Southwestern Energy asks Pa. high court to restore the ‘rule of capture’ for shale drilling

(Post Gazette – by Laura Legere) A Marcellus Shale company is asking the Pennsylvania Supreme Court to take up a case it says could disrupt a century of oil and gas law by defining fracking that drains shale gas from a neighboring property as a form of trespassing.

A decision by the lower Superior Court threatens to throw “the law surrounding oil and gas rights into chaos,” Southwestern Energy Co. said in asking the high court to review the ruling.

The Supreme Court does not have to agree to hear the appeal.

Two judges on the Superior Court ruled in April that a legal principle known as the “rule of capture” does not apply to oil and gas that is recovered using hydraulic fracturing — the high-pressure injection of fluids underground to free gas from surrounding rocks.

The rule of capture, which has been applied since at least 1889 in Pennsylvania and throughout the United States, holds that oil and gas in underground reservoirs belongs to whoever pulls it from a well on his own property first — even if the gas or crude flowed from under a neighbor’s land.

Southwestern petitioned the full Superior Court to allow it to reargue the case, Briggs v. Southwestern Energy Production Co., but the court denied that request last month.

Fracking is not new, but it is instrumental in loosening gas from tight rock layers like the Marcellus Shale. That extra effort distinguishes shale gas extraction from past decades of conventional drilling, the lower court said, although legal analysts have found flaws in the court’s distinction.

The scale and expense of modern shale drilling also puts the traditional remedy — for each neighbor to drill his own well — out of reach for small landowners, who can then be pressured to sign a lease or risk having their gas taken without payment, the Superior Court said.

In a petition filed Monday with the state Supreme Court, Texas-based Southwestern said it is the Legislature’s job to balance the rights of neighboring landowners and to encourage the efficient extraction of oil and gas through policy.

The lower court decision departs from “the clear and time-honored rule” in a way that threatens to disrupt and disadvantage Pennsylvania’s shale gas industry and possibly interfere with other land uses, like gas storage and waste disposal wells, Southwestern said.

“There is no reason for Pennsylvania to deviate from an established legal regime that has worked in practice in multiple jurisdictions [including Pennsylvania] since hydraulic fracturing began” nearly 70 years ago, the company said.

In its new petition, as in its earlier attempt at an appeal, Southwestern is supported by a host of gas industry and business trade groups. The Pennsylvania Chamber of Business and Industry said in an April court filing that the Superior Court’s decision would have “a massive, negative impact upon industry, employment and the Pennsylvania judicial system.”

If allowed to stand, the lower court ruling could inspire many more lawsuits that would require judges and juries to address unanswerable questions about how far fractures spread and where fluids flow underground — “something science has not been able to do with any precision,” Southwestern said.

The ruling could also curtail operations on leased land, as companies shy away from property boundaries to protect themselves from liability for draining neighboring gas.