February 6, 2015 - Texas Supreme Court Avoids Ruling On Subsurface Trespass Claims
On February 6, 2015, the Texas Supreme Court issued its decision in Environmental Processing Systems, L.C. v. FPL Farming Ltd. The case involved a claim of trespass damages based on subsurface migration from a wastewater injection well. When the Supreme Court first heard the case in 2011, it rejected the well operator’s argument that a valid injection permit provided blanket immunity from trespass liability and remanded the case to the trial court. On remand, the jury found that no trespass occurred, but the court of appeals reversed the jury’s verdict.
In today’s decision, the Court avoided the trespass issue altogether. Instead, the Court decided an ancillary issue regarding the burden of proving “consent” in a trespass cause of action. The trial court’s instructions to the jury stated that to recover damages for trespass, the plaintiff had to show that it did not consent to the entry of the defendant’s injections beneath its property. The court of appeals held that this jury instruction was erroneous because consent should be an affirmative defense, which the defendant must prove to defeat the plaintiff’s claim. The Texas Supreme Court reversed the court of appeals on this point, holding that the burden of proving lack of consent belongs to the plaintiff. In addition, the Court held that the trial court properly denied the plaintiff’s motion for a directed verdict (an order from the presiding judge to the jury to return a particular verdict) on the issue of consent. Since the jury found that no trespass occurred based on the facts of the case, the Court did not need to reach the main question in the appeal—whether deep subsurface wastewater migration is an actionable trespass under Texas law.
The oil and gas industry, working interest owners, and other stakeholders have closely monitored this litigation. Many hoped that the Court would resolve the subsurface trespass issue. In prior decisions, the Court has held that well injections performed during enhanced oil recovery activities do not give rise to trespass claims, but recent decisions have raised many questions with respect to the viability of trespass claims in the context of hydraulic fracturing and injection wells. Today’s decision does not resolve those questions and will allow other lawsuits against wastewater disposal owners to proceed. Read the opinion here.
January 8, 2015 - Environmental Groups Seek Additional Disclosure of Emissions from Oil and Gas Industry
On January 7, 2015, several environmental groups filed suit in the District of Columbia federal district court against the U.S. Environmental Protection Agency (“EPA”) seeking a response to plaintiffs’ October 2012 petition to EPA to bring the oil and gas industry within the scope of the Toxic Release Inventory (“TRI”) reporting requirements under the Emergency Planning and Community Right-to-Know Act (“EPCRA”). The TRI provisions of EPCRA require covered facilities to report, on an annual basis, releases into the environment of specifically-listed chemicals. Thus, such requirements may overlap to some extent with state requirements for operators to disclose the chemicals used in their hydraulic fracturing fluids on databases such as FracFocus, as well as other voluntary disclosures made by many operators and service companies.
In order to fall within the scope of the TRI reporting obligation, a facility must have 10 or more full-time employees, manufacture, process, or use a listed chemical, and fall within one of the specified Standard Industrial Classification Codes (“SIC”) codes. Although EPCRA did not include the SIC codes associated with the oil and gas industry in those covered by the TRI obligations, EPA has the authority to add additional SIC codes to the list of those covered by the TRI obligations. Plaintiffs’ 2012 petition, as well as their more recent complaint, requests that EPA add the SIC codes associated with the oil and gas industry to the list of those covered by the TRI obligations. While plaintiffs propose that EPA add all oil and gas industry facilities within the scope of the TRI obligations, they specifically cite the expansion of hydraulic fracturing and horizontal drilling activity as the source of the dramatic increase in oil and gas extraction facilities over the past decade. However, even if plaintiffs’ efforts were successful, it remains to be seen how EPCRA’s definition of a “facility,” defined as “all buildings, equipment, structures, and other stationary items which are located on a single site or on contiguous or adjacent sites and which are owned or operated by the same person,” would be applied to hydraulic fracturing operations, which are typically temporary in nature and involve wells, pads, compressors, and other equipment disbursed over a large area. Read the environmental groups’ complaint here.