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Southwestern Energy Appeals Rule of Capture Case to Pennsylvania Supreme Court

Southwestern Energy Co. has asked the Pennsylvania Supreme Court to decide if the rule of capture applies to oil and natural gas produced from hydraulically fractured (fracked) wells and whether operators can be held liable for subsurface trespass in what could be a landmark appeal if the justices agree to hear the case.  

In its petition, Southwestern again said the state Superior Court’s decision earlier this year, which called into question the rule of capture and how it applies to unconventional development, has drawn national attention because it has the potential to “disrupt” oil and gas exploration across the country.

“The Superior Court’s two-judge precedential decision, issued without the benefit of oral argument and representing the views of only one commissioned judge, rejects the continuing application of this rule to the most common method of oil and gas extraction used today -- hydraulic fracturing,” the company wrote in its petition to the state Supreme Court.

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. It prevents liability for draining migratory oil and gas from underneath private land. Southwestern argues in its petition that the Superior Court’s decision conflicts not only with the Pennsylvania Supreme Court’s precedents, but also with the only other decision in a state court of last resort to address the issue and its application to unconventional development.

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

The two Superior Court judges 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 Texas Supreme Court found that there is no actionable trespass caused by unconventional wells, while a federal court in West Virginia disagreed in a case that was eventually settled.

Last month, the state Superior Court declined Southwestern’s application for reargument. The company had sought an en banc hearing before all of the court’s judges. The “sweeping effects” of the ruling, Southwestern said in a statement this week, “may negatively impact all Pennsylvania citizens, especially those who depend on natural gas for royalty payments, jobs and affordable energy, not just Southwestern Energy Co.”

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

In citing reasons for the appeal, Southwestern also said that the Superior Court’s decision could upset property interests and burden the courts with “speculative and unwieldy” litigation, as the ruling could also have wide-ranging impacts on other types of land use.

“The ruling also risks pitting neighbor against neighbor in speculative disputes over the ownership of oil and gas produced from their properties, leading to excessive, unnecessary and costly litigation,” Southwestern said late Monday after the petition was filed.

The company also argues that the ruling is an “encroachment into the legislative branch,” as it “intrudes” on policy that lawmakers might better consider.   

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.

The Superior Court’s opinion reversed and remanded the case to the lower court to determine if Southwestern committed trespass with its shale wells.

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