On August 29, 2008, the Texas Supreme Court delivered its long-awaited and landmark decision in Coastal Oil & Gas v. Garza on the issue of whether fracing was open to claims of subsurface trespass when the fractures extend into neighboring properties. 268 S.W.3d 1 (Tex. 2008). The Court held that the rule of capture eliminated any actual damages, precluding a claim for trespass by the specific parties before the Court. Id. Since Garza, there has been a dearth of reported cases in other jurisdictions, with the notable exception in the April 10, 2013 opinion from the U.S. District Court for the Northern District of West Virginia in Stone v. Chesapeake Appalachia, LLC, which pointedly rejected the majority opinion in Garza and criticized it as giving "oil and gas operators a blank check to steal from the small land owner." 2013 U.S. Dist. LEXIS 71121 (N.D. W. Va. Apr. 10, 2013). Now, the Texas Supreme Court has before it a case which may compel the Court to provide further comments towards understanding its application of Garza on aspects of subsurface trespass in FPL Farming LTD. v. Environmental Processing Systems. No. 12-095 (Tex. filed Jan. 18, 2013).
FPL involves claims of subsurface trespass brought by FPL, a neighboring surface owner, against an entity that was engaging in disposal of industrial wastes (which might include oil and gas wastes in the form of used frac fluids) by deep injection that was permitted by the Texas Commission on Environmental Quality and which was or would invade the formation under FPL's land. FPL Farming, Ltd. v. Envtl. Processing Sys., L.C., 351 S.W.3d 306 (Tex. 2011). The Beaumont Court of Appeals affirmed a take-nothing judgment after a jury trial, stating that if a state agency authorizes wastewater injection, no claim for subsurface trespass exists; in doing so, the Beaumont Court referenced the Supreme Court's Garza holding, which recognized "the import of a state agency's authorization of competing uses of land." FPL Farming, Ltd. v. Envtl. Processing Sys., L.C., 305 S.W.3d 739, 743 (Tex. App. —Beaumont 2009), rev'd, 351 S.W.3d 306 (Tex. 2011). The Texas Supreme Court reversed and remanded the case, stating that "holders of wastewater injection well permits issued by the TCEQ are not immune from civil liability." FPL, 351 S.W.3d at 308; Petition for Review at 3, Envtl. Processing Sys., L.C., No. 12-0905 (filed Dec. 19, 2012). In addition, the Court found that Garza did not determine whether EPS trespassed because the rule of capture does not apply to wastewater injection. FPL, 351 S.W.3d at 314. The possibility that this case presents an opportunity to expand, restrict or avoid Garza, arises from the Court's own admission that its Garza statements were limited and open to different applications for differing forms of trespass. FPL, 351 S.W.3d at 314–15.
Specifically, in remanding the case to the Beaumont Court of Appeals, the Texas Supreme Court held that the simple fact that the injection was subject to a valid permit did not make the injector free from tort claims, including trespass. Id. In doing so, the Court expressly explained that the Garza ruling was limited to the circumstance where the complaining landowners had, by leasing their property, retained only a non-possessory royalty interest and thus could not bring a claim for trespass that does not require proof of damages. Id. at 313–14. Rather, in holding a non-possessory interest, a neighboring lessor could only bring a claim in trespass on the case, requiring a showing of harm to the property. Id. Notably, the Court did not refute or comment on its fundamental holding in Garza that the rule of capture applies to oil and gas produced from fracing even if the fractures may extend onto neighboring properties.
The practical reading of the Court's first FPL opinion appears to be (1) that Garza is silent on and therefore does not expressly or unequivocally prohibit an action for subsurface trespass by an owner of an adjacent present mineral interest (as opposed to a lessor's royalty and reversionary interest) and (2) leaves in place the uncertainty of whether the rule of capture would apply to foreclose the collection of actual damages by this type of plaintiff, and (3) whether, in addition to nominal damages, such an owner could seek injunctive relief.
However, a second opinion is pending from the Court in FPL. Upon the Court's initial remand, the Beaumont Court promptly reached four conclusions, one of which was the finding that wastewater migration in deep, subsurface formations may constitute a trespass. FPL Farming Ltd. v. Envtl. Processing Sys., L.C., 383 S.W.3d 274 (Tex. App.—Beaumont 2012, pet. granted). The Court accepted a petition for review and, on January 7, 2014, heard oral argument on specified issues; its decision and opinion are pending. THE SUPREME COURT OF TEXAS, (last visited June 30, 2014). While the Supreme Court will evidently take up at least one ancillary issue on the question of the Plaintiff's consent to the physical invasion of its subsurface strata, it will, significantly have the opportunity to address the fundamental issue of subsurface trespass in the context of a regulatory permit for water migration from deep injection and may clarify the questions left open in Garza as to causes of action for subsurface trespass in the context of fracing.
Principal among those questions likely to be raised in the next round of disputes will be the very ones emanating from the close reading of Garza that the Supreme Court is now considering: what actions for subsurface trespass lie with a neighbor who holds a possessory interest rather than the nonpossessory interest that allowed the rule of capture to be an absolute a bar to the Garza plaintiffs? Stated another way, will such neighboring possessory interest owners avoid the rule of capture? Alternatively, if the rule of capture applies to bar compensatory monetary damages, will such possessory interest holding neighbors be allowed to sue for monetary damages under per se trespass or injunctive relief? Looking further down the road in the legal landscape, will the Garza application of the rule of capture come to affirmatively require lessees to frac into the neighboring property under the implied covenant to reasonably operate? All we can say is to stay tuned.