As reported on September 27, 2012, the West Virginia Supreme Court of Appeals was recently presented with a certified question concerning whether surface rights owners may bring a court action to challenge gas well drilling permits issued by the West Virginia Department of Environmental Protection (“DEP”). As anticipated based on the tenor of the oral argument held on September 25, 2012, the Court held on November 21, 2012, that surface owners may not bring such actions. (Martin v. Hamblet, No, 11-1157.)

Writing for a unanimous Court, Justice Workman stated that the statutory provisions governing who may bring a court action to challenge gas well permits does not include surface owners such as Mr. Hamblet. Although surface owners enjoy the right to submit comments on well permit applications, which DEP must consider before issuing a permit, the Court concluded that the “Legislature intended to deny surface owners the right of judicial review with respect to the issuance of a well work permit[.]” The Court observed that the applicable statutory language “is clear and unambiguous with regard to who may object to the well proposed to be drilled. Notably absent from the statute is any mention of the surface owner of the subject property.” In reaching this holding, the Court overruled a 2002 per curiam decision, State ex. rel. Lovejoy v. Callaghan, which appeared to recognize a surface owner’s right to appeal well drilling permits.

In addition to overruling Lovejoy, the Court rejected the argument that depriving surface owners of a right to challenge well drilling permits violates Constitutional rights of due process or equal protection. The interference with a surface owner’s enjoyment and use of property caused by well drilling activity is not a function of government action, the Court concluded. Rather, drilling activity is an exercise of the mineral owner’s rights, which in this case had been leased to the gas company EQT Production Company (“EQT”). “Here, EQT has a legally binding lease that grants it explicit rights of access to the oil and gas underlying Mr. Hamblet’s property. It is this contractual obligation burdening Mr. Hamblet’s surface estate . . . not the issuance of the well work permit at issue.” In other words, the government’s action in issuing the permit is not the source of any infringement upon the surface owner’s rights. It is instead the nature of the property rights to the tract at issue, and the fact that the surface estate has been severed from the mineral estate, that creates this burden upon the surface owner’s rights. “The permit issued by the DEP does not authorize EQT to interfere with Mr. Hamblet’s property rights; rather, the permit merely allows EQT to exercise its existing rights and controls the manner in which [EQT] does so.” Constitutional due process and equal protection provisions are not implicated by DEP’s permitting activity, the Court held, because these Constitutional guarantees only protect individuals from deprivations by the government – not from actions of private parties. The Court declined to address an argument presented by the West Virginia Surface Owners’ Rights Organization, which intervened in the case, that surface owners have a Constitutional right to a hearing before DEP renders a decision on an application for a well drilling permit. However, in light of the Court’s holding negating a right to appeal such permits, it is unlikely that surface owners have a Constitutional right to a pre-issuance hearing.

Although surface owners may not appeal well drilling permits, they are not without a remedy in the event the drilling activities cause damage to their property. The Oil and Gas Production Damage Compensation Act provides an avenue for surface owners to seek compensation for property damage related to oil and gas production and (according to the Court) common law remedies may be available to the extent a gas lessee causes damage by undertaking actions that exceed its contractual rights.

Before concluding its opinion, the Court expressly noted that its decision was driven by the statutory language at issue, which was “enacted prior to the extensive development of the Marcellus shale in this State.” “Where the legislature has prescribed limitations on the right to appeal, such limitations are exclusive, and cannot be enlarged by the court.” The Court then took the unusual step of “urg[ing] the Legislature to re-examine this issue and consider whether surface owners should be afforded an administrative appeal under these circumstances.” The Court never mentioned the enactment of the 2011 Natural Gas Horizontal Well Control Act, W.Va. Code §§ 22-6A-1, et seq., which was most certainly preceded by Legislative consideration of such an option.