The Supreme Court of Texas agreed Friday to hear ExxonMobil Corp.’s arguments regarding a dispute with ranch owners in the Permian Basin concerning environmental impacts to freshwater from old oil and natural gas wells.

The high court has scheduled Nov. 7 to hear oral arguments in ExxonMobil Corp. v. Lazy R Ranch LP, et al., [15-0270]. In October 2009, Lazy R Ranch, general manager Helen A. McDaniel and Joseph Williams, a trustee of the Helen Williams Inter Vivos Trust, sued ExxonMobil to prevent the producer from “causing or continuing to cause” hydrocarbon contamination to fresh groundwater resources underlying the ranch, which is spread across nearly 20,000 acres in the West Texas counties of Ector, Crane, Ward and Winkler.

The plaintiffs said in March 2009 they first discovered that hydrocarbon contamination, including benzene, was in the subsurface and/or groundwater at five identified areas of concern, including an ExxonMobil tank farm and tank battery sites. Four of the sites were owned and operated by ExxonMobil until June 2008, when the lease and related facilities were sold to Aghorn Energy.

The plaintiffs in June 2009 provided ExxonMobil with an environmental report detailing the identified contamination, and ExxonMobil “indicated it would initiate a review and followup on the manner; however, Exxon took no action…” The lawsuit was filed in October 2009, seeking equitable relief.

Plaintiffs claimed that ExxonMobil “apparently abandoned and closed” the sites “without investigating or remediating the contamination, thereby causing and continuing to cause substantial groundwater pollution.” The plaintiffs’ groundwater expert testified that the identified contamination likely would continue to migrate or spread to unpolluted fresh groundwater resources.

ExxonMobil argued that because the plaintiffs were not seeking monetary damages, there was no evidence of diminished value to their property and no recourse to demonstrate contamination. The lower court originally sided with ExxonMobil. On appeal, ExxonMobil lost.

Amended court filings seeking remediation were made by the plaintiffs, who are seeking a mandatory injunction to remediate about 1.2 acres of land at a cost of $6.3 million. The Eighth Court of Appeals last year agreed with the plaintiffs. ExxonMobil appealed to the Texas Supreme Court for review.

ExxonMobil noted that the plaintiffs aren’t seeking remediation for prior damage to the groundwater but only to prevent future damage.

“The bottom line is that no reported Texas case allows the result that plaintiffs seek: a mandatory injunction to remediate, at a cost of $5.25 million/acre of land recently valued at $50/acre, ‘extremely obvious’ contamination that allegedly was ‘everywhere’ and that plaintiffs knew about ‘way back before 2005,’ when limitations ran.”

ExxonMobil challenged the plaintiffs to “cite a single reported case in which a Texas court allowed the result demanded…Plaintiffs have failed to cite any such case. This is understandable because there is no reported case in which a Texas court has ordered or upheld a mandatory injunction where the cost of restoration was ‘well in excess’ of the diminution in fair market value.”

The Texas Oil & Gas Association (TXOGA) in March filed an amicus brief at the Texas Supreme Court in support of ExxonMobil. The appeals court decision overturned state law and created “uncertainty and confusion regarding limitations defenses involving property damage suits and confusion in determining the proper measure of damages to the property affected,” TXOGA argued.

The damages issue also is significant for oil and gas operators, according to TXOGA, “because the availability of injunctive relief based on remediation costs allows plaintiffs to make an end-run around well-established Texas law on damages available to landowners. Such relief could also turn previously uneconomical property damages cases into windfall remedies for property owners…

“Not only could plaintiffs renew suits and get past well-established limitations defenses by waiting to discover the full extent of previously known harms, but they would have the ability to pursue potentially massive and disproportionate damage awards based on cleanup of otherwise minimal-value properties.”