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Texas landowners may have more recourse against some fracking operations

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How the Texas Supreme Court decides the fracking wastewater case before it may came down to the difference between how Texas law treats up versus down.

The energy and farming industries--diametrically opposed on this issue--have been closely watching the debate between Environmental Processing Systems LC (EPS) and FPL Farming Ltd.

It would behoove anyone else interested in the negative effects of fracking in the environment to take some interest as well.

Since 1997, EPS of Dayton, Texas has had waste injection operations on a very small tract of land it leases that is adjacent to FPL’s rice farm in Liberty County. This injection operation involves briny water mixed with industrial wastes such as acetone and naphthalene that is recovered from fracking wells elsewhere.

The operation is condoned through a “Class I non-hazardous waste” permit provided by the Texas Commission on Environmental Quality. EPS injects this effluent water one mile below the surface into a sand aquifer in the Frio Formation.

To date, EPS has injected over 100 million gallons of wastewater. The first injection well EPS built was 875 feet from FPL’s land. According to expert witness testimony, the plume of wastewater migrated across FPL’s subsurface boundary sometime in 2007.

FPL sued for trespass but lost in trial court to a jury that wasn’t convinced any trespass occurred. On appeal, FPL did not sway the Beaumont Court of Appeals but the Texas Supreme Court said EPS’s valid permit wasn’t a sufficient reason to bar a trespass claim.

With the reversal, the Beaumont Court of Appeals reconsidered its position and in 2012 concluded Texas law recognizes FPL’s property interest in subsurface briny water.

Now it was EPS’s turn to appeal and over the course of 2013 each side filed briefs and replies to briefs. Three friend of the court briefs were also submitted by a host of energy industry associations and councils. Their principal concern is that a decision recognizing trespass as a cause of action would threaten oil and gas production.

Or they could offer to pay the neighbors some licensing fee for their consent, but that’s just me talking. What do I know?

The Texas Farm Bureau filed the opposing amicus brief.

We come now to the Jan. 7, 2014 oral argument before the Texas Supreme Court. Craig T. Enoch and Melissa A. Lorber of Enoch Kever in Austin argued for EPS. I was surprised to see Melissa, who I knew by her maiden name Melissa Prentice, a fellow journalist I worked with in the late 1990s at the San Antonio Express-News. By the way, good job arguing for your client Melissa!

Justice Debra Lerhmann told Enoch that if someone stored stuff in another person’s garage, that would be trespass and the garage owner would have a legal cause of action.

“And isn’t this the same thing?” she asked.

Enoch agreed with the example, but he disagreed that it applied. He compared the subsurface effluent to a neighbor’s activity that causes smoke to waft onto another’s property.

“We don’t call that trespass, we call that nuisance,” Enoch said. The difference being that in a nuisance claim, actual damage must be proved.

Enoch also pointed out that the storage space lost in a garage doesn’t apply with fluids migrating in subsurface strata. If FPL wanted to inject wastewater below its rice fields, it could do so tomorrow.

Claudia Wilson Frost of DLA Piper in Houston, attorney for the farmer plaintiff, thought that was a clueless example. Why would FPL want to inject wastewater?

The problem is FPL--as the owner of mineral rights below its land--has the right to exclude stuff it doesn’t want there. Further, FPL might someday have an industrial use for the briny water, but now that it’s polluted with acetone, and who knows what else, that is a much less attractive opportunity.

Lorber followed Enoch for EPS and focused on the elements of trespass law: the offended party owns the land, the defendant intruded and entry was without consent. She argued FPL should have to prove there was no consent; this goes back to an ongoing dispute over who has the burden to prove consent.

I got the impression that Frost came to court with the big guns. She seemed to have the more persuasive arguments.

Justice Paul Green came after her pretty hard.

“Assume it is a trespass,” Green said. “It seems it’s loaded with proof problems--establishing where the trespass occurred on the property, if it did, and when and then what are the damages for that? I’m having a hard time getting my hands wrapped around the issue of how much would be owed and when it would be owed.”

TCEQ keeps good records and relies on scientific models, “and certainly it should be what is required here and for a jury to determine,” Frost said. Common sense also tells us there’s no physical way the 100 million gallons pumped in as of the time of trial could be contained within the 5 acres that EPS leases.

“It’s all a guess, though,” Green said. “It may be a scientific guess, but nonetheless we don’t know, 8,000 feet down, where it goes.”

“You have expert witnesses … who said that if you use a formula, you can figure out if X number of gallons go down there what its dispersal rate is going to be,” Frost said. “They know the permeability, they know the porosity, they know the geology, they know the formation characteristics. Just like in any other subsurface migration, they can predict, just like you can when you’re working and drilling on all kinds of things.”

EPS relied on Coastal Oil & Gas Corp. v. Garza Energy, a 2008 decision where the Texas Supreme Court said fracking reaching beyond property lines was not trespass.

Frost wasn’t fazed.

“It’s very critical to remember one key fact, and that is the owner of the subsurface. The defendant who was making the claim did not have a possessory interest in that land,” Frost said of the Garza Energy case. “If you have a possessory interest, you don’t have to show harm. FPL had a possessory ownership interest. In Garza, the defendant did not, he had a royalty interest.”

Frost also hammered home the point that oil and gas mining is governed by the Railroad Commission and relies on the rule of capture, which means the first person to capture a resource owns it, even if the resource was drawn from adjoining lands.

Landowner rights can be differentiated where injecting wastewater back into the ground is concerned. For one, the Railroad Commission does not regulate that.

The deciding factor here is likely Frost’s next point, and that is the Legislature’s long history of protecting a landowner’s mineral and water rights.

EPS emphasized Texas Supreme Court comments in Garza Energy, where it said, “the ancient common law maxim that land ownership extends to the sky above and the earth’s center below … has no place in the modern world,” and to the court’s comment in a 1962 opinion where it said “wheeling an airplane across the surface of one’s property without permission is a trespass, flying the plane through the airspace two miles above the property is not.”

EPS would love the court to say the same applies below the surface, but the Legislature makes a more rigorous distinction about what goes on below a landowner’s boots.

“The Legislature makes no distinction or limitation on depth or salinity or use or anything else,” Frost said. “In fact, the Legislature amended the statute to remove a use limitation, the very one (EPS) argued for--that we would have to show the groundwater had some beneficial use in order for it to be of a real property type subject to the right to exclude.

“So to the extent the court wants to look at balancing interests, the interests that are predominant are the real property interests here, and the right to exclude is probably the hallmark of those,” she said.

Bear in mind that this is an all-Republican court. It will be very reluctant to reach a decision that could be perceived as contrary to the legislative intent of a Legislature that has been Republican dominant for over two decades.

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