions.” 

To some, the Supreme Court of Pennsylvania’s decision to avoid the question of whether the rule of capture precludes trespass liability will be a disappointment, particularly since the case progressed through the appeals process as if the Briggs had alleged a sufficient subsurface intrusion to make out a claim for trespass.  However, many believed that the Superior Court’s per se rule that the rule of capture does not apply to hydraulic fracturing would be devastating to oil and gas production in Pennsylvania, and the Supreme Court’s rejection of the Superior Court’s holding in that regard should alleviate this concern to some extent.  Additionally, the Supreme Court’s explanation that plaintiffs in a future case must plead and prove some form of subsurface intrusion to establish trespass should help eliminate frivolous trespass claims given the difficulty and expense plaintiffs will face in proving this through expert testimony.

 

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