By Peggy Mackenzie
A federal judge has ruled that “fracking” into neighboring tracts is a trespass. Property owners with their mineral rights intact should know that a driller who, without a proper lease, “fracks” into their mineral tract from a well bore on a neighboring mineral tract is trespassing, and that driller might be made to pay for the total value of the gas obtained that way, according to the West Virginia Surface Owners’ Rights Organization (WV SORO).
The ruling was made by a U.S. District Court Judge John Preston Bailey in the Northern District of West Virginia in Apr. 10, 2013, and therefore is not precedent that other courts would have to follow, as it would be if it were a ruling of a state or federal appeals court. However, there is no appeals court ruling that would bind a West Virginia court to a different ruling, and having a U.S. District Court judge make the ruling will be persuasive to any other judge in the state.
The rule of capture applies if the mineral owner’s gas migrates to a well bore on a neighboring tract through pre-existing natural porosity and permeability, and the driller next door does not have to pay for that. However, Judge Bailey ruled it is unlawful for a driller to use a horizontal well bore in one mineral tract to inject hydraulic fracturing fluid into, and so take gas from, a neighboring tract without an appropriate lease to the neighboring tract.
Bailey said, “[T]his Court finds, and believes that the West Virginia Supreme Court of Appeals would find, that hydraulic fracturing under the land of a neighboring property without that party’s consent is not protected by the `rule of capture,’ but rather constitutes an actionable trespass.”
In the case before the judge, Chesapeake Appalachia, LLC and Statoil USA Onshore Properties, Inc. had a lease for the tract owned by plaintiff Marion Stone, where the well bore was going to be located, plus another old lease for Stone’s neighboring tract. However the lease for the neighboring tract did not have a pooling provision that would have allowed the tracts to be developed together by horizontal drilling and hydraulic fracturing. Chesapeake and Stone did not come to an agreement to amend the lease to add in a pooling clause.
Chesapeake drilled anyhow and fractured a horizontal well bore that ran only “tens of feet” away from the boundary of Stone’s neighboring tract. Chesapeake claimed that the “rule of capture” made it legal for them to take the gas that came to their well bore as a result of “fracking” into the neighboring tract without paying royalty for it, relying on a Texas Supreme Court decision Coastal v Garza. Judge Bailey refused to dismiss the case, stating that Chesapeake had trespassed and cited a dissent filed by several of the Texas Supreme Court justices in the Coastal case.
According to Bailey’s ruling, “The Garza [majority] opinion gives oil and gas operators a blank check to steal from the small landowner. Under such a rule, the companies may tell a small landowner that either they sign a lease on the company’s terms or the company will just hydraulically fracture under the property and take the oil and gas without compensation. In the alternative, a company may just take the gas without even contacting a small landowner. …[T]his Court simply cannot believe that our West Virginia Supreme Court would permit such a result.”
The rule of capture, the judge reasoned, was developed as a rule of necessity near the turn of the 20th century as a rule of necessity where gas inevitably migrates on its own from neighboring tracts to the well bore and was difficult to measure. It does not apply where the driller trespassed onto neighboring property using artificial means to stimulate the flow of gas from neighboring tracts.
“We have been saying all along that this is what the law is, but there were no court decisions in West Virginia stating that ‘fracking’ would be a trespass, just that poorly reasoned four to three majority opinion against us from the Texas Supreme Court,” said David McMahon, a lawyer and co-founder of WV-SORO.
“It is difficult getting good case decisions to rein in the industry’s abusive practices,” said McMahon. “When we have a good decision in our favor, or even just a good case pending, the industry offers enough money to get the plaintiffs to settle. When that happens, the industry can still get away with saying that the law is what the industry wants it to be, and use that to take advantage of citizens they deal with.
People need to talk to a knowledgeable lawyer in any dealings with industry. People pay for homeowner’s insurance and car insurance in case of a fire or wreck. They should think of paying a lawyer as insurance to protect themselves from industry abuses – at least until we get some favorable decisions from our appellate courts.”