Summary of Oral Argument in Environmental Processing v. F.P.L. Farming

*This article is not a substitute for the advice of an attorney.*

Today the Texas Supreme Court heard oral argument from counsel in Environmental Processing Systems, L.C. v. F.P.L. Farming LTD., which was discussed in detail on this blog on Monday.   Essentially the case involves a claim that waste water from an oil and gas operation that was injected in an underground disposal well on EPS’ property has migrated under the property of FPL Farming, causing subsurface trespass.   The case has been submitted to the Court for decision.

Texas Cap

The justices were quite active during the argument and asked numerous questions of counsel for both parties.  Here are some interesting points that were raised.

*  EPS argued that the Supreme Court actually need not reach the question of whether Texas should recognize underground trespass to resolve this case.  The jury ruled that no trespass occurred based upon the facts in the case.  Thus, even if the Supreme Court were to find that trespass was a recognized cause of action, Farming would still lose because of this jury verdict.  In response, counsel for Farming argued that the jury instruction, which required Farming to prove lack of consent as an element of a trespass claim, was inaccurate, and consent instead should be an affirmative defense that must be proven by EPS as found by the Beaumont Court of Appeals.  This was a particularly interesting argument that could provide an opportunity for the Texas Supreme Court to essentially punt on having to decide whether migration from waste water injection wells constitutes trespass.

*  One justice asked Farming’s counsel a hypothetical question, “If the water being injected and migrating underground was not harmful, and was instead the exact same type of water as already found in the formation, would a trespass still occur?”  Farming’s counsel responded that in that circumstance, there would be no trespass.  This was an interesting admission, particularly because it is the position of Farming that in order to successfully prove trespass under Texas law, proving harm is not a necessary requirement.

* Farming’s counsel made a strong point that the Texas Supreme Court in Edwards Aquifer Authority v. Day, and the Texas Legislature in passing Texas Water Code Section 36.002 held that all groundwater beneath the land is the property of the overlying landowner.  There is limitation for the quality of the water, the depth of the water, or the uses to which the water will be put.  Thus, EPS’ argument that because this case involves briny saltwater over 7,000 feet below the surface that Farming has not put to a beneficial use is irrelevant to determining ownership of the water and, consequently, the right to exclude.

*  The Court seemed particularly concerned with how the distinguish the facts of this case from the facts of Coastal Oil & Gas Corp. v. Garza Energy Trust (in which the court held that fracking reaching beyond property lines was not a trespass).  One justice explained that he found it difficult to get his head around the idea that pushing fracking proppant onto the land of another would not be trespass, but that waste water migrating onto the land of another would constitute a trespass.  Counsel for Farming distinguished Coastal on two grounds:  (1) that case involved oil and gas production, meaning that it was governed by the Rule of Capture; and (2) in Coastal, the claim of trespass was made by a royalty owner who did not own a possessory interest in the subsurface land, whereas here Farming owns the subsurface area and the right to exclude others from that land.

*  Counsel for EPS pointed out that there was no limitation being placed upon Farming by the injection of waste water under their property.  For example, Farming could still use the same formation to inject waste water if it wished to do so.  Counsel also used this point to distinguish the Edwards Aquifer Authority v. Day case, as in Day there was a government imposed limitation on the amount of water that could be pumped from the ground, and no such limitation applies to Farming in this case.

*  The justices asked an interesting question of counsel for EPS regarding the impact of depth on their argument.  In this case, the waste water at issue is injected 7,000 feet underground.  The justices posed the hypothetical of waste water being injected at only 50 feet underground and asked whether trespass would still occur.  EPS’ counsel responded that no trespass would occur in that situation because regardless of the depth, there is no reasonable expectation of Farming to be able to exclude another from the subsurface of the land.

 

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