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Texas Railroad Commission Jurisdiction Not Exclusive in Oilfield Contamination Case, State Supreme Court Says

The Railroad Commission of Texas (RRC) does not have exclusive or primary jurisdiction in cases where environmental contamination is alleged, the Texas Supreme Court said late last month.

The decision comes from a years-long case involving Forest Oil Corp. (a predecessor company to Sabine Oil & Gas Corp.) and rancher James McAllen and other entities. McAllen controls the more than 27,000-acre McAllen Ranch; the city of McAllen, TX, is named after his great-grandfather. The case is Forest Oil Corp. v. El Rucio Land and Cattle Co Inc. et al [No. 14-0979].

McAllen and Forest resolved a 1990s dispute over royalties and lease production with “settlement” and “surface” agreements. The surface agreement precluded Forest from bringing hazardous materials onto McAllen property or disposing of the materials on the property. It also included an arbitration provision.

In 2004 McAllen learned that Forest had contaminated his property. Further, used oilfield tubing donated to McAllen by Forest and used to construct a rhinoceros pen was contaminated with naturally occurring radioactive material. When McAllen contracted sarcoma in his ankle and required an amputation, he blamed Forest and sued, alleging environmental contamination, improper disposal of hazardous materials and “maliciously donating” the contaminated tubing.

An arbitration panel awarded more than $21 million in damages and attorneys’ fees, $500,000 in exemplary damages and $500,000 to McAllen for personal injury.

Forest contended that the RRC should have had first crack at the case as it has exclusive or primary jurisdiction over the claims made by Forest. The commission had referred Forest to its voluntary cleanup program but had not approved the company’s final remediation plan.

Hearing the case on petition for review from the Court of Appeals for the First District of Texas, the Texas Supreme Court sided with McAllen and upheld the award.

“The doctrine of primary jurisdiction does not apply to claims that are ‘inherently judicial in nature,’ such as trespass, one of McAllen’s Claims,” the state’s high court said. “McAllen also asserted claims for negligence, negligence per se, intentional battery, and breach of contract, all inherently judicial in nature.”

Further, the court said, simply because RRC might have the jurisdiction to determine some facts of the case, that is not enough to “oust the courts of jurisdiction.”

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