Since the first oilman drilled the first water disposal well, cases have come through the courts in the U.S. trying to determine what rights each estate owner has, as well as the potential liability attributable to using those rights. Among the topics to be considered by courts is whether such injection could be a trespass. Based on multiple amicus briefs filed in Envt’l Processing Sys., L.C. v. FPL Farming Ltd., No. 12-0905 (Tex. Feb. 6, 2015), many thought the Texas Supreme Court would clarify the law on this issue. It did not.
The dispute in FPL was whether deep subsurface wastewater migration is actionable as a common law trespass in Texas. The action was originally brought by FPL Farming Ltd. (FPL), seeking damages for water migrating into the subterranean tract of its estate. The migrating water at issue was injected into the adjacent estate by a wastewater disposal facility owned by Environmental Processing Systems, L.C. (“EPS”).
Following a series of appeals that included a remand from the Texas Supreme Court, a jury found that no subsurface trespass occurred. However, the Texas Ninth Court of Appeals reversed this decision after determining that the jury instruction did not properly include lack of consent as an element of a trespass cause of action. In its opinion, the Court noted EPS’ argument that “Texas law does not recognize a claim for trespass to protect possessory rights at the depths that are at issue in this case.” After reviewing two Texas Supreme Court opinions, the Court of Appeal assumed that Texas recognized a subsurface trespass claim at the depths at issue in this action. (See, Gregg v. Delhi-Taylor Oil Corp., 162 Tex. 26 (1961); Hastings Oil Co. v. Texas Co., 149 Tex. 416 (1950).)
However, instead of analyzing this assumption made by the Court of Appeals, the Texas Supreme Court, on the petition for review of the Court of Appeals decision, decided not to address the question of whether deep subsurface trespass is actionable, but instead reversed the ruling by finding that the jury instructions of the lower court were in fact proper, and therefore the findings of the jury were affirmed.
Although the Texas Supreme Court decided not to address the subsurface trespass of wastewater issue, the U.S. Court of Appeals for the Fifth Circuit has ruled on a related issue. Boudreaux v. Jefferson Island Storage & Hub, LLC, 255 F.3d 271 (5th Cir. 2001), presented to the Fifth Circuit, among other items, the issue of whether under Louisiana law the migration of saltwater under a landowner’s property constituted a legally actionable trespass. The saltwater was produced in association with the creation of two underground natural gas storage caverns. Similar to FPL, Jefferson Island Storage & Hub, LLC, the owner of the storage facility, obtained the requisite permits from the Louisiana Department of Natural Resources to create the natural gas storage caverns. Jefferson was sued by the surface owner of an adjacent property, who claimed that the injected saltwater migrated under the property and was therefore a subsurface trespass. The Fifth Circuit ultimately held that because the injection was permitted under Louisiana law that the migration was lawful and therefore did not constitute a trespass. However, the Circuit did note that “a plaintiff can still recover if he can show that his property was actually damaged.”
Although Boudreaux did specifically apply to produced oil and gas wastewater, the Fifth Circuit nevertheless has expressly held, albeit under Louisiana law, that subsurface migration of water associated with oil and gas operations is not a trespass. However, at least one other court has held the opposite.
The 2007 California decision, Starrh and Starrh Cotton Growers v. Aera Energy LLC, 153 Cal.App. 4th 583 (2007), also dealt with a subsurface trespass claim. Similar to FPL, this action was brought by a farming company against an entity disposing of oil and gas wastewater. In Starrh, the California Court of Appeal for the Fifth District held that “[c]ausing subsurface migration of oil field wastewater into a mineral estate (groundwater pore space) of another without that landowner’s consent is a trespass under California law.” After finding that a subsurface trespass had occurred, the court remanded to the trial court to determine a proper damages calculation. After noting that“[t]rial courts in trespass actions have historically been given great flexibility to award damages that fit the particular facts of the case,” the Fifth District advised the trial court that “Starrh should be permitted to introduce evidence that some portion of Aera’s profits is tied to the use of less expensive means of disposing of produced water. However, the trial court needs to ensure that any evidence of ‘benefits obtained’ is directly linked to the wrongful trespass.” Accordingly, California has implied that the damages may be tied to the benefit obtained by the producer for causing the subsurface migration, instead of solely basing the calculation on a remediation cost. As of this writing, this damage calculation is not utilized in Texas.
With the amount of water disposal and hydraulic fracturing being utilized in Texas, claims similar to those in FPL will certainly be heard again by the courts. However, until the Texas Supreme Court decides to address the issue, certain risks will be presented to operators in Texas that employ wastewater disposal, especially in relation to the amount of damages that would be owed to a successful plaintiff. Accordingly, for the time being, operators seeking to reduce the risk must weigh whether the price of entering into subsurface agreements with adjacent landowners exceeds the risk of being sued for subterranean wastewater migration.