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Rule of Capture is Back for Pennsylvania Oil and Gas Wells . . . Sort Of

On Wednesday, the Pennsylvania Supreme Court overturned a lower court decision that appeared to make the “rule of capture” inapplicable to oil and gas wells subjected to hydraulic fracturing, or “fracking.” Briggs v. Sw. Energy Production Co., No. 63 MAP 2018 (Pa. Jan. 22, 2020) (see majority opinionsee concurring and dissenting opinion). However, the court has left open whether a well owner whose hydraulic fracturing fluids or proppants migrate under a property line, and perhaps even a well owner whose fracture traces extend across that line, has committed a trespass. Those issues are remanded, and their resolution remains uncertain.

Oil and gas (or, for that matter, any fluids) migrate into a well bore from the surrounding rock. If the well drains a conventional reservoir, the hydrocarbons may have originated at the other end of the reservoir under a different property. A well on one property can drain hydrocarbons originally located under another. Recall the “I drink your milkshake” scene from There Will Be Blood (Paramount 2007).

In the context of a conventional reservoir, the origin of the oil and gas is hard to know. So, the law has long applied the “rule of capture.” See, e.g., Westmoreland & Cambria Nat. Gas Co. v. DeWitt, 18 A. 724 (Pa. 1889). The hydrocarbons brought up a well belong to the owner of the well. A neighboring landowner afraid that his or her valuable resource is being drained by a neighbor should drill an offsetting well. See, e.g., Colgan v. Forest Oil Co., 45 A. 119 (Pa. 1899). He or she should “go and do likewise.” Barnard v. Monongahela Nat. Gas Co., 65 A. 801, 803 (Pa. 1907)

But when gas is in a formation – like shale – where the pores do not communicate with each other, a well must be completed by creating factures in the rock so that the oil or gas can flow to the well bore. That typically involves injecting a fluid at high pressure into the well along with a proppant (like sand).

When the well bore passes under a property line, the well owner trespasses unless it has a right to do so. Well bores in “unconventional” wells targeting shale formations are typically horizontal, and extend for many thousands of feet laterally, so developers take care to secure rights all along the planned footprint. But what if the hydraulic fluid, the proppant, or perhaps just a fracture extends out of the well bore across a property line? Does the well owner have to pay for the gas it drains from a neighbor as the result of that intrusion a mile or more underground?

The Superior Court assumed that unconventional gas could only flow to a well through a fracture created during completion of the well, and therefore that the rule of capture could not apply to any “fracked” well. Briggs v. Sw. Energy Prod’n Co., 184 A.3d 153 (Pa. Super. Ct. 2018).

The Supreme Court resolved the appeal by rejecting the assumption. Maybe there was a physical intrusion of fluid or proppant, or not. Maybe there was an “artificial” fracture, or not. And, without deciding whether any of those things would constitute a trespass miles underground, the Supreme Court vacated the Superior Court’s opinion and remanded for further proceedings to decide those issues legally and factually.

So, the “rule of capture” is back in place in Pennsylvania for unconventional wells. But only sort of. The argument that a fracture under a property line constitutes a trespass remains available.

©2020 Greenberg Traurig, LLP. All rights reserved.

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About this Author

David G. Mandelbaum, Greenberg Traurig Law Firm, Philadelphia, Environmental Law Litigation Attorney
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David G. Mandelbaum represents clients facing problems under the environmental laws and serves as Co-Chair of the firm's Environmental Practice. He regularly represents clients in lawsuits and has also helped clients achieve satisfactory outcomes through regulatory negotiation or private transactions. David teaches Superfund, and Oil and Gas Law in rotation at the Temple Law School. He has taught Environmental Law, Climate Change and Land Use Law and Administration in the past, and he is a regular writer and speaker on the subjects.

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