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The Pennsylvania Supreme Court is set to determine whether the rule of capture, which precludes trespass liability for drillers where oil and gas drains from surrounding lands in the course of conventional extraction from an underground pool, applies where shale gas is extracted through hydraulic fracturing.

In an apparent case of first impression, the Pennsylvania Superior Court ruled earlier this year that it does not.

On Nov. 20, the high court issued a one-page order agreeing to consider a single question on appeal: “Does the rule of capture apply to oil and gas produced from wells that were completed using hydraulic fracturing and preclude trespass liability for allegedly draining oil or gas from under nearby property, where the well is drilled solely on and beneath the driller's own property and the hydraulic fracturing fluids are injected solely on or beneath the driller's own property?”

The case has drawn heavy amicus interest from industry organizations including the Marcellus Shale Coalition, the American Exploration & Production Council, the Pennsylvania Chamber of Business and Industry, the Pennsylvania Independent Oil & Gas Association, the Independent Petroleum Association of America and the American Petroleum Institute.

In a published opinion issued April 2 in Briggs v. Southwestern Energy Production, a two-judge panel of the Superior Court reversed a Susquehanna County trial judge's decision granting summary judgment to defendant Southwestern Energy Production Co. on claims of trespass and conversion by a group of property owners.

The property owners alleged that Southwestern had unlawfully extracted gas from beneath their property while drilling on an adjoining property.

While Southwestern invoked the rule of capture in its defense, the Superior Court said the rule was inapplicable to hydraulic fracturing (also known as fracking), a process by which high-pressure liquid is used to forcibly extract natural gas from shale.

“In light of the distinctions between hydraulic fracturing and conventional gas drilling, we conclude that the rule of capture does not preclude liability for trespass due to hydraulic fracturing,” Senior Judge John L. Musmanno Jr. wrote for the panel. “Therefore, hydraulic fracturing may constitute an actionable trespass where subsurface fractures, fracturing fluid and proppant cross boundary lines and extend into the subsurface estate of an adjoining property for which the operator does not have a mineral lease, resulting in the extraction of natural gas from beneath the adjoining landowner's property.”

Musmanno was joined by President Judge Susan Peikes Gantman. Judge Mary Murray was also listed as a member of the panel but the opinion said she did not participate in the consideration or decision of the case.

In considering whether hydraulic fracturing that extracts gas from beyond the boundaries of a leased property could be considered a trespass, the Superior Court looked to rulings by the Texas Supreme Court and the U.S. District Court for the Northern District of West Virginia for guidance.

In the 2008 case Coastal Oil & Gas v. Garza Energy Trust, the Texas Supreme Court held that the rule of capture barred liability for drainage by hydraulic fracturing, just as it did for drainage by conventional oil and gas production methods. But Justice Phil Johnson dissented, arguing that “the gas at issue … did not migrate to Coastal's well because of naturally occurring pressure changes in the reservoir” and stating that he ”would not apply the rule [of capture] to a situation … in which a party effectively enters another's lease without consent, drains minerals by means of an artificially created channel or device, and then 'captures' the minerals on the trespasser's lease.”

In the 2013 case Stone v. Chesapeake Appalachia, the U.S. District Court for the Northern District of West Virginia, persuaded by Johnson's dissent in Coastal Oil, found the rule of capture was inapplicable to hydraulic fracturing and criticized the Coastal Oil majority's opinion as giving “oil and gas operators a blank check to steal from the small landowner.”

“Under such a rule, the companies may tell a small landowner that either they sign a lease on the company's terms or the company will just hydraulicly fracture under the property and take the oil and gas without compensation,” the Stone court said.

Musmanno said the Superior Court found both Johnson's Coastal Oil dissent and the Stone ruling persuasive, noting the fundamental difference between fracking and conventional oil and gas production, which the rule of capture was originally intended to cover.

“Unlike oil and gas originating in a common reservoir, natural gas, when trapped in a shale formation, is non-migratory in nature,” he said. “Shale gas does not merely 'escape' to adjoining land absent the application of an external force. Instead, the shale must be fractured through the process of hydraulic fracturing; only then may the natural gas contained in the shale move freely through the 'artificially created channel[s].'”

Like Johnson and the Stone court, the Superior Court disagreed with the Coastal Oil court's rationale that a landowner could protect his interests by drilling his own well to prevent drainage into adjacent properties.

“Hydraulic fracturing is a costly and highly specialized endeavor, and the traditional recourse to 'go and do likewise' is not necessarily readily available for an average landowner,” Musmanno said.

Musmanno also echoed Johnson's and the Stone court's concerns “that precluding trespass liability based on the rule of capture would effectively allow a mineral lessee to expand its lease by locating a well near the lease's boundary line and withdrawing natural gas from beneath the adjoining property, for which it does not have a lease.”

“Such an allowance would nearly eradicate a mineral lessee's incentive to negotiate mineral leases with small property owners, as the lessee could use hydraulic fracturing to create an artificial channel beneath an adjoining property, and withdraw natural gas from beneath the neighbor's land without paying a royalty,” Musmanno said.

In reversing the lower court's grant of summary judgment and remanding the case, the Superior Court said the plaintiffs must be given an opportunity to develop their trespass and conversion claims.

Reached Nov. 20, counsel for the plaintiffs, Laurence Kelly of Kelly Law Office in Montrose, said of the high court's allocatur grant, “I'm just looking forward to presenting my client's case in the Supreme Court.”

Southwestern's counsel, Robert Byer of Duane Morris in Pittsburgh, referred comment to his client. A Southwestern spokesperson said in a statement, “We appreciate the court's thoughtful decision to review this ruling, especially given the case's potential to negatively impact Pennsylvanians who depend on natural gas for royalty payments, jobs and affordable energy. Bringing legal clarity and certainty to this potentially far-reaching matter—while avoiding pitting neighbor against neighbor in costly and speculative legal disputes that could unnecessarily overburden our courts—are top priorities for Southwestern Energy.”