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Southwestern Asks Pennsylvania Court to Reconsider Opinion of 'National Significance'

Southwestern Energy Co. has asked the Pennsylvania Superior Court to reconsider an opinion issued earlier this month that could find unconventional oil and gas producers liable for subsurface trespass, arguing that a two-judge panel misunderstood crucial facts and claiming the case is of “national significance.”

The company filed an application this week for reargument en banc before all of the 20 judges. The Marcellus Shale Coalition (MSC), Pennsylvania Independent Oil and Gas Association, American Petroleum Institute and the Pennsylvania Chamber of Business and Industry filed amicus briefs in support.

The partial panel had called into question the rule of capture and how it applies to unconventional development. The rule is considered a fundamental principle in energy law that has been applied to conventional development from shallow reservoirs for more than 100 years, which prevents liability for draining migratory oil and gas from underneath private land.

If the court’s opinion were to stand, Pennsylvania’s unconventional gas producers could find themselves liable for trespass if rock fissures formed through hydraulic fracturing (fracking) techniques deep underground stretched beneath unleased property near drilling units.

“The panel’s decision does not only affect Pennsylvania,” Southwestern wrote in its motion. “Because hydrofracturing is the most economic and commonly used method of producing oil and gas across the country, and because Pennsylvania is the second largest natural gas producing state, this court’s decision unsettles the legal landscape for the entire industry.”

Until this month’s opinion, Pennsylvania courts had not yet considered how the rule of capture should be applied to unconventional drilling and stimulation techniques, nor whether they constituted trespass.

The two judges had leaned heavily on two cases in Texas and West Virginia -- one of which was vacated -- to conclude that “hydraulic fracturing is distinguishable from conventional methods of oil,” essentially finding that unconventional gas, particularly in shale rock, would remain trapped forever if not for human intervention.

The judges reversed and remanded the case to a lower court to determine if Southwestern committed trespass with its shale wells. But it made no distinction between fracking and high-volume fracking, the technique typically used today in unconventional development. The court did not recognize that shale is a source rock that migrates and has long fed shallower reservoirs.

“The panel conducted its own, outside-the-record investigation about hydrofracturing and incorrectly concluded that this is a new method of oil and gas extraction, requiring the application of new legal principles,” Southwestern said. “Contrary to what the panel concluded, hydrofracturing was first introduced nearly 70 years ago, and it is the principal method of oil and gas production in Pennsylvania.”

Southwestern also argued that the panel erred in relying on out-of-state dissenting and vacated opinions to break with established Pennsylvania law. The MSC said in its brief that the opinion “upends settled rules, contradicts policy and injects considerable uncertainty in the industry.”

While attorneys disagreed on the potential impact of the case after the opinion was issued, Southwestern cautioned that the court’s decision could hamper oil and gas production if it isn’t revisited.

“The decision would make hydraulic fracturing subject to so much litigation that it will likely have the ultimate effect of significantly curtailing this activity, which has been so valuable to Pennsylvanians in so many ways,” the Pennsylvania chamber added in its amicus brief.

Filed in 2015 in the Susquehanna County Court of Common Pleas by Adam Briggs, his wife and other family members, the plaintiffs allege that Southwestern for years has been unlawfully extracting gas under an 11-acre unleased parcel of land they own from an adjoining leased property. The Briggs are seeking punitive damages.

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