*1 OIL & CORP. COASTAL GAS L.P., USA, &
Coastal Oil Gas
Petitioners,
GARZA ENERGY TRUST Respondents. al.,
et
No. 05-0466. Court of Texas.
Supreme
Aug. Denied
Rehearing Nov.
& Lewis, Houston, TX, Raymond B. Roush, Chesapeake Corp., Energy Okla- OK, City, Hundley, Dallas, homa David M. TX, Hall, Fulbright W. Wendell & Jawor- TX, L.L.P., Antonio, ski San for Amici. Justice HECHT the opinion delivered Court, BRISTER, in which Justice *4 Green, CHRISTOPHER,1 Judge Justice joined, and Justice PEMBERTON2 and in all but Part II-B of which Justice JEFFERSON, MEDINA, Justice Justice JOHNSON, joined. and Justice WILLETT primary The issue in appeal this whether hydraulic subsurface fracturing of natural well that extends into anoth- property er’s is a for which the value of drained as a result damages. recovered as hold that We rule capture of bars of recovery such dam- ages. We hold: also (cid:127) mineral lessors with reversionary in- bring terest have an standing to action for trespass causing subsurface actual Miller, N. Webre, Elizabeth M.N. Jane injury; McConnico, L.L.P., Scott Douglass & Aus- (cid:127) tin, TX, for Petitioners. damages of for breach measure of the implied protect against covenant to Garcia, Ramon Law Offices Ramon drainage is the value of minerals Garcia, P.C., TX, Edinburg, Michael D. lost because of the lessee’s failure to Jones, Reed, Jones & E. Kilburn Clarence act prudence, with reasonable Gill, LLP, Houston, TX, George L. Will- there is no evidence of that value in ingham, George Law Offices of L. Willing- case; ham, Stahl, Curl & Stahl, P.C., Bennett (cid:127) III, &
Roy R. Barrera, Barrera Golden supported jury’s some evidence L.L.P., Antonio, TX, Respondents. San for finding implied of breach of the cove- develop, nant to and whether lessors’ Patterson, Jerry General Texas Land repudiation of the lease was a defense Office, White, Jr., Rex H. Law Offices of was, record, law; on this a matter White, Jr., Rex H. Hayes, John Robert (cid:127) Owens, Fowler, Hayes & Lindil supported jury’s Carol Aus- some evidence tin, TX, Jr., A. Marseglia pooling; Everard bad faith finding Liskow Pemberton, Justice, Tracy Christopher, Judge, 1. Hon. E. 295th 2. Hon. Robert H. Court Court, Texas, County, sitting Appeals District Harris for Third District of Texas at Austin, Wainwright for sitting commission of Hon. for Justice com- O’Neill Justice Texas, Perry, pursuant Perry, Rick Governor of mission Rick of Tex- of Hon. Governor as, pursuant Section 22.005 of the Texas Government Section 22.005 the Texas Code. Code. Government (cid:127) Hidalgo County tract of land memoran- a 748-acre into evidence of a admission their an- they and called which Share a racial was re- containing
dum slur century. for occupied over cestors error; and versible case, petition- to this At all times material (cid:127) its discre- the trial court did not abuse Corp.5 has been Oil & Gas er Coastal case refusing tion in to abate this in Share 13 and of the minerals lessee two related cases. tract, was also adjacent Share court judgment We reverse until of the minerals Share lessee to the trial appeals3 and remand the case in that 163- the mineral estate acquired proceedings. court further A reser- acre in 1995. natural tract formation, voir, Vicksburg T lies be- I 12,610 11,688 feet below these tween following depicts schematic Respondents,4 to we shall refer tracts. whom Salinas, area. own minerals in the surface collectively *5 interpleaded respondents years. area for Coastal disputes
Title have roiled the Ibarra, Torres, Garza, Resources, L. Energy Norma Inc. Nellie S. 3. Mission v. Garza Trust, Saenz, Saenz, (Tex.App.-Corpus Eloy Mary 301 Elizabeth Esteban 2005). Hernandez, Saenz, Christi Muniz and the Hilaria Trust, Energy dis- of the Garza beneficiaries Salinas, Respondents 4. are Hilda Hilaria Sali- Garza, 31, 2004—Juan Lino solved December nas, Salinas, Salinas, Margarita Maria Rosa Jr., Garza, Garza, Sr., Guadalupe Romulo Saenz, Jr., de Mercedes Salinas Lon- Vincente Carreles, Lopez, Garza Maria Rita Garza Aida Salinas, goria, Miguel Angel Elva Maria Del- Garza, Cantu, Jose Car- Elma Garza Eduardo Saenz, Jr., gado, Edwardo Olivia Salinas Per- Garza, Garza, Jr., Billy Sal- Carlos men ez, Robbins, Sendejo, Lydia Aurelia Salinas vador Robbins. Guerrero, Luis Hum- Maria Matilde Salinas Delgado, Delgado, Ra- berto Marco Antonio & El Paso Production Oil is now 5.Coastal Garcia, Muniz, Lopez, mon Jesus Israel Javier USA, Company. & Gas L.P. Coastal Oil Gas Vasquez, Lopez, Muniz Meliton Francisca petitioner, parties have iden- Alaniz, also Lopez Olga Betancourt San Juanita of the two no difference in interests tified Sylvia Lopez, Myrna Lopez, Nora Betancourt entities, them and we refer to collec- Coastal Lopez, Lopez, Oscar An- Betancourt Norberto tively "Coastal”. Lopez, Ampora gel Lopez, S. de Leticia well, ing in a 1978 disagreements operate action resolve order that it could among respective them over their Coastal Fee No. well near 13. In interests Share February 1997, 13. Coastal drilled Share Those issues were resolved the Coastal 2, agreed Fee No. also near Share 13. judgment Many 1982. again Share 13 sued in owners March, In Salinas sued Coastal boundary in 19957 their over with Share breach of its implied develop covenants to 15. That was not issue resolved until prevent drainage. Share Salinas plaintiffs 1999.8 The in those cases also allowing was concerned Coastal was claimed that their was being drained gas, Share 13 on which Coastal owed Sali- on wells Share royalty, nas a to drain Share where Coastal, as operator, both owner and was From 1978 to drilled Coastal three by royal- entitled unburdened on wells Share two which were ty obligation. prompted suit Salinas’s productive, M. Salinas No. 1 and No. flurry drilling Share 13— 2V, other, though B. Salinas No. 1 eight wells in fourteen until months. Not (“BS1” diagram), on the In not. again late 1999 did Coastal drill on Share Coastal drilled M. Salmas No. and it exceptional producer. was an The No. 3 1,700
well was about feet from Share 12. “tight” T is a Vicksburg sandstone The closest well on Share was the formation, relatively im- imporous and (“PI” diagram), Pennzoil Fee No. 1 on the permeable, which natural cannot *6 closer, but Coastal wanted in one so produced be commercially hydrau- without 1 Coastal drilled the Coastal Fee No. in stimulation, lic or fracturing “fracing”, as the northeast corner of Share as close process industry. the is known in the This (and 3) to Share 13 the M. Salinas No. down well pumping done fluid Railroad Texas Commission’s statewide high that it pressure so is forced out into spacing permitted Rule feet from the formation. The creates pressure —467 the north boundaries the and east.9 in propagate along cracks the rock that the That location was too close to the Pennzoil elongat- azimuth of natural fault lines an I,10 Fee No. and the Commission refused elliptical pattern opposite ed directions exception because both wells the the well. Behind fluid comes a drain from 13. slurry containing granules would Share So Coastal small called 1, produc- beads, proppants sand, shut the Pennzoil Fee No. ceramic or baux- — Garza, 1,200 6. Lino al. v. than Juan et H. hereafter be drilled nearer feet to Elizabeth Maddux, al., et Coates Cause No. C-035-88-G drilling completed well in or same to the Ct., Tex., (370th Hidalgo County, Dist. filed farm, on same or and horizon the tract 7, 1988). Jan. well shall be drilled nearer than 467 feet to line, line, any property lease or subdivision Salinas, de et Amelia al. v. Garza Elizabeth 7. line; commission, provided the in order to Maddux, al., et Cause H. Coates No. C-6239- prevent prevent the waste or confiscation (93rd Ct., Tex., Hidalgo County, 95-B Dist. property, grant exceptions permit 7, 1995). Dec. filed drilling pre- shorter within distances than Maddux, (Tex. paragraph S.W.2d 280 when scribed in this the commis- Garza denied) (af pet. App.-Corpus Christi exceptions are sion shall determine such firming summary judgment in the Juan Lino necessary prevent pre- either to or to waste suit). Garza property.”). vent the confiscation of 3.37(a)(1) (2007) (Tex. 9. Tex. Admin. Code Id. Rule) Comm’n, ("No Spacing R.R. Statewide oil, gas, geothermal well for or resource shall fracing No. the Fee in the For the Coastal lodge are themselves
ite used—that to reach designed cracks, against length the was hydraulic them propping open 1,000 the Salinas’s feet from well. pressure would over enormous subsurface Economides, testi- was J. expert, shut as soon as the fluid Dr. Michael force them drained, leaving designed operation the is then he gone. The fluid fied would 1,100 1,500 the feet from open oil to flow to least the cracks to extend at the from the Fracing in effect increases distance wellbore. well. The farthest the formation, allowing line was 660 exposure well’s 13 lease to the Share well hydrau- First used commer- greater production. agree that the parties The feet.11 cially fracing is now essential this dis- lengths exceeded propped lic oil tance, economic the effec- they disagree whether Texas, throughout used commonly lengths cannot be length The tive did. States, the world. United directly, and each side bases measured opinions of an eminent assertion Engineers design fracing operation hydraulic engineer long experienced well, injection selecting a particular Salinas, and Economides for fracturing: injected, and of material pressure, volumes for Coastal. Stephen Allen Holditch Dr. re- type of to achieve a desired proppant that a shorter effective Holditch believed porosity, regarding sult based on data by post-fracing pro- length supported (elasticity) of permeability, and modulus duction data. rock, as- pressure and the and other design pro- pects of reservoir. Share 13 All the wells on Share jects length of the fractures from by the amount fraeed. As measured were hydraulic ways: three well measured well, into the the frac- injected proppant fracing length, is the distance the which 1 and No. ing of Coastal Fee No. travel, 3,000 fluid will as far as sometimes testified, was, “mas- as Economides wells well; length, the propped feet from *7 sive”, any fracing larger opera- than much slightly which is the shorter distance Several on a well on Share 13. tion reach; proppant will the effective suit, Salinas amended filing months after length, the still shorter distance within trespass, a claim for pleadings to assert his actually fracing operation which the will fracing of the alleging that Coastal’s these improve production. Estimates of invaded the reser- Fee No. well Coastal data dependent distances are on available 12, causing substantial beneath Share voir imprecise. and are at best Clues about drainage gas. likely which fractures are direction 1997, unit In formed an 80-acre horizontally run from the well be Coastal just acres in the data, under 73 comprised and other derived from seismic 13 and little be corner of Share virtually nothing can done control southwest direction; in the southeast corner over seven acres that the fractures will follow M. The unit included the Sali- fault in the forma- Share 12. Mother Nature’s Unes did not fracing No. and No. wells but vertical dimension of the nas 2Y tion. The The unit on by include a well Share confined barriers —in pattern is making for case, possible lithological changes benefited Salinas shale—or other be in the M. Salinas No. 8 to drilled above and below the reservoir. longest square, The distance Share 13 is 467 feet. well is on the corner of The lines. opposite length diagonal, which are the lease feet. sides of the well and The between shortest distance location, 1,200 most desirable -within feet of exact direction taken the fractures and 2-V, the M. Salmas No. which Rule 37 the extent of their incursion into Share prohibited.12 would otherwise have But and whether conditions the reservoir complained Salinas that the unit effectively- varied from Share 12 to Share 13. Eco- royalty obligation freed Coastal from its on nomides calculated the value of that to Share 12 n gas equal the amount of $388,000 $544,000. Coastal, between portion produced from the two noted, offered expert evidence from its unit wells on Share percent about nine drained from Share 13 due to (%oths),since that amount appor- would be fracing. claim, On their faith pooling bad tioned Share and that Salinas would $81,619 Salinas offered evidence of dam- have received the same benefit —the No. 8 ages royalties. in lost along higher royalties if Coastal well— jury found: only had included one Share acre in the (cid:127) Coastal failed reasonably develop unit. Salinas to his added lawsuit claim Share 13 after causing Salinas pooling. bad-faith damages million for interest on $1.75 trial, At claimed he Salinas had lost royalties; lost royalty revenue because of delay Coastal’s (cid:127) duty pool Coastal breached its in developing Share 13. argued Coastal faith, good causing Salinas million $1 delays part were due in to con- damages royalties; lost cerns over uncertainties about Salinas’s ti- (cid:127) fracing Coastal’s the Coastal Fee tle. In response, Salinas offered evi- No. 1 well trespassed on Share dence internal memo from Coastal’s causing substantial which drainage, files, 1977, discussing written in prob- title reasonably prudent operator would among lems the Share 13 owners which prevented, million dam- $1 the author attributed to the fact that their ages royalties; in lost were, words, ancestors in his “mostly illit- (cid:127) acted appropri- Coastal with malice and erate Mexicans”. The memo concluded property unlawfully, ated Salinas’s drilling 13 was worth Share punitive should be assessed million $10 despite risk problems. the title Coastal’s damages; objection that the memo was irrelevant (cid:127) attorney Salinas’s fees reasonable unfairly prejudicial was overruled.13 million. trial were $1.4 also offered evidence that because *8 price had increasing, been Sali- The damages trial court reduced the for actually any nas delay benefited from $81,619 pooling bad-faith from million to $1 development. damages and the from drainage for $1 $543,776, million each instance the Regarding drainage, expert, Salinas’s maximum supported by amount Salinas’s Economides, testified that because of the evidence, and judg- otherwise rendered fracing operation on the Coastal No. 1 ment on the verdict. well, 25-35% of the gas produced it from explained drained Share 13. He appeals he The court of reversed the attor- not ney could be more definite because of two fee award fees for because included not factors could be ascertained: a claim prosecution Salinas’s of breach 37, supra 12. substantially outweighed by danger See Rule note 9. ue is prejudice_”). of unfair relevant, ("Although 13. See Tex.R. Evid. 403 probative evidence be excluded if its val-
9 market, A on implied covenant damages, and jury found no which lessor, only “a has As mineral Salinas attorney case to be remanded the for fees of re- possibility interest and the royalty respects, other redetermined.14 In all terminate, but the leases verter” should appeals court of affirmed.15 for, pro- possess, right explore “no courts have
duce the minerals.”18 Texas
II
of an
occasionally
gist
stated
“[t]he
injury to
trespass
realty
is the
action of
begin
with Salinas’s contention
We
possession.”19 Since Salinas
right
hydraulic
fluid
fracturing
the incursion of
right
no
to the minerals
possessory
has
two
proppants
into another’s
land
13,
argues he has no stand-
Coastal
Share
a tres-
miles below the surface constitutes
ing
trespass.
sue for
can
pass for which the minerals owner
damages equal to the value of
recover
the rule too
But courts have stated
gas thereby
law,
on
royalty
trespass
drained
broadly. At common
includ-
argues
land.
that Salinas has
to different
ed several actions directed
standing
wrongs.20
quare
to assert an action for tres-
kinds
Trespass
clau-
did, hydraulic
if
pass,
physical
and even
he
fractur-
limited to
inva-
fregit
sum
was
possessory
interest
ing
trespass.
plaintiffs
an actionable
Because
sions of
land;21
was
standing may
jurisdictional,16
we ad-
case
not22
injury
a non-
an action
provided
dress it first.17
Co.,
301,
Pentagon
(Tex.App.-Corpus
E.g.,
v. Sw. Bell Tel.
14. 166
330
19.
Enters.
S.W.3d
2005).
477,
(Tex.Civ.App.-Houston
Christi
478
540 S.W.2d
1976,
n.r.e.);
ref’d
see
Dist.]
writ
[14th
at
15. Id.
331.
159,
Dooley,
v.
S.W.3d
188
144
McMillan
2004,
denied); Light
pet.
(Tex.App.-Eastland
Inman,
DaimlerChrysler Corp. v.
252
16. See
Bank,
v.
889
house Church
Tex.
299,
(Tex.2008) (“A
of Cloverleaf
S.W.3d
304
court has no
595,
(Tex.App-Houston
n. 3
598
jurisdiction
plaintiff
over
claim made
denied);
writ
Dist.]
Maranatha
it.”);
[14th
standing
without
to assert
but Allen
cf.
Co.,
737, 750-752,
Temple,
v. Enter.
Wright,
Inc.
Prods.
468 U.S.
104 S.Ct.
v.
(1984)
(differentiating
(Tex.App.-Houston [1st Dist.]
possessory
such as
By
trespass,
reversion.23 estate.
his claim of
Salinas
explain:
permanent
Professors Prosser
Keeton
seeks redress
a
injury
for
interest —a loss of value because of
Thus a
cannot
a
landlord
sue for mere
wrongful drainage.
specu-
His claim is not
trespass to land in the occupation of his
lative;
actual,
he
alleged
has
concrete
tenant.
is not
legal
He
without
remedy,
not,
harm
his
whether
leases continue or
in the
of an
form
action on
case
the
for
either in
royalty
reduced
or in
revenues
injury
reversion;
the
the
order
loss
gives
of value to the reversion.25 This
it,
to maintain
he must show more than
him standing
sue
for
form of tres-
the trespass namely,
permanent
actual
—
pass,26 and under our liberal pleading
property
harm to
of
the
such sort as to
rules,
law,
unlike the common
he was not
affect the
of
value
his interest.24
required
specify
which form. At com-
Salinas’s
law,
reversion interest
the
choosing
mon
wrong
form ac-
minerals
case,
leased
Coastal is similar to a
tion was fatal to the
but modern civil
landlord’s
procedure
reversion interest in the surface
has
such rigid
abandoned
dis-
Letson,
488,
23. See
person,
Alexander v.
242 Ala.
7
must
establish that
conduct of
(1942);
Fordyce
So.2d 33
Crowder v.
(a)
Lumber
person
such third
is such conduct as
392,
Co.,
(1910);
93 Ark.
11
est
cujus
ejus
est solum
note,
But that
important
It
howev-
tinetions.27
maxim —
et ad
usque ad coelum
er,
trespass does not
that Salinas’s claim of
inferos —“has
Wheeling
world.”30
(which
in the modern
place
damages
he
entitle him to nominal
surface of one’s
across the
airplane
He
sought).28
prove
not
must
actual
has
permission
trespass;
is a
without
property
injury.
airspace two
plane through the
flying the
B
not. Lord
property is
miles above the
maxim,
Coke,
pronounced the
did
who
something
like
Had
caused
But
possibility
airplanes.31
the
of
consider
surface
deposited
to be
on the
proppants
imagine oil
The law
neither did he
wells.
13, it
for tres-
of Share
would be liable
two
no more be the same
trespass
of
need
pass,29
from the ancient common law
miles
surface than two
miles
the
below
the
ownership
maxim that land
extends to
above.
below,
sky above and the earth’s center
rule
whether
might extrapolate
previously
one
the same
We have not
decided
to an ac-
fracing
give
can
rise
should
two miles
the surface.
subsurface
apply
below
20,
1.2,
action,
reversion,
for
supra
§§
at 5
and the tenant’s
27. See
note
harper,
times,
("The
significance
trespass,
ac-
distinction between
landlord’s
retains
in modern
tion,
reversion,
damage
despite
for
to the
and the
be
of the distinction
abolition
action,
trespass,
signifi-
for
contemporary
tenant’s
retains
action. Under
tween forms of
times,
course,
despite
cance in modern
the abolition
pleading, of
neither the land
rules of
of
of
distinction between
forms
action.
dis
nor the tenant’s action should be
lord’s
contemporary
pleading, of
Under
rules of
appears
simply because it
to have
missed
course, neither the landlord’s
the tenant’s
nor
brought
wrong
in the
form. The older
been
simply
action
because it
should
dismissed
however,
important,
it
since
affected
rule is
wrong
appears
brought
to have been
in the
way
damages recoverable in a
the measure of
however,
important,
form. The older rule is
prevails.”).
that still
damages
it affected the
re-
since
measure
way
prevails.”),
in a
coverable
that still
Dietert,
382,
v.
Tex.
29. Glade
156
1.3,
("Under
formulary system
642,
("To
(1956)
trespass
constitute a
proceed
a plaintiff’s
law
common
suit could
entry upon
land need not be in
another’s
action;
only
wrong
one form of
if the
form
by causing
per-
person,
may be
made
chosen, plaintiff
if
were
lost the case even
boundary
mitting
thing to
of the
cross
recovery
facts were shown that would entitle
omitted).
(internal
premises.”)
quotes
hardships
in another form.... The
bred
rigidity
system finally
led to the
256,
Causby,
328 U.S.
260-
30. United States
great procedural
reforms of the mid-nine-
5,
1062,
tion
That
held in
migrated
property
we
water
across
Gregg
Delhi-Taylor
Corp.,
v.
heavily
we relied
on the
Oil
fact that the Com-
is one for
approved
mission
decide,
operation.33
had
the
the
to
courts
not
the Railroad
later,
Viking,
in Geo
Inc. v.
years
Thirty
1961,
In
Commission.32
when we decided
Operating
Tex-Lee
Company, we issued a
Gregg,
the Commission had never ad-
per
opinion
curiam
holding
fracing
that
subject,
dressed the
specifically
and we
beneath another’s land
a trespass,34
was
indicated no
on
view
whether Commission
rehearing
but on
opinion
we withdrew the
rules
secondary
could authorize
recovery
and expressly did not decide the issue.35
operations
that
crossed property
lines.
Term,
The next
in Railroad Commission
needWe
not decide the broader
Manziel,
Texas v.
we held that a salt
case,
issue here.
In this
actionable tres
of
injection
water
secondary recovery opera-
pass requires injury,36
only
and Salinas’s
trespass
tion did not cause a
injury
when the
claim of
op-
fracing
Coastal’s
—that
26,
411,
26,
(1961).
411,
(1961);
162
Tex.
344 S.W.2d
415
Tex.
344 S.W.2d
416
Amaril
points
language
opinion
Products,
20,
Salinas
to
in our
Energy-Agri
lo
v.Oil
794 S.W.2d
suggest
hydraulic
could be read to
(Tex.
Therefore,
frac-
1990).
27
capture
the rule of
turing
property
below another's
constitutes an
operator]
permit
would not
[an
to recover for
trespass.
example,
actionable
For
we offered
of
might
loss
oil
been
allegations
that the
case
were “suffi-
produced
fracing beyond
of
as
result
cient to raise an issue” whether there was a
tract.”).
its
boundaries of
trespass.
Id. at 416. But we were not re-
quired to reach the issue.
797,
(Tex.1992)
(per
839 S.W.2d
798
cu-
riam) (“The per
opinion
judgment
curiam
560,
(Tex.1962).
33. 361 S.W.2d
568-569
We
22,
April
of this court issued
are with-
1992
stated:
Further,
drawn.
the order
of
of
court
if,
We
conclude that
valid exercise
22, 1992,
April
granting
application
waste,
authority
prevent
protect
of
its
withdrawn,
of
application
writ
error is
as the
rights,
correlative
or in
the exercise
other
improvidently
peti-
granted.
denying
In
powers
jurisdiction,
within its
the Commis-
error,
application
tioner's
for writ
we
secondary recovery
sion
pro-
authorizes
approving
should not be understood as
or
jects,
trespass
does
occur when
not
disapproving
opinions
ap-
of the court of
injected, secondary recovery forces move
lines,
peals analyzing
trespass
capture
the rule of
operations
across lease
and the
are
they
hydraulic
subject
injunction
apply
fracturing.”).
not
to an
on that basis.
trespass
The technical
rules of
have no
place
validity
consideration of the
Waddle,
90,
Lyle
36. See
v.
144 Tex.
the orders of the Commission.
noted,
(1945).
already
As
acknowledge
Id. We
opinions
that our
trespass against
this case
does
involve
Gregg
are
in some tension and
Manziel
interest,
possessory
require
which does not
perfectly
did not
delineate the Commission’s
injury
actual
be actionable and
result
authority
regulate secondary recovery op-
damages.
in an award of
See
nominal
erations.
Wilson,
McDaniel
v.
Bros.
70 S.W.2d
ref'd)
(Tex.Civ.App.-Beaumont
writ
(Tex. 1992) (No. D-1678)
34.
13 more Nothing is suspend application. for to flow possible gas eration made it drilling 12 of sense than the beneath IB the Share unnatural that from Share by capture. no the rule of be precluded wells, wells—is there would which without gives rights a mineral owner That rule If “unnatural” by at all. need for the rule gas produced oil from title unusual, the facts are that Salinas means on the even property, well bottomed lawful been com- fracturing long has hydraulic gas from if the oil and flowed to the well industry and is monplace throughout rule beneath another owner’s tract.37 The production necessary for commercial is a of the oil and capture of cornerstone formations. Vicksburg many T other gas industry and is fundamental both un- Salinas means by And if “unnatural” rights regulation.38 and to state property fair, He ample law him relief. affords claim that the Coastal Salinas does not to stimulate hydraulic fracturing may use regula- No. 1 statute or Fee violates his wells and drain from own Thus, the claims to have lost gas tion. he his property to his own —which He simply belong does not to him. does Coastal, successfully done has operator, hydraulic fracturing op- claim not that the not may he sue already —and damaged his or the Vicks- eration wells done, he also doing sooner—which has so T burg property. formation beneath his case, as it though unsuccessfully, in this sum, damages In does not claim Salinas now turns out.39 that are recoverable. stimulating argues produc- Salinas argues capture Salinas the rule fracturing ex- through hydraulic tion hydraulic fractur- apply does not because beyond property one’s is different tends argu- ing point is unnatural. drilling or slant well—a from a deviated is If “unnatural” Sali- ment not clear. signifi- departs from the vertical well that intervention, due to nas means human property, cantly on another’s activity simple answer that such is the —bottomed rule, produce oil and not Both very basis a reason which is unlawful.40 Comm’n., 417, solely Halbouty capture "occur[] v. it did not 37. R.R. 163 Tex. because 364, (1962); agencies in through operation S.W.2d 374 v. Texon natural 357 Elliff 558, Co., 575, manner, Drilling distinguished 146 Tex. 210 from artifi normal 509, (1948); Harrell, 561 143 Tex. v. flow.” applied stimulate such a Corzelius cial means 961, (1945); v. 186 S.W.2d 964 Brown Hum meaningless or But distinction is either Co., 296, Oil 83 S.W.2d ble & 126 Tex. all of oil and because extraction circular Ref. 935, (1935); Stephens County v. Mid- 940 In Railroad Commis artificial means. Co., 160, 254 560, Kansas Oil & Gas 113 Tex. S.W. Manziel, 361 S.W.2d 568-569 sion v. 290, (1923); see & Tex. 292 also Houston (Tex. 1962), injecting held that water into a we East, 146, Ry. Cent. 279, Co. Tex. 81 S.W. 98 operation secondary recovery reservoir (1904). trespass. The production was not a increase different, not of these cases were outcomes See 1 Ernest 38. also Jacqueline E. Smith & injection than is less artificial because water 1.1(A) § Lang Weaver, Texas Law of Oil and Gas pumps, but Railroad Com vacuum because 1998) (2d ("The capture ed. rule injection and for allowed water mission rules important single doctrine of oil the most pumps. bade vacuum law.”). Co., 416, Hastings Co. v. Tex. 149 Tex. Oil capture, the court applying In the rule of (1950); 234 S.W.2d appeals distinc Tex Admin. drew a natural/unnatural ("A 3.37(m)(5) well is either bot- Co., Grayce 37 S.W.2d tion in Peterson v. Oil Code lease, April deviated after 1931), tomed off the (Tex.Civ.App.-FortWorth 370-374 specific (1936), of a drilled in direct violation aff'd, Tex. placed the Rule 37 drainage condition limitation resulting the use holding that specific commis- permit, or is in violation of pumps did fall within the rule of vacuum *13 gas situated property. beneath another’s property one owner to sue another for oil capture But the rule of gas by hydraulic fracturing determines title to and drained gas property by beyond that drains from owned that extends lease lines. person property by one onto anoth- owned First, already the law the affords owner says nothing er. It about ownership the of drainage who claims full recourse. This is place. gas that has remained The justification the capture, the rule of produced through a deviated well does not and it applies regardless of the whether migrate to the wellbore from another’s drainage fracing. is to due If the drained it property; already is prop- another’s well, owner has can he drill one to erty. capture justified The rule of is be- drainage offset from property. his If the cause a protect landowner can himself minerals are leased and the not lessee has drainage by well, drilling own his well, drilled a the owner can sue the lessee thereby avoiding the uncertainties of de- for violation of the implied covenant in the
termining gas migrating through how is a protect against drainage.42 lease to If an reservoir.41 is expedience. It a rule of adequately offset well protect will not protect against One cannot drainage from (or against drainage, opera- the owner his by well; a drilling deviated well own his tor) may pool, offer to and if is the offer the produce deviated well will continue to rejected, may he apply to the Railroad gas. his Nor uncertainty is there that Commission for forced The pooling.43 Com- a producing deviated well is another own- regulate mission to production also gas. justifications er’s The for the rule of prevent drainage.44 suggests No one capture support applying do not the to rule these various provide inadequate remedies a deviated well. protection against drainage. persuaded by Second,
We are not
allowing
Salinas’s
recovery
arguments. Rather, we find four reasons
the
of gas
by hydraulic
value
drained
frac
change
not to
the
capture
turing
rule of
to allow
usurps
juries
to courts and
law-
order,
well,
illegal
sion
is an
well and shall
be
capture,
it
not
called the
of
it
rule
and said
permitted,
permit
and such well where
adjoining
protect
landowners
could
replaceable
refused shall
considered a
by going
doing
themselves
likewise. Ad
replacement-well reg-
well under commission
mittedly
expediency,
of
was matter
ulation.”).
in the then
of the oil
state
business and
dynamics,
knowledge
then
it
reservoir
292;
Stephens County,
see
S.W. at
result.”).
practical
reached
Pickens,
Ryan
Corp. v.
Consol. Petrol.
155 Tex.
(Wilson, J.,f
(1955)
Alexander,
42. Amoco Prod. Co. v.
C.J.,
Hickman,
J.,
Garwood,
joined by
(Tex.1981) ("The implied
covenant
(‘‘[T]he
dissenting)
adjoining
owner of the
protect against drainage
part
migrating
tract
from which
oil is
can
implied
protect
broad
covenant
lease-
protect
by drilling
himself
offset wells. This
protect
hold. The covenant to
the leasehold
equal
always
right
supported
to drill
has
reasonably prudent
opera-
extends what
constitutionality
capture.
of the rule of
Take
tor
do
would
under similar facts and circum-
fails,
away
and the reason for
rule
stances.”).
leaving
unjust
only
a result not
one
incon
concept
sistent with the fundamental
of own
§§
43. Tex. Nat. Res.Code
102.001-.112. See
ership
part
place
oil
as a
Railroad
Oil
Comm'n
Pend Oreille
& Gas
realty....
right
our
Under
law no one has a
Co.,
(Tex.1991).
dustry sixty years, over neither for ever Legislature nor the Commission has to Salinas’s claims turn now We it, every regulate though fit other seen protect implied covenant of the breach thoroughly aspect production has been drainage, implied against breach regime Into regulated. so settled a pooling. develop, and bad-faith covenant law need not itself. common thrust A
Accordingly,
damages
we hold that
to act
implied obligation
had
drainage by hydraulic fracturing
pre-
are
operator
pro-
reasonably prudent
It
capture.
as a
cluded
the rule
should
drainage,
which could
capture
that the rule of
tect Share 13
go
saying
without
by drilling
discharged
offset
cannot
used
shield
that is
have been
misconduct
malicious, reckless,
12.57
on Share
illegal,
or intended to wells
counter
*16
justifica-
jury
that
failed meet
harm another without commercial
found
Coastal
E.g.
technique.”);
Land
Royalty
as
Brief for Texas General
Brief of American
Council
(“[W]hile
Supporting
at 2
Supporting
Amicus
Petitioners
Petition-
Office as Amicus Curiae
parties
prevailing
the
in the case below are
("Recognizing
2
a
for
ers at
cause of action
owners,
long-term
royalty
the
the
effect of
trespass by
is
fracture treatment
subsurface
appeals’
for
court of
decision is disastrous
policy
only
public
not
ill-advised
a
royalty
throughout
opera-
owners
Texas.
If
practice
standpoint, it is neither warranted
possibility of
lia-
tors are faced with the
tort
protect
necessary to
mineral owners from
nor
hydraulic
bility
engaging
fracturing,
when
fractures.”);
drainage
caused
subsurface
wells,
they
likely
will
fracture fewer and fewer
Independent Producers and
Brief for Texas
royalty
of
los-
the ultimate effect
owners
Royalty
of
Owners Ass’n and Texas Alliance
ing out
hundreds of
of
on
millions
dollars
Energy
Support-
Amici Curiae
Producers as
royalties
economy
the
and
the entire state
of
("The impact
ing
of
...
[a]
Petitioners
Co.,
weakened.”);
al.
Brief of BJ Services
et
trespass by
holding
of action for
that
cause
("The
Supporting
as Amici
Petitioners at 24
bring
hydraulic fracturing exists ... will
dra-
the
[lower courts’] decisions do not reflect
consequences to technolo-
matic and adverse
law,
wrong,
nothing
they
portend
are
and
gy,
operators
and to the Railroad Commis-
gas producers
short
chaos for oil and
and
of
waste.”);
ability
prevent
Brief of
sion’s
companies in the State Tex-
related service
of
Sup-
as
Curiae
Texas Oil & Gas Ass’n Amicus
as,
producing
perhaps
gas
oil
other
and
(”[L]egitimate hydrau-
porting Petitioners at
well.”);
Harding
states as
Brief of
Co. as
fracturing
considered
lic
should never be
Supporting
Amicus Curiae
Petitioners at
Holding
activity.
would
otherwise
tortious
(“|T]here
every
it clear that
is
reason make
recovery operations that
jeopardize secondary
trespass
of
will not be allowed
tort
fifty years and have
have been used for over
imperil
practice
hydraulic
of the sound
of
use
greatly
energy re-
to this nation’s
contributed
fracturing. To do otherwise would be to im-
serves.”).
pose
segments
on all
of the
massive costs
gas industry
impede devel-
Texas oil and
and
Helton,
Corp. v.
57. Kerr-McGee
production
vitally
opment
needed oil
("An
(Tex.2004)
oil and
lessee
reserves.”);
Brief for Railroad Com-
obligation
protect
implied
an
lease-
has
Support-
Texas
Curiae
mission of
as Amicus
drainage
drainage. Local
occurs
hold from
("A
ing
judicial
at 2
determination
Petitioners
migrates
a lease to the
when oil
from under
that a cause of action for subsurface
producing
adjacent
well
well on
bore of
by fracture treatment exists in Texas would
prevented by drilling
Drainage may
lease.
significant
for
create a
disincentive
oil
a breach of the
an offset well. To establish
gas operators to
refine
continue to use and
drainage,
implied
protect against
production
covenant to
longstanding
this
and effective
obligation but
was instructed to find
have held that
measure
“[o]ne
We
damages
royalty
value of the
on
damages”
implied
“[t]he
breach
cov
drained from
“the
protection
roy
Share 13
enant of
is
amount of
trespass” by
subsurface
the Coastal No. 1
that
alties
the lessor would have received
fracing operation,
drainage
not the
rea-
from the offset well
lease.”58 But
sonably prudent operator
pre-
should
overcompensate
this would
the lessee if
jury
vented. The
instruction
that
production
assumes
from the offset well exceeded
a reasonably prudent operator on
13 the
drainage.59
Share
Another measure
dam
prevented
drainage
should have
all
due to
ages
royalty
is the value of the
on the
too,
fracing
this,
operation
gas,60
on the Coastal No. 1. drained
overcom
would
complains
that
there is no evi-
if
all of
pensate
drainage
the lessee
assumption,
dence to
support
prevented,
could have been
either because
field,
jury should
regulatory
have been instructed to find as
of the nature of the
or the
damages the
drainage
system,
value
whatever
reason.61 The
prevented,
damages
should have been
correct measure of
for breach of
protection
there
no evidence of
amount
such
the implied
covenant of
is the
drainage.
fully compensate,
amount that will
but not
(1)
short,
proof
a lessor
show
being
must
In
substantial
drained from
land.
field,
(2)
drainage
necessary
from the lessor's
that a
there is
correlation between
reasonably prudent operator
drainage
recovery
would have act
lessor’s
due to
and a
loss
prevent
drainage.”);
ed
Prod.
based
from an
Amoco
on the amount of
*17
Alexander,
563,
(Tex.
(footnote omitted)).
622
Co.
S.W.2d
offset well.”
568
1981) ("[B]ecause
complexity
the
the
oil
gas industry
changes
technology,
and
and
in
Tichacek,
Pipe Line
60. See Southeastern
Co. v.
obligation
the courts cannot list each
of a
393,
(Tex.App.-Corpus
399
reasonably prudent operator
may
which
arise.
1998),
part,
part and
in
Christi
in
rev’d
aff'd
perform any
The lessee must
a
act which
(Tex. 1999) ("The
prices rates. Earlier B prices plus interest ments at lower higher also well less later implied obligation payments had than current market illustrates. develop prices, continue to Share 13 with reason- as the able No. A on a of oil diligence royalty payment after the M. Salinas barrel $50 plus completed.64 paid year, well which have been last alleged Salinas should interest, delay year’s drilling Coastal’s wells is far less than same additional year. obligation, jury royalty breached that and the on a barrel of oil this $150 *18 instruction, in agreed. But the Salinas claimed to have lost the the trial court’s argument, the and did royalties interest income would have context the evidence sooner, they jury considering had not from produced paid prevent been the the position. the court the to con- reads in- jury trial instructed Coastal’s Coastal Co., liability 62. v. Oil a does not affect its See Mandell Hamman & common lessee Ref. 153, lessors].”). (Tex.App.-Houston generally [plaintiff [1st 822 S.W.2d 164 the See 1991, (“The denied) 59, (dis writ measure of Dist.] §§ supra note 824-824.2 Williams, damages drainage for breach of the covenant authorities). arguments cussing various production royalty was interest the the on lost by prevent producer’s the failure to drain- Co., Waggoner Sigler W.T. v. Oil 64. See Estate age."). (1929) Tex. 29 118 ("Where mining provided a for oil or lease argument a rejected have the that les We gas royalties, and failed to define the lessee’s higher be to a a see should held standard than regards discovery duty development after as when, reasonably prudent operator as in this gas, implied paying the law the oil or case, operator that he is of the well is also obligation to continue the lessee draining property. Amoco Prod. lessor's production development oil or Alexander, (Tex. Co. v. S.W.2d diligence.”). with reasonable 1981) (“The prudent operator reasonably [plaintiff is standard not to reduced Barker, & Co. Pac. Coal Oil les Texas [their lessee] because has other lessors] (1928). sors field. status as Tex. [The lessee's] in same jury’s suspending development struction confine the consider- Coastal’s obli- gation. ation amount determining of some interest, years’ regard
two lost without is in The law well-settled Texas that But other factors. the instruction directed who ... wrongfully repudiate “[l]essors jury to consider Salinas’s lost interest by unqualified title lessees’ notice income, they and had believed Coastal’s that the leases are forfeited or have evidence, they could have answered zero— cannot if complain terminated the latter Salinas interest earlier royalties lost on suspend operations under contract but lost net no income. Coastal made this pending determination the contro- plain in summation.66 The instruction versy will not profit be allowed to clearer, should been we cannot wrong.” repudi- their own A lessor’s say prevented jury that it from consid- ation of a lease relieves the lessee “from ering all the evidence. any obligation operations, to conduct otherwise, drilling, re-working, or on argues Coastal also there in said land order to maintain the lease support jury’s no evidence to answer of judicial pending force determina- components million. The of the $1.75 ... controversy tion of the over the damages projected past calculation— validity of the lease.”67 rates, prices, and the time val argues But rule applies Salinas money essentially ue of all undis —were only suspends operations when lessee trial, puted at and the result should have disputes, because of lease which Coastal straightforward been a matter of mathe Indeed, did not do. drilled eight Coastal matics, parties’ respective but the experts additional wells on Share 13. Salinas con- disagreed howon the calculation was to be tends that these circumstances Coastal appears made. It us Salinas’s ex repudiation cannot assert defense to pert’s calculations credit failed to Coastal delay parties’ development. dis- made, past payments interest factual, agreement legal, and Coastal entirely clear, but the record is not and we has not us to it. Coastal asked resolve cannot conclude that conclusively argues only that it to a jury was entitled not damaged established Salinas was repudiation. finding on none of the Since delay development, or that Salinas material facts no dispute, finding was offered evidence amount of such necessary. damages. Accordingly, reject we argu- Coastal’s
Finally, development regarding Coastal contends that ments the cove- nant, follow, refusing the trial court erred in to ask though the reasons that we jury by suing whether to invalidate the conclude that Coastal is entitled to a new leases, them, repudiated thereby Salinas trial. summation, argument just part, They’re in in it.... 90 some Coastal’s invested still thou- "[T]he was this: fact of the matter payment is upon sand ahead the dollars based prices have increased and that means more they receiving are now than this assumed being paid gas today they dollars are than payment they gotten that could have had we were, royalty being and that means more drilled earlier.” paid today than it was.... Let’s assume that every single penny they took the Plaintiffs that Invs., Inc., Ridge Co. v. 148 Oil Guinn would have received had these wells been (footnotes (Tex.2004) 157 omit- earlier, cent, it, every drilled and invested ted). it, bank, spent never never took it out of the to the Safinas and
C to maximize benefit altogether, disregard its own interests so to Coastal The Salinas leases authorized good as it in faith. As evidence long acted judg- “in pool option” “at its whenever [its] faith, points Safinas to Coastal’s of bad “necessary ment” or pooling was advisable the Coastal Fee No. not to include decision to properly explore, ... in order to or Unit, given in have 1 well which would operate premises said develop and leased royalty part production; on of its Safinas spacing in with the compliance rules of the M. Safinas No. well the inclusion Railroad Commission Texas.” Salinas Unit, unnecessary which was to to right had no insist that Coastal exercise spacing for the M. Safinas obtain favorable way, in any particular this broad discretion part from No. 8 and freed Coastal obliged good to act Coastal was royalty and the location of the obligation; faith,68 jury do. which the found failed to M. No. and No. wells less Safinas complains that evi- Coastal there drainage prevent favorable locations to support that finding. dence to agree Fee No. 1 well. We Coastal the M. Coastal formed Salinas Gas Unit supports that with Safinas this evidence to include the M. Salinas No. 2-V and No. finding. jury’s wells, thereby the M. allowing Salinas damages mil- jury also found of $1 No. 8 to be drilled in most advanta- lion, which the trial court reduced to location, No. than geous closer 2-V $81,619, total claimed. Salinas We have permit- Commission Rule 37 would except would affirm award we required ted. Coastal was to include some conclude, explain, as we will there acreage outside Share 13 in the Unit but trial. must be new was free determine the amount of acreage the size the Unit. Coastal all,
chose make the Unit 80 acres in IV include 7.357 acres Share finally procedural to two issues We come two on 13 but on include wells Share none raised Coastal. result, Share 12. As a Safi- Coastal owed nas his rata royalties only pro share of A from the two wells— the trial court Coastal contends 72.643/80ths, or Without 90.80375%. by admitting evi- abused its discretion Unit, royalty due a on all Safinas was regarding a 1977 internal memo dence produced from both wells. 13 title issues that referred Sali- Share illiterate argues predecessors “mostly Safinas that Coastal should nas’s Mexicans”, Rule 403 of the only included one acre because under Share Evidence, Unit, probative him providing the same benefit— Texas Rules of “the royal substantially outweighed by [was] M. Safinas No. 8 well —but more value 98.75%, 79/80ths, danger prejudice”. unfair production. ties^—on *20 it that the memo was irrelevant to required argues Coastal counters that was Tichacek, upheld Pipe pooling decision will be 68. Line v. 997 A lessee’s Southeastern Co. (Tex. 1999) ("A (citations has no pools 170 lessee unless the lessee in bad faith.” power pool express omitted)); without the lessor’s express ("Beyond at 171 the id. authorization, usually contained in lease, which power terms of the a lessor has pooling pooling the clause. For to be lease’s good pooling deci direct a in its faith lessee valid, it must be done in accordance with ...”). sions. specified purposes in lease. method and case, any in if claiming prevail they issue and that Salinas used thereunder Thus, all-Hispanic jury, it to inflame the as evi- recom- sued” Coastal. memo verdict, by denced their which included that calculat- mended Coastal “assume the exceeding damage findings Salinas’s ed well” drilling risk of on Share 13. If [a] claims, findings that Coastal’s actions were the well were a memo producer, the con- criminal, malicious and and an assessment tinued, interpleader Coastal could “file an Thus, damages. million punitive $10 parties suit and let the court decide which argues Coastal that admission the memo royalties percent- are entitled to and the was error. reversible exactly That ages.” what Coastal did. M. When the Salinas No. well was com-
Salinas
the one-page
offered
memo to
pleted in
interplead-
Coastal filed an
position
any delay
counter Coastal’s
that
in
action, joining
er
Share
various
development between 1993 and 1997 was
An agreed judgment resolving
owners.
all
any
due to Coastal’s concerns that
further
in
issues
was rendered
investment
in
jeopar-
the lease could be
title,
in
dized
flaws
Salinas’s
and that
argues
Salinas
that the
was rele-
memo
provisions in the Share 15 leases could vant
willingness
to show Coastal’s
devel-
recoup royalties paid
make
difficult to
op
problems,
title
despite
Share 13
under-
wrong
owners. Since
Share 13 cutting
argument
delays
its
that
were due
litigation
had
owners
been involved in
litigation.
to concerns over the Share 15
boundary
Share
owners over the
course, if
Of
Coastal’s view of the Share 13
dispute
between the two tracts.69 The
pre-1982
problems
owners’
title
were in-
memo;
not addressed in the 1977
relevant,
undisputed
deed
facts estab-
instead
memo
dealt with uncertainties in lished,
without
need to refer to the
determining
respec-
Share
owners’
memo,
that
problems
those
were not
tive interests in the property. Referring
enough
stop
drilling
opinion
prepared,
to a title
that had been
Moreover,
Share 13.
Coastal’s assessment
explained:
the memo
problems
suggests nothing
those
complex problems
encountered
completely
about
assessment of a
unre-
title
result from the
[the
examiner]
fact
boundary dispute
lated
with the Share 15
possession
began
of these lands
in litigation
owners
resulted
some
years ago
people
over 200
and the
years
eleven
later. None of the issues
illiterate
possession
mostly
were
Mexi-
in the 1977 memo—the source of
discussed
and later
cans
Mexican-Americans who
problems,
they
the likelihood
title
families,
large
many
prob-
had
estate
exploited,
of drill-
could be
and the risk
lems, heirship problems and errors of all
ing
remotely
present
in the
involved
—was
involving surveys and resurveys,
kinds
Specifically,
case.
the source of
Safi-
partitions
attempted partitions.
prob-
title
long-since-resolved
nas owners’
Noting
complete
nothing
“the
absence
base rec-
lems
to do with this
had
whatever
title,”
argues
ord
the title examiner had concluded
case.
the 1977 memo
Safinas
difficult,
that would
de-
extremely
“it
fact
the foundation
Coastal’s
“form[ed]
impossible,
parties
almost
for third
who cision
side with” the Share 15 owners
remaining
grantees
were not
the Share 13 Deed or
neu-
litigation “instead
Maddux,
(Tex.
plaintiffs’
applied,
judge, Hon. E. over- Mario Nothing else in the record prejudice. with objection peculiar ruled this Coastal’s any legitimate had that Salinas reflects particularly “It caveat: doesn’t inflame introducing memo. purpose Margarito plaintiffs, me.” One of the Sali- only in the memo mentioned twice nas, his testified direct examination evidence, just quoted, passage once lawyer to a different reaction: earlier, once when Salinas’ counsel you Q. Let me hand been what’s corporate representative, asked Coastal’s marked Plaintiffs [the Exhibit Sandefur, identify the memo. Thomas you recognize Do what that is? memo]. was not After testified he Sandefur Yes, I A. do. recipients the author or acquainted with Q. already It has into been admitted memo, then read the named counsel evidence, you that, but when saw how no other memo aloud. Counsel asked feel, did you Mr. Salinas? memo, it was questions nev- about infuriated, IA. feel insulted because again summation. er mentioned until my ancestors insulted in this were—are lawyers, Chapa, E. One of Jose Coastal’s memo, really, really and it makes me Jr., argument his entire devoted mad. memo, part: stating pertinent you
I to talk to about up came here you up I here to talk thing. one came family Q. How did the rest departmental memo re- about they feel heard or read members when the term “illiterate Mexican.” ferred to that? testify Mr. that he You heard Salinas Well, by the term “illiterate way. They
A. the same feel was offended may you I’m sure some of They Mexican.” hurt. feel infuriated. testimony in resolv- appeals we still consider The court of refused consider testimony prejudicial argument regarding ing effect of this because the rele- Coastal’s object failed to to it. 166 S.W.3d prejudicial the 1977 vance effect of object Although Coastal failed memo. testimony, preserve any complaint about *22 by have been offended place the term then your “illiter- to on a piece mark ate I you Mexican.” want to tell that paper your was It bond. meant that I’m offended term “illiterate you going you were to abide what Mexican.” But I’m maybe offended said. meant you It that were a man or different reasons than the Plaintiffs are. woman honor. It meant you that offended, one,
I’m land, number because person were a knew has bearing. nothing no It has to do land courage and knew and knew surviv- lawsuit. this And I’m offended be- al. intelligent cause Plaintiffs’ attorneys Why have the Plaintiffs introduced would try your insult intelligence. Why they this memo? have done this? ancestors, We all know that our our They’ve done they this because have ancestors, pioneering people were They’ve case. done this because the were more about the land and not peo- against facts are them. The Plaintiffs ple of the letter. The reason this came you, gentlemen, don’t want ladies and about is because this term was used and They think just about facts. want offensive, this term was way back us, you at angry angry They at Coastal. people then our knew the land. Our figure get you if they angry can people knew things that pertained to the enough, you going then are to throw people land. Our knew cattle. Our peo- judgment sound out the window and ple game knew and the wildlife. that your decisions will be based on farming. Our knew people Our people sentiment not on reason. And we ranching. knew Nobody cared to read can’t them To let do that. do that would or to write. That wasn’t insult. every break rule of fairness that we just way That’s it was. We sur- stand and in county this this coun- And vived. how did we survive? We try. The Plaintiffs want an don’t intelli- land, through knowing survived gent you. decision from The Plaintiffs through using the land. That’s how we just us, you want punish punish were able overcome. Coastal. The memo about the illiterate Mexi- can about really collaterally. It came collaterally
about because low level employee was ordered to do a But I need to broach one other issue. this, doing title search. And in he wrote Along lawyers, with their the Plaintiffs opinion, this 50-page opinion. title have been enriched in this case. “Nadie opinion And in this he traced the land Nobody esta en la calle.” is on the change King Spain, back even the street, lawyers, not the not the Plain- back sovereign. to the He traced it tiffs. You’ve testimony. heard back probably years ago. And 200 some, they they already And years ago, gentlemen, ladies and I would more, want give and to them more guarantee you percent almost that 80 just not would be fair. gringos were illiterate. The landed I gentry am to be a proud was illiterate. And that’s Mexican American. testi- fied I am through proven through proud come from Mexican an- lot of if you cestry. proud these deeds am check the court- I to come from illiter- “X”, ancestry. ancestry house are marked with an la ate That marca. Mexican knowing ancestry Back then not how to That country. read or settled this thing write was not a fought. ancestry courageous. dishonor. Back That *23 Oops. ancestry, owner]? Share 15 [the And of that I’m here Coates because up to Mr. Coates going help Are we today. and a of us are here lot here, going help to the [Sali- or are we counsel, response, In Ramon Gar- Salinas’s nases]. cia, following: closed the argument establish that evidence and The they First are Coastal is offended. significance of the 1977 memo only the of a memo that their offended because use the trial of this case was its of the and it employees prepared, own wasn’t unfairly to Mexicans” phrase, “illiterate It way pre- back then. prepared Coastal. prejudice Now, not pared way back then. Evidentiary are com rulings they trying I’m to are offended—and sound, trial not mitted to the court’s already they They talk about what said. boundless, signifi the discretion. Because they and now are want- some here presented danger prejudice unfair cant of ing some more.... outweighed its substantially by the memo zero, value, which was the trial probative the admitting its discretion in court abused Yeah, time were maybe at one we argues that memo in evidence. Salinas But, know, you people the land. objection addressing Coastal waived people got some these educated. summation, we have held the memo They They learned how to read. or party explain entitled to rebut you to And learned how write. the— admitted objection over evidence know, thing is that about memo idly by sit and take its required not “to attitude, shows the the attitude on also appeal”.71 argues on Salinas chances notice, you’ll If part corporation. memo should not have that even if the corporation not in one bring did admitted, was harmless error been memo, person that not received did a small part the memo was such because bring in the author the memo to tell men trial. But while the memo was No, really rely they us what he meant. times, only think verdict tioned four we ... lawyers on that have some not without effect. Sali shows it was nothing to do with this who are now $544,000 damages for drain nas asked for coming trying explain something million. age; jury found Salinas $1 corporation $10-billion $81,619 damages for bad-faith asked enough bring per- in the didn’t care jury found million. It is pooling; the $1 actually son that wrote memo damage findings of more to see how hard they you received the memo so can tell three times the total Salinas claimed than really they what meant. deliberations. products of reasoned were Why they referring to are a—1977 turn findings clearly did not The Why just call case; rather, they illiterate Mexicans? in the evidence relevant land, them owners of we owners exceeded even Salinas’s evidence royalty special? prejudi interest? was so to the What must have been due think pos- Why? they trying jury. memo on the Because were cial effect of the convincing trying by clear and They jury ture themselves. were then also found malice, of, who acted with put position themselves in a that Coastal evidence specific you And look at the trial court defined going help. are which we injury or con- intent to cause substantial going help Mr. those memos. Are we Smithwick, 1986). (Tex. Co. 71. Scurlock Oil *24 identical, others’ rights. They closely
scious indifference to more but not and related beyond parties overlapped found a reasonable doubt the but were the not theft, guilty felony was the ef- same. fect of which remove statutory was to lim- held that We have a later-filed punitive on damages,72 jury its which the suit a must be abated there exists “[w]hen all, In assessed at million. reviewing $10 complete parties identity and controver record, entire we believe the verdict sies” and a between it earlier suit.74 Oth indicates that the effect the memo was erwise, of a “[a]batement lawsuit due clearly jury.73 to inflame the pendency prior of a suit on is based Salinas never used the memo in convenience, principles comity, and way, way only relevant in calculated to necessity orderly procedure for in prejudice. create unfair We think Salinas issues”,75 the trial of contested matters succeeded. We therefore conclude that committed sound to the discretion of the the trial court’s in abuse discretion ad- trial court in first instance.76 Coastal mitting the 1977 was harmful memo error provided has basis for us to conclude requires and a new trial. that the trial court this case abused its discretion.
B Coastal also contends that this action, [*] [*] [*] [*] [*] [*] 1997, filed in have been should abated judg- We reverse the court of appeals’ action, 1988, while an earlier filed in pro- ment, judgment render that Salinas take action, ceeded. The earlier which we nothing on his claims for referred, previously involved a dis- implied breach protect of the covenant to boundary pute over the between Share 13 against and remand the drainage, remain- and Share as well as claims that Coast- der of a new trial. the case for al, operator draining Share Share 13 that direction and had failed to WILLETT, concurring. Justice develop Share 13. but not all of Most right: James well be Michener same, plaintiffs both were the cases “Water, oil, is the Texas not lifeblood of defendants, Coastal, of the including some ...”1 together, But oil and are its were the same. In the boundary sum: muscle, today which fends off atrophy. claim in the had nothing earlier case to do case, insatiable drainage claims in At a time ener- appetite cases similar legally factually gy deposits two were and harder-to-reach —iron distinct, claims development truths that were contribute barrel $145 judg improper See Tex. did of an cause the rendition 72. Civ. Peac. & Rem.Code 41.008. ment."). Co., Pipeline See also Heddin v. Delhi Gas 73. (Tex. 1975) (holding S.W.2d 889-890 Bank, Nat'l v. Continental Dolenz 74. condemnation case that admission of (Tex.1981). S.W.2d "highly inflammatory” photos of the carcass pets es of livestock killed in a natural Co., Wyatt Plumbing Shaw 75. pipeline rupture proper near the landowners' (Tex.1988). ty jury "were not to aid the calculated in its understanding of the case” and "must be con Dolenz, at 575. appeal attempt preju as an to the strued passion jury”, dice and which "was reasonably probably calculated cause and James A. (1985). Michener, v Texas (cid:127) only Consumption: Texas gallon gasoline2 crude $4 —Texas but, state, energy-producing give leading traction to an law should not common energy- large given population Our fast- its action rooted abstraction. also most fast-growing economy, ener- State confronts intensive growing needs, (“accounting 11.5 power-hungry can ill afford finite gy and Texas use”).6 law, resources, stuck in energy or its remain all percent of U.S. *25 (cid:127) averts an ground. today The Court Tax Revenue: State Oil-and-Gas that, in of its
improvident decision terms acute inflict high energy prices While legal been a impact, would have real-world consumers, tax re- pain everyday hole, dry juris-imprudence turned have production oil ceipts from and into into busts and torrents trickles. booms 30%, respec- and almost surged 58% exists, Scarcity above-ground supply ago, high- just year from “and tively, exist, also and this Court obstacles energy royalties er also boosted them. shouldn’t be one of educational endowments.”7 Texas’ [*] [*] [*] [*] [*] [*] The four public funds receive oil general and revenues —the state energy production profound- Efficient fund, Fund, Rainy Day revenue ly important to Texas and to the nation: Fund, and Per- School Permanent (cid:127)Reserves: Texas the nation in leads all University Fund —have manent (accounting fossil fuel reserves for year, significantly this fiscal jumped nearly a quarter of oil reserves U.S. “posting growth percent of at least 30 nearly 30% of natural re- percent over prior to 84 up serves).3 year.”8 n Production: Texas is top do- also side, we supply On and demand both producer of mestic both oil and natural transformed, energy inhabit an world gas (generating 20% the nation’s increasingly growing the data are sober: gas).4 crude of its and 28% natural (cid:127) (cid:127) days of reliance on Refining: twenty-five petroleum Texas’ near-total “[T]he may be represent cheap than one- and abundant fossil fuels refineries “more refining capacity.”5 drawing fourth of total U.S. to close.”9 Administration, Energy Id. 2. Information Short- 4. Outlook, Energy http://www.eia.doe. Term (last 27, 2008). Aug. gov/steo visited Fortu- 5. Id. nately, highs these all-time from mid- record 27, August July slightly. 2008 have fallen On Comptroller Accounts, The 6. of Public Texas 2008, per-barrel price light, sweet Energy available (2008), Report at 4-5 2008, $118. delivery crude for settled at October at http://www.window.state.tx.us/specialrpt/ Home, Exchange, http:// New York Mercantile Energy energy Report]. Texas [hereinafter (last www.nymex.com/index.aspx Aug. visited side, 2008). On the retail Texas motorists High Bring a Mixed Oil Prices Robison, 7. Clay gallon paid average day $3.48 for a Bag Economy, Texas’ Chron., Houston July regular unleaded. American Automobile 1, 2008, at Bl. Association, Daily Gauge Report, http:// Fuel (last www.fuelgaugereport.com/TXavg.asp vis- Texas?, Zehr, 27, 2008). Fuel Good Prices Aug. ited Aus- 8. Dan Am.-Statesman, July 2008, at tin Al. Administration, Energy State Information Texas, Energy http://tonto.eia.doe. Profiles: Energy supra Report, note 9. Texas gov/state/state_energy_profiles.cfm?sid=TX (last 2008). Aug. visited (cid:127) The large undeveloped U.S. has drilling fossil- of exploratory surged wells 2007,13 138% from 2000 to but domestic deposits undeveloped fuel because — production oil fell over same 12.4% congressional drilling morato- period, to levels not seen 1947.14 since imports ria —and 60% of roughly its (cid:127) oil gas production Texas continues oil,10 (and much of it from unstable peak production period fall unfriendly) geopol- areas riven early years 1970s. “[I]n recent itical strife.11 crude oil output Texas has to less fallen (cid:127) Energy companies experiencing are than peak.” one-third its 1972 Natu- sharp drop-offs production despite ral gas peaked also (an triple-digit prices impetus crude “output steadily has declined aggressive exploration).12 less than three-fifths of that level.”15 *26 Administration, Energy output 10. major Information Ener- er the of all the international oil 1, 2008, Conoco, gy May Chevron, BP, in Brief: http://tonto.eia.doe. companies, including Shell, Exxon, gov/energy_in_briei/foreign_oil_dependence. appears and Total this be the (last 27, 2008). declines, Aug. cfm straight quarter visited production fourth according Barclays Capital analysts. Bar- 600,- clays might said total decline exceed One 11. scholar laments that "oil wealth often day, reflecting a barrels the difficulties wreaks havoc country's economy on a and companies gaining the oil had in access to politics, helps insurgents, aggravates fund and regions up new to make for the decline of grievances Today, ethnic ... with violence mature fields.” Id. "With new and finds rare falling general, oil-producing in states make sources in best countries that limit West- up growing a fraction of the world's conflict- investors, longer ern crude oil is no viewed as oil-pro- ridden countries ... The number of abundant, dominant fuel it was.” once grow ducer-based likely conflicts is in the Gold, $10.89 Russell Exxon’s Net Di- Billion stratospheric prices future as of crude oil Investors, sappoints Gathering Fuels Political push developing more countries in the world Storm, J., 2, 2008, May Wall St. at Bl. Ross, produce gas." oil and Michael Blood Why Conflict, Barrels: Oil Wealth Fuels For- Administration, Energy 13. U.S. eign Information May-June available at Affairs, Production, http://tonto.eia. Crude Oil Field http://www.sscnet.ucla.edu/polisci/faculty/ (last doe.gov/dnav/pet/hist/mcrfpuslA.htm vis- arrelsFA.pdf. ross/BloodB 27, 2008). Aug. Drilling activity ited Texas surging. is also Texas Railroad Commission- opening Consider 12. this from a re- sentence recently predicted er Victor Carrillo "the state front-page atop cent article The Wall Street 24,000 drilling permits should about see premier energy Journal: "The world's moni- year, Fuquay, the most since 1985.” Jim preparing sharp tor is a downward revision of Speak Energy High Texas Execs Out About forecast, oil-supply a shift that reflects Sting, Aug. Costs’ Ft. Worth deepening pessimism over Star-Tel., oil whether com- 3C. at panies keep booming can abreast of de- Fritsch, King, mand.” Neil Jr. & Peter Ener- Administration, Energy Crunch, Information U.S. Watchdog gy Warns Oil-Production Oil, Gas, J., 22, 2008, Dry Natural Exploratory Crude May at Al. The leader of Wall St. " Drilled, warns, Developmental http://tonto. Wells study dangerous 'This is a situa- ” eia.doe.gov/dnav/ng/hist/e_ertwO_xwcd_nus_c Birol). (quoting tion.’ Id. Fatih It is nota- (last 27, 2008). Mobil, Aug. A.htm visited Irving-based ble Exxon largest private company, world's oil has seen Administration, straight quarters tumbling supra two oil and Energy Information Council, production, despite spending Energy billions more Planning note 3. The Texas previous finding years produc- energy than in charged helping on with Texas meet its Krauss, ing from new century, reported fields. Clifford Exxon’s in the 21st demands Second-Quarter Record, Earnings gas production quite Set N.Y. "Texas’ ma- oil ture, Times, Aug. marginal 2008 at accounting C2. The wells problems Energy industry-wide: "Adding togeth- production.” are third of statewide Texas half-step rule, I them a diversify its but would foreclose The world will doubtless inter energy coming “balancing decades profile sooner under the same carbon-emitting reduce reliance approach applied we subsurface ests” sources, assuming fuel but even nearly half-century ago injection fluid efficiency major advances both v. Manz Commission Texas Railroad sources, fuels and alternative fossil just isn’t “no iel.18 Such encroachment still meet as much 80% of will as all. trespass”; trespass it’s no actionable energy through demand global matter, the distinction be practical As a 2030.16 trespass” and “no “no actionable tween than more more rhetorical trespass” Bottom line: We are more and seem recovery way. a barrel of fossil either But over as “our reserves is denied real: becoming fuels are harder and more ex- govern principles orthodox pensive supply-side find.”17 Given this to me to dwin surface invasions seem slide, recovery fracing is maximizing via relevance, particularly dling subterranean essential; liability for enshrining trespass techniques grow so exploration ever claim) (a fracing join I “tres-frac” not. innovation, pace of phisticated. Given the an- today’s no-liability suggest result supply- by spiraling fueled demand barring other reason for suits: tres-frac *27 world, Lord I would confront constrained Open-ended liability inflict threatens directly maxim and decide whether Coke’s harm, and grave unmitigable ensuring sky ownership indeed “extends to the land 19 undeveloped energy much of our State’s below,” and the center above earth’s supplies stay way would that —undevel- alternatively, whether that ancient doc “ drilling Texas oil and law oped. favors ‘has modern place trine no wells, drilling not consumers. Amid soar- ”20 says no The there is world.’ Court ing sagging demand supply, Texas trespass because there is actionable cutting- common law must accommodate injury injury, and there is no because edge able to untold technologies extract “the claims capture says rule of so: he reserves from unconventional fields. belong does not simply to have lost Two additional comments on the Court’s True, actual you him.”21 cannot recover decision: I injury, for absent but damages not approach this case as the Court
First,
would
trespass-by-frac
for
nixes
suits
in Man-
(the
here)
today
but as the Court did
drainage
only damages
does
sought
ziel, focusing
injury
caused
invoking
capture.
not on
agree
the rule of
I
alleged trespass
such suits would subvert this time-honored
whether
2005,
Energy
Wright,
Planning
at
Portfolio,
17. Bruce
The Texas
Council,
Fiscal
Texas
Plan
(Dec.2004),
Energy
Issue, Apr.
at
http://www.rrc.
15
at
Special
available
Notes:
Broomes,
state.tx.us/tepc/;
http://www.window.state.tx.us/
see also John W.
available
l/fnotes/fnEnergy08/fnEnergy08.pdf.
comptro
Wrestling
with a Downhole Dilemma: Subsur-
Trespass,
Rights,
the Need
Correlative
face
(Tex.1962).
Reservoirs,
18.
indispensable innovation in indispens- industry24
able
and make it a tort.
In
I. A Comment on the Court’s Decision
so,
doing
it
usurp
would
the Railroad Com-
A.
Barring
Another Reason for
Tres-
mission’s
authority
oversee,
vast
pass-by-Frac
Suits: Unbounded
through carefully
regulations,
balanced
Liability
Impose
Tort
Would
Exor-
production
State,
of oil
in
gas
and
this
and
Society
bitant Costs on
replace
legislatively
conferred discre-
tion with wide-open tort
liability for an
Although it
damages
disallows tres-frac
essential recovery practice
every
used in
under the rule of capture,
the Court is
producing region of Texas.
It would take
exposure
unconvinced that tort
would nec-
a meat-ax approach to a task that demands
essarily crimp production and inflict
scalpel-like precision, all to
prob-
address a
broad-based economic harm.
I am not
22. Manziel,
566-69;
361 S.W.2d at
see also
23.
state’s Squeeze Liability the fun- i. Tres-Frac completely contrary Would con- concept of oil and Much-Needed Production damental mission agency’s servation and our curiae The views one amicus merit support development and enhanced particular attention: Railroad Commis- vitality for the benefit economic sion, legislatively superin- commanded Texans.” industry Texas energy given tend the *29 luxury, not a but a must-have Fracing is jurisdiction every over each and one our recovery today vital and will tool that is 200,000-plus producing gas State’s oil and (along with other remain vital tomorrow wells.25 Easy- recovery technologies). promising irreplaceable As to its role modern un- increasingly are to-produce reserves exploration, fracing, says the Rail- energy common, meeting re- spiking demand Commission, road is: techniques to make unec- quires advanced (cid:127) necessary produc- maximize “often onomical fields economical. assure oil gas tion and dense, huge expanse Exhibit A is ... left in the reserves are not Shale, rock called the Barnett gas-bearing ground”; 5,000 square miles across spanning about (cid:127) counties.26 central Texas widely prolifically through- several north “used basin, drfiling active The nation’s most production technique”; Texas as out (last August visited 81.051(a)(2). bamettshale/index.html Tex. Nat. Res.Code 25. 27,2008). Texas, Barnett 26. Railroad Commission of Information, http://www.rrc.state.tx.us/ Shale 7,500 home to economic,” more than producing gas spike and the in activity and wells, the Barnett Shale is considered largely “are attributable to the some experts largest to be the and most development specialized of a fracture stim- prolific natural field the continental technique ulation that has opera- allowed States, United an producing estimated tors to ‘unlock’ gas trapped for millen- three billion cubic feet of natural every success, turn, nia.” This prodded has However, day.27 Shale, the Barnett as its exploration elsewhere. As Comptrol- name implies, is known for unforgiving May ler’s Energy 2008 Texas Report shale, and “technological improvements in states, “The success of the Barnett Shale recovery fracing innova- ie., methods” — production zone spurred has pro- efforts to widely tions—are sparking credited with gas many duce other areas and geologi- boom, the so-called Barnett Shale which cal formations that were previously consid- 83,823 jobs created an estimated in 2007 ered unrecoverable or uneconomic.”31 alone, injecting more than billion into $8.2 importance fracing to Texas fields economy the local and almost billion $1.1 like the Barnett Vicksburg Shale and the into state and local tax coffers.28 One overstate; T impossible is energy vast current railroad commissioner calls the supplies being are Barnett Shale the recovered from areas “shining star” of modern energy-production (or success long thought depleted stories to be passed else “[ajdvanced adds exploration techniques over because of permeability).32 low native have transformed marginal this once trend Fracing required is imprecise. but also a giant.”29 into The Railroad Commission notes, As the Court talking we are about itself has stated: “The success of the Bar- fissures of length immeasurable and un- nett in large Shale is part a result of the controllable direction. Whether a frac- use of technology,” stimulation namely hy- ture’s length actually effective crossed fracturing.30 draulic The Commission’s adjacent lease line miles amicus beneath brief notes that for many years after discovery, its initial Earth’s surface “the field cannot be determined until considered only marginally uneconomic or after controlling the fact.33 As for a frac- Energy supra note Energy 31. Texas supra note at 68. Report, Texas Report, ("The largest Barnett Shale one involving of the most active "The issue natural gas production supply.” natural "continuing zones in the state Id. at 77. Without ad- nation.”); Krauss, technology, gas pro- Clifford vancements natural There’s Gas in Hills, 8, 2008, Apr. keep pro- Those N.Y. ducers find it more difficult to at C 1. Times, ducing adequate supplies.” supply Id. This innovation, pinch mitigated by must be ex- Study: Boosting Barnett Shale North Texas plaining why producers pursue "Texas now J., Economy, Dallas Bus. Mar. 2008. As *30 gas plays throughout unconventional the on- noted, recently Railroad Commission state, part fracturing shore rock forma- "The Barnett Shale must be stimulated— sand-bearing liquids expand tions with to permeability treated to increase order for —in gas-producing underground.” areas Id. the field to be economic.” Railroad Commis- Texas, Shale, sion of Water Use in the Barnett See, Krauss, e.g., supra note at C1. http://www.rrc.state.tx.us/divisions/og/ wateruse_barnettshale.html (last Aug. visited by plaintiffs’ expert, 33. As described who has 27, 2008) [hereinafter Use”]. "Water area, written several books fracture’s length is shorter than its initial effective Jones, Op-Ed., Energy Elizabeth Ames Se- propped length. Even if the induced fracture 9, 2007, curity Oct. at A17. Post, momentarily, Wash. crossed over lease line and experts even if had the wherewithal to con- Use, much, supra 30. Water say note 28. firm as who is to the effective direction, poli- into similar wisely lead ex- took account precise plaintiffs’ ture’s We Manziel, rejected where we cy concerns way there is to do so: pert conceded liability for a waterflood preordained. fracture azimuth is “the found breached lease boundaries. We little that to affect very There is we can do recovery pro- secondary “obvious Creating a frac- the fracture orientation.” and be conduct- grams could not would not geological engineering ture is itself and adjoining operator stop the if could ed marvel; controlling di- length ground of tres- project on the subsurface (in dimensions) simply three be- rection is urges Railroad pass.”35 The Commission yond present capabilities. to real-world con- the Court accommodate urging it has in past,” here “as cerns daily Risk-taking entrepreneurs contend to the “give careful consideration us uncertainties, law de- with such but Texas recogniz- of a policy implications decision greater predictability permit- than serves recovery ing a new cause action.” Like ting exemplary damages for invisible torts. waterflood, recovery by fracturing is operators Because lack ab- fraced wells key maximizing recovery. control, liability the specter solute of tort many operators will convince rational Fracing Less Tax and ii. Less Means fracing altogether forego and leave other- Royalty Revenue Texas for recoverable ground, wise resources Tex- energy production enriches Robust to the detriment of the as a whole. State year line. fiscal bottom In fiscal as’ exposure exemplary It defies belief that gas production taxes on oil severance damages tort will do other than anything produced more than billion for $2.7 sharply fracing curtail curtail sharply revenue, State, all 7% of tax about (thus thus reducing supply, figures year current preliminary up prices everything).34 may ... pushing suggest surpass revenues billion.36 $3 actually drainage portion part or fracture —the tion in terms of and interference captures oil from the reservoir —did whatever else.” completely not remain Share within Coastal’s at- 12 lease boundaries? Plaintiffs made no rules, as be as close 34. Under well tempt to determine the fracture’s effective line, given a lease that the 467 feet from length drainage in this case. Because occurs (the forty-acre square tract small- center of exclusively length, via this frac effective size) permitted only feet from its est original liability, penetration length, frac edge, operator realistically has no risk-free all, reasonably if at must be limited to tres- facing place a fraced without to drill well pass injury drainage—not actual that inflicts — possible trespass liability. See 16 Tex Ad- produces an encroachment no ill effect. rules); (spacing § Laura H. 3.37 see min.Code where, here, particularly plain- This is true Burney Hyne, Hydraulic J. Frac- & Norman alleged felony attempt theft avoid tiffs in an Stimulating turing: Trespassing? Your Well or statutory cap punitive damages. See 19-1, Min. L. at 19-14 Rocky Mtn. Inst. 41.008(b)(1), & Tex. Civ. Prac. Rem.Code (1998) (estimating length a fracture in (c)(13). Only length, the fracture's effective feet); tight reservoir a few thousand sand hydraulic propped lengths, speaks not its supra Ragsdale, at 338 n. also note see actually draining whether the fracture 2,500 typical (noting that a runs fracture hydrocarbons. The Dr. cross-examination of 4,500 wellbore). feet from the point on this Economides was illustrative. *31 Although he "estimated” that of the 25-35% Manziel, 35. R.R. Comm'n Tex. penetrated plaintiffs’ property, plain- fracture 560, (Tex.1962). expert attempt made no to measure its tiffs' length, part actually captures effective 8, Zehr, Al; Comptrol- inju- supra note Texas complained-of inflicts 36. minerals and Accounts, by ry: do calcula- Texas Net Revenue “I did not other elaborate ler of Public addition, In drilling insists, on State lands annual- GLO will be ruinous: “Fewer wells ly generates millions in oil gas royalty drilled will development mean less revenue for general the State’s fund.37 oil and gas reserves underlying State lands, which royalty means less revenue
The two
agencies
state
most involved in
for the Permanent School Fund.”
gas
oil and
production see ominous fiscal
posed
threats
by
liability.
tres-frac
As to
Statutory
iii. Texas
and Common Law
revenue,
tax
the Railroad Commission con-
Suggest
the Court’s Decision
tends that
litigation exposure
increased
Should Be Informed
Concern for
up
would ratchet
exploration costs and “re-
the Public Good
sult in
significant
impact on the state’s
generated
revenues
from oil and
pro-
The interplay of
trespass
common-law
revenue,
duction.”
royalty
As to
the Gen-
and oil and gas law must be shaped by
(GLO),
eral Land Office
which oversees
concern
public good.
for the
In Hastings,
twenty million acres of State-owned miner-
recognized
we
a trespass cause of action to
als, underscores that the State’s lease of
drilling
combat slant-hole
“in
as
line with
drilling rights
energy
firms sends hun-
public
policy of this state.”39 In Man-
dreds of millions of
annually
dollars
in ziel, we stated that “[secondary recovery
royalty revenue to the Permanent School operations are carried on to increase the
help
Fund to
public
finance Texas
schools
recovery
ultimate
of oil
gas,”
and that
(thus “reducing the need for tax revenue”
cannot
disputed
opera-
“[i]t
that such
taxes).
by offsetting
property
local
Al-
tions should be encouraged.”40
any-
If
GLO,
though
constitutionally charged with
thing, encouraging the use of leading-edge
maximizing revenue from State-managed
technology
greater
is a
today
concern
than
lands, might
see a
cause of action
in 1962 when
Hy-
Manziel was decided.
all,
a positive development
Texas
—after
fracturing
draulic
unique practical
involves
could be a plaintiff in these cases—the
and policy considerations that Texas com-
agency
exposure
worries
such
“will
mon law
ignore.
cannot
create a significant impediment to
ag-
statutory
Our
certainly
law
doesn’t.
gressive exploration
development
Legislature,
The
consistent with its focus
Texas’ oil and
reserves” and “will re-
reserves,
on maximizing
sult in
recoverable
affir-
operators,
waste as
seeking to avoid
liability,
matively champions
tort
fracturing
granting
leave otherwise recoverable
ground
reserves
per-
exemptions
rather
than
severance tax
form the fracture
necessary
treatments
to from dormant
and gas
brought
oil
wells
produce
economically.”38
upshot,
back into production and from fields the
window,
http://www.
Source-Fiscal
prevent
manded the Railroad Commission to
(last
waste,
visited
§
"physi-
state.tx.us/taxbud/revenue.html
id.
86.082. “Waste” includes
27, 2008);
Aug.
Energy
see also Texas
resulting
cal waste or loss incident to or
from
Report,
supra note
at 30-31.
drilling, equipping, locating, spacing,
oper-
or
ating a well or wells in a manner that reduces
Accounts,
Comptroller
37. Texas
of Public
Bi-
recovery
tends to reduce the total ultimate
(2008-2009),
ennial Revenue Estimate
http://
85.046(6);
any pool.”
§
of oil or
Id.
www.window.state.tx.us/taxbud/bre2008/
86.012(5).
see also id.
htmVsched_I_GR.html (last
Aug.
visited
2008).
Co.,
Hastings
Oil Co. v. Tex.
149 Tex.
(1950).
Legislature
38. The
has declared waste in oil
unlawful,
gas production
to be
Tex Nat.
85.045, 86.011,
Manziel,
§§
and has com-
Given
industry practice,
recognized by
modern
My departure
as
from the Court’s reason-
law,
Commission,
says
“no
Texas
Railroad
is a narrow one. The Court
ing
201.057;
determining
§
41. See Tex. Tax Code
16 Tex. Admin.
difficulties in
the source of
(2)
§
3.101.
production,
justified due to the
a well’s
Code
(3)
self-help,
practical
availability of
"a
Burney Hyne, supra
&
note
at 19-17.
industry.”
accommodation of
infant oil
45, 1.1(A).
supra
§
&
note
As to
Weaver,
Texas,
Smith
43. Railroad
&
Commission of
Oil Gas-
accounting
justification,
for oil
”[a]n
the last
101-Approved Tight
Statewide Rule
Gas For-
placed
drained from other tracts would have
Listing, http://www.rrc.state.tx.
mation-Index
dry
unproductive
(last
entire risk of a
hole or
us/divisions/og/publications/hgindex.html
27, 2008).
upon
allowing neighbor-
Aug.
well
the driller while
visited
ing landowners to
from a successful
benefit
Use, supra
44. Water
note 28.
energy
While the
indus-
venture.” Id.
Texas
longer
infancy indeed, it is
try is no
in its
—
Lang
E. Smith &
1 Ernest
Jacqueline
Weaver,
(hence
quite
imperative
mature
need for
ed.2006).
1.1(A)(2d
§
&
Texas Law of Oil
Gas
recovery technologies)
same
advanced
—these
recognized
century
We have
for almost a
concerns,
including
problem,
the free-rider
drainage of oil or
another’s
from beneath
equally
persist
applicable
and are
to fractur-
perfectly legal
land is
the wellbore itself
if
liability
ing.
not turn on
decision should
oper
lease
does not cross
boundaries and the
migrate
proppant and
whether
frac fluid
complies with
ator
Railroad Commission re
Brooks,
imaginary
quirements.
plane separating
Tex.
See Bender v.
across an
vertical
(1910);
127 S.W.
Smith & Weav
properties
underground (particular-
miles
two
1.1(E).
allege
supra
Plaintiffs do
ly
migration
fact of
is often
when the
such
er,
that Coastal's
encroached into its
wellbore
unknowable).
Burney
Hyne, supra
See
&
property,
undisputed
and it
that Coastal
("The
at 19-3
extent of the fractures
note
complied
pertinent
with all
Commis
Railroad
only
the wellbore
determined
out from
can be
regulations.
sion
(emphasis add-
by theoretical calculations.”
ed)).
capture
variously
46. The rule of
has
been
(1)
acknowledgment
explained
practical
*33
because,
liability”
flood,
presumes
while it
a
usually
primary pro
tres-
conducted after
occurred,
ceased,
pass
duction
capture pre-
the rule of
methods have
water is in
jected
pressure
under
a
injury:
into
reservoir to
injury,
cludes
no lawsuit.
I
push residual oil toward certain output
would instead tackle a more threshold is-
in Manziel com
plaintiffs
wells. The
sue, one
we addressed Manziel almost a
plained the waterflood amounted to “tres
half-century ago: whether formalistic tres-
by
pass
injected water” that would drain
pass principles apply
equal
force to
oil from beneath their
pushing
lease
it
recovery
ever-dwindling supplies
of
of
to other properties
pre
and “result in the
natural resources miles below the surface.
mature
producing
destruction of their
...
many
To
people,
subsurface intrusion
injected
well.”49
held that
We
water that
fissures, fluid,
proppant
invites a
crosses lease lines did not constitute tres
simple application
rudimentary
trespass
pass: “The orthodox
principles
rules and
principles. Why not call a tort a tort?
applied by
regards
the courts as
surface
Well,
we affix that common-law
label,
invasions of land
appropriately
not be
intrusion,
every
technical
no matter
applied to subsurface invasions as arise out
small,
damages,
how
warrants
no matter
secondary recovery
of natural resources.”
large. Trespass
how
ais
court-defined
Basically,
50
we held the law of
doctrine,
squarely
falls
on this
trespass
applied
must not be
in an unduly
Court’s shoulders to decide what is action- dogmatic
manner to the oil and
indust
so,
In doing
made clear Man-
able.
we
ry,51 a
I
statement
believe counsels
ziel the common law must permit common-
existence against the
liability,
not mere
sense accommodations for technological
extent ly the
liability.52
breakthroughs
society.
that benefit
Notably, we did not concede in Manziel
Manziel,
In
our watershed waterflood
to trespass
waterflood amounted
but
case,
flatly rejected
we
an absolutist tres
opt against liability
good
because the
out-
standard,
pass
stressing that the definition
Indeed,
weighed
if
the bad.
encroachment
industry
must make room for
waterflooding
trespas-
from
were deemed
unanimously rejected
innovations.47 We
sory,
public policy
then
considerations
theory of
trespass based on
earlier-
could not even be factored in.53 Nor did
developed secondary recovery practice
say
capture precluded
we
the rule of
(waterflooding) that
develop
was used to
plaintiffs
oil
swept away
whose
giant
Rather,
East Texas
In a
claiming
compensable injury.
field.48
water-
Manziel,
assuredly
deny
47.
Comm'n
R.R.
Tex. v.
aided is
un-natural and would
(Tex. 1962).
566-70
protection
everyday recovery
to scores of
techniques
beyond fracturing—
above and
48. Id. at 568-69 & n. 5.
techniques that the Railroad Commission has
Indeed,
long permitted.
produc-
all modern
49.
Id. at 565.
technologies
de-
tion
are artificial to some
Id. at 568.
gree;
ordinarily seep
oil and
do not
out of
ground by
when
Clam-
themselves or
Jed
Id.
pett’s
up geyser
errant
sends
of "bub-
bullet
bling
This
dichoto-
crude.”
natural/artificial
plaintiffs'
52. As for the
contention that the
my
support in
law and is rather
has no
Texas
capture
apply
pro-
rule of
ceases to
when a
seriously;
hard to take
the common law must
recovery
ducer uses an "unnatural"
tech-
too,
Court,
nique,
unpersuaded.
I
like the
am
be informed
common sense.
produc-
Plaintiffs nowhere define "natural”
tion,
granting protection
under the rule of
53. Manziel,
interests if non-drainage example, cases—for Coast- and if the activi- damaged; authorized job damaged frac had the Share 13 al’s recovery adjoining secondary ties in an T plaintiffs Vicksburg or forma- wells unit found to be on some are based plaintiffs their property. tion beneath substantial, occasion, justifying then this injuries, claim such but I would fore- validity.54 court should sustain their possibility trespass-based dam- close event, intervening technolog- No legal or non-drainage simple for a ages cases ical, forty-six years in the Manziel since already reason: settled Texas law affords urges result in that today a different than precedent in such ample relief cases. Our case, incidentally which a far involved years that, dating back 60 makes clear (waterflood) greater that, physical invasion notwithstanding capture, adja- the rule of (and some, inflicts according greater far property cent owners sue driller irreversible) damage than fractures ex- otherwise, who, through fracturing neg- Plus, tending from a wellbore.55 with wat- reservoir, damages a ligently common thus erflooding, migration across lease lines is reducing causing recoveries and waste.56 guaranteed; fracing, not, since it’s precedent settled makes clear that Other length fracture direction cannot be rule-of-capture law affords no im- Texas (like precisely controlled. Fracing water- munity stemming for waste or destruction injection flooding) involves the fluids negligent from a well blowout.57 (like lines, across but fracing lease water- flooding) trespass fracing is not a because II. A Dissent Comment on the (like waterflooding) is wrongful be- Fracing Is A. Not Slant-Hole (like fracing cause waterflooding) gener- Drilling Another Name ates societal and economic benefits any harm to outweigh operators. individual fracing The dissent likens slant-hole Allowing wide-open damages intentionally drilling, bottoming drill bit Co., Drilling Id. 56. See v. Texon 146 Tex. Elliff (1948) (recog 210 S.W.2d 562-63 Broomes, supra note at 20-23 to 20-24 nizing negligence harming liability for (“By fracing], [to contrast a waterflood in- reservoir); Explora HECI common see also catastrophic damage flicts owners to mineral Neel, tion Co. 886-88 secondary who are not included in the recov- (Tex. 1998). ery fairly unit ... A waterflood be de- could scribed as the atomic of subsurface bomb Co. v. Tex. Pac. 57. See Comanche Duke Oil trespasses because its the com- effects are Co., (Tex. Comm’n Coal & Oil S.W. 554 plete, potential irreversible destruction of the finding judgm’t adopted) (jury App.1927, produce oil and from the flooded zones using quarts nitroglycerin to boost land onto which the water encroach- well). nearby ruined offset es.”). wells,
beneath the vertical boundaries of anoth- wells and regulating fraced the for- er’s land. I multiple meaningful see heavily mer and the hardly latter at all: distinctions between fraced wells and devi- categorized “the Commission has never wells, ated as does the Railroad Commis- wells have been fracture stimulated as *35 sion. ‘deviated’ wells a requiring permit for job the fracture or attempting to deter-
First, a slant-hole driller exerts absolute mine the location of the fractures to assess control, knowing directing and with GPS- compliance spacing rules of other precision like exactly where the drillbit is and Commission rules.”61 The Commission going. Fracing, plain- where it’s conceded, always expert highly tiffs’ is has focused on the location of unpredict- able; itself, present-day under petroleum engi- any wellbore fractures or other neering technology, a fracture’s direction subsurface that might impact features controlled, cannot except be determined or drainage. Nature,
by Mother a length and fracture’s precisely Second, cannot be measured.58 B. We Should Defer to the Railroad well, slant-hole in connecting pipe, encased Discretion, Commission’s Not open location, remains its bottom-hole Usurp It only portion while of the initial fracture gas drilling painstakingly Oil and is reg- actually capturing contributes to miner- Commission, ulated the Railroad which Third, als.59 nobody contends that bottom- possesses jurisdiction sweeping over all ing a your neighbor’s wellbore beneath persons Texas oil and wells all and property indispensable to Texas oil and engaged drilling or operating such gas production; everybody-including plain- Legislature wells.62 The has conferred tiffs’ own expert-agrees fracing is ab- open-ended authority “adopt to all neces- solutely critical in low-permeability areas sary governing rules for and Fourth, regulating like South Texas.60 the Railroad persons operations” and their Commission has within the never treated slant-hole jurisdiction.63 drilling drilling jurisdic- and frac Commission’s This the same. In exercising expertise, tion techniques Commission includes “the use of sharp sees distinctions between slant-hole production protect enhance correlative 1981). Ragsdale, supra Hydraulic fracturing paradigm 58. See note at 338 n. 128. ais example of such a method. If the dissent’s expert hydraulic Plaintiffs’ testified that controlled, operator, particularly view one (1) fracturing produces lengths: four fracture tract, operating on a smaller would face a (2) (3) length, hydraulic length, propped fracing risking dilemma of a well and thus (4) length, length, stating effective "I not high-stakes trespass nearby lawsuit exist], only agree lengths [that those I’m the landowners, declining to frac and thus disputes author of those definitions.” No one risking high-stakes develop” "failure law only length the effective enhances miner- suit from its lessor. recovery. al governing approval rules Commission testified, plaintiffs’ expert 60. As in such areas operation compre- of slant-hole wells are indispensable production: it to viable least, say hensive to see 16 Tex Admin. hydraulic fracturing, “without there is no 3.11, § but the Commission has never Code hope economically attractive required special permitting frac a well. ... formations that I know of [in recognized Texas].” South We have les § 62. Tex Nat. Res.Code 81.051. duty sees have a to use successful modem production methods. Amoco Prod. Co. v. Al exander, (Tex. 567 & n. 1 63. Id. 81.052. legisla- in order achieve the rights.”64 specifically, More fraced wells Commis- waste, cali- authority objectives preventing make rules and sion has tive preventing brating rights to be correlative “require issue orders wells It could injury adjoining land.69 operated drilled and a manner that will undue (no- administratively what other states protect injury adjoining property.”65 do Texas) legislatively tably not have done jurisdiction, exercising that the Rail- In require operators permit70 to obtain a has promulgated road Commission exten- fracing a well. not done before But has regulations regarding oil and sive so, restraint, showing and this far from generally single out drilling none that public policy, demonstrates the absence If, in the course of fracing specifically.66 *36 pursues legislative its the Commission advancing legislative pre- mandate to in a manner that facilitates techno- charge safeguard vent waste and correlative logical innovation. rights, fracturing a the Commission deems practice nearby argue land- “Coastal potentially unfair to The Share Plaintiffs and the amici owners, can weigh always legislation it has wide discretion to seek interests competing proper properly and strike the or rules to [Railroad Commission] regulatory balance. That puts The Commission address their concerns.” could, listening wrong frac- par- Hydraulic after all interested shoe on the foot. ties, Texas, daily modify regulating turing throughout Statewide Rule 37 occurs en- the minimum distance a couraged well can be locat- state tax law aimed at boost- ed property ing production tight, hydrocarbon- from a line.67 But whether formations, technique should be bearing that distance stretched to 500 and is a feet, 1,500 feet, 1,000 utterly or feet is vested with championed agency beyond expertise. regulate Why powers Court’s The Com- broad it. must could, do, legislative as Georgia regulators mission Coastal seek or administrative require commencing notice before a frac to thwart a of action this action cause Indeed, job.68 could im- when formally recognized Commission Court has never pose any targeted gas pro- number of den- that spacing, agency oversees oil sity, production, no pooling, or other rules on has issued rules or orders duction Prods., 64. Energy-Agri (providing § Amarillo Oil Co. v. 67. 16 Tex. Admin. Code 3.37 Inc., (Tex.1990). 794 S.W.2d well shall be drilled closer than 467 feet line). any property or lease 85.202(a)(4); § 65. Nat. Res.Code Tex. see also Texaco, Comm’n, v. R.R. Inc. 391-3-13-.il, Regs. §§ R. & 68. Ga. Comp. (Tex. 1979) ("It now well settled 391-3-13-12(2). pow the Railroad Commission is vested charged duty regulating with the er (au- 86.081(a)(2) § 69. See Tex. Nat. Res.Code prevention of oil and for the thorizing regulate gas produc- Commission to protection as waste as well of correla "adjust rights op- tion correlative rights.”). tive each a common portunities of owner of See, e.g., (requir- § 16 Tex. 3.24 Admin. Code reservoir”); 85.202(a)(4) (directing § Com- ing check valves where than one well is more promulgate rules and orders mission line, separator, to a or connected common operated in a "require wells to be drilled and manifold); (statewide rule); spacing § 3.37 adjoining prevent injury manner that will densities). (well § does 3.38 The Commission property”). notification, part require as W-2 and well, of forms G-l, fracing when will be on a used 45.1-361.11; W. Va.Code VaCode Ann. 3.16, require permission. §§ it does not See § 22-6-12. Ann. 3.51, 3.80(a). tie Coastal’s pass, old-fangled hands? Commission’s but an contract action alleging breach of policymaking expertise implied considerable covenant to protect against uncompensated drainage, strongly against recognizing militates plaintiffs brought which the here.72 Even open-ended new form of liability.71 tort lease, when a mineral estate is under I would defer to the Railroad Commis- litigation lessor’s threat of or actual litiga- sion, competence whose this matter far spur tion can a lessee to drill offset wells own, surpasses our compet- to balance the engage in voluntary pooling, appar- ing interests and fine-tune the production ently occurred this case. The Share 13 hydrocarbons. of Texas If the Commis- Plaintiffs contend their brief that “[i]t sion believes free-market practices have only after suit was filed that Coastal clamorous, become too it can regu- flex its protect acted to drainage.” Share 13 from latory muscle over offending produc- litigation, Aside from plaintiff can drill tion activities. But drainage whether re- an offset well if he believes a fraced well sults from honest mistake or dishonest nearby property causing drainage; misdeed, the Commission is posi- best self-help remedy is the settled under Tex- tioned to strike the smartest balance to *37 as law. As one venerable Texas oil and protect rights safeguard landowners’ gas authority opined: “There is no reason viability of fracing shrinking amid re- giving injured for an a party cause of serves. regulation We should leave the of action for the violation legal right of some energy Texas’ regulators sector to the as resulting a adjacent from reasonable use of Legislature intended. aggrieved land if the party’s remedy of self-help is completely adequate for his Aggrieved Existing C. Lessors Have proper protection.”73 Our law long has Seeking Remedies of Short Millions recognized that if a landowner desires the Trespass Damages hydrocarbon riches his property, beneath The Share 13 Plaintiffs are not without he should drill a well. This common-sense case, alternative remedies. In they this approach, emphasized also in the Railroad pursued lessee, against claims their Coast- brief, especially Commission’s is amicus al, for protect against drainage failure to warranted when the landowner sees that remedy and other claims. The clearest is neighbor his a has drilled successful well new-fangled not a alleging tort action tres- next door. The landowner should drill his (who 71. In geological one current commissioner mercial and unconventional reser chair) reported was then to the United States Important ... voirs new fields have been Congress “[hjydraulic fracturing a dec is developed geologists areas once con process completing ade’s old for over of 90% Jones, goat pasture.” supra sidered note the oil and natural wells drilled in the at A17. States,” United and that "the states have been responsible regulating process.” this En Alexander, 72. See Amoco Prod. Co. v. ergy Policy Hearing Act 2005: Before (Tex.1981) (recognizing 567-68 Energy Quality Subcomm. on and Air the H. where, here, liability such as the lessee was Comm, Commerce, Energy Cong. 109th party doing draining by producing (2005) (statement Carrillo, Ill of Victor tract). adjacent from an Chairman, Texas), Railroad Commission of http://www.rrc.state.tx.us/ available Walker, Jr., Property Rights 73. A.W. in Oil commissioners/carrillo/press/energytestimony. Upon Regula- and Gas and Their Police (also Effect html. Another current commissioner Production, tion 16 Tex. L.Rev. chair) ago: former a few wrote this months (1938). technology bringing "Innovative is on line oil gas production from heretofore noncom law, the law repeal we cannot own, neighbor trespass; common but not sue his any more than we and demand simple supply con- capture recognizes rule of occupy gravity. the law of We repeal can preserve Self-help I it. cept, and would world, and decades a petroleum-addicted or conve- always cheap remedies are not fossil-fuel alter- may pass before scalable cheap fix in this case (although nient etc.) (wind, nuclear, solar, comprise natives been a demand from Plaintiffs would have piece of our diversi- significantly larger drill some offset wells on then, 13) letting energy portfolio. Until availability another fied but their Share each against file tresfrac suits neighbors reason not to announce a new common-law reali- only yield other will these stubborn privileged to sink tort. “The landowner drilled; fewer ties: fewer wells will be many upon as he desires his tract wells (but will under- productive) still wells appro- older of land and extract therefrom recovery to enhance go fracing remedial priate all the oil and that he plugged prematurely; long as he within the and will instead produce, operates so Texas land will remain huge swaths of spirit purpose conservation statutes utterly their resources wast- undeveloped, of the Railroad and orders Commission.”74 economy grind would not different ed.76 The Texas Should law be when halt, dampening feel the recovery to a but would neighbor uses advanced tech- decision, and those effects nique, drilling without which would be im- effects such so, and acute. practical? The dissent in would be real thinks my view fails to reason so. Viking, Inc. v. years ago Geo Sixteen Tesy-Lee Co., opened we Operating *38 Allowing Damages
D.
Tres-Frac
claims:
trespass-by-fracture
door
Many
Portend
Would
“Fracing under the surface of another’s
Inconvenient Truths
trespass.”77
land constitutes
subsurface
Permitting trespass liability
attention-grabbing
pronouncement
be a This
would
blunder,
grave
auguring industry-wide tu-
had a short shelf life. We withdrew
mult,
later, noting
Vi-
resulting
opinion
tremors of which would
six months
Geo
granted and
far-reaching.
king
improvidently
be substantial and
Both
had been
disavowing
anything
in
we
energy-intensive
expressly
worldwide and
our
State, energy
increasingly
approving
is at
be “understood as
once
de-
said should
scarce,
the court of
increasingly
disapproving
opinions
sired and
and thus
or
capture or
increasingly expensive.
shape
appeals analyzing
the rule of
Courts
Co.,
575,
hope
economically
production”
Drilling
74.
v.
Tex.
attractive
Texon
146
Elliff
558,
(1948).
Vicksburg
210 S.W.2d
562
in the
T.
case,
pending
expert testimony
Energy Planning
In the
con-
Council re-
76. As the Texas
drilling
region
ported
Energy
firmed
would not
Plan: "Ex-
in its 2005 Texas
economically
fracturing.
viable without
tending
productive
life of
the useful
"tight
produce gas
marginal
encourages
pro-
Certain
formations”
wells
the domestic
only through
quantities
commercial
fractur-
gas.
Once these wells are
duction of oil
field,
ing,
Vicksburg
plugged,
and all the wells in the
T
ac-
abandoned and
Texas will lose
13,
including all of the wells drilled on Share
natural resource.” Tex-
cess to this valuable
received
ex-
Energy Planning
supra
fracture treatments. Coastal’s
note
at
Council,
as
pert
every well
testified that
in South Texas
subjected
has been
to at least one fracture
reh’g,
expert
at
839 S.W.2d
treatment. The Share 13 Plaintiffs’
77. 817 S.W.2d
(Tex.1992).
fracturing
testified that without
"there is no
harmful,
they
hydraulic
frac-
trespass
apply
randum constituted error and was
turing.”
Fortunately,
analysis
we avoid a similar
I would hold
harm
that a
necessary
today.
mistake
because admission of the
memorandum was
error.
incurable
leadership
Texas’
Given
unrivaled
Capture
I. Rule of
shaping
dynamic energy
the nation’s
sec-
tor,
frequently
states
look to Tex-
“[o]ther
capture precludes liability
The rule of
as decisions when confronted with a new
oil
capturing
or
drained from a
oil and gas
unsettled issue of
law.”79 neighboring property “whenever such flow
I
While would tackle the
issue
solely through
operation
occurs
of nat
slightly differently,
reasoning underly-
manner,
agencies
ural
in a normal
as dis
ing
no-liability
pro-
the Court’s
outcome
tinguished
applied
from artificial means
legal roadmap.
agree
vides a valuable
I
stimulate such a flow.”
v.
Peterson
equate hydraulic
Texas law should not
Co.,
Grayce
Oil
370-71
fracturing
boundary
across a lease
1931),
(Tex.Civ.App.-Fort
aff'd,
Worth
trespass.
actionable subsurface
I also
(1936).
Tex.
43 originally but is the owner property In face this record and an tionable. finding may legally that Coastal tres he recover.
uncontested
all that which
in
the manner
passed
by
on Share 13
added).
(emphasis
at 375
operations
it conducted
on Share
which
legally
must be
gas
concedes
Coastal
capture
agree
I do not
the rule of
the rule
in order to come within
produced
applies.
legally
Coastal did not
recover
Elliff, 210
capture.
See also
S.W.2d
gas
it drained from Share 13 unless
(“[E]ach
of land in a com
562-63
owner
hydraulic fracture into Share 13
Coastal’s
supply
gas
of oil and
has
mon source of
illegal.
the issue of
Until
owners of
legal privileges
against
other
addressed,
into
Coastal’s fracture
Share
to take oil or
therefrom
land therein
illegal trespass.
must be considered an
13
conducted on his own
operations
lawful
I
the rule to a situation
apply
would not
land.”)
added)
1
(emphasis
(citing W.L.
effectively
a party
such as this
which
(Perm, ed.));
63
SummeRS,
and Gas
Oil
consent,
enters another’s lease without
Duke
Co. v. Tex. Pac. Coal
Comanche
Oil
artificially
drains minerals means of an
(Tex.1929)
Co.,
&
298 S.W.
Oil
device,
“cap
then
created channel or
(“[O]ne
properly
owner could not
erect his
trespasser’s
tures” the minerals on
structures,
underground,
surface or
(limiting
id. at 375
the rule of
lease. See
line, and
part beyond
dividing
or
whole
legally
recov
capture to oil and
adjoining
thereby take oil on or
SWEPI,
ered);
L.P. v.
see also
Camden
tract,
come onto or
or induce
oil to
Res., Inc.,
(Tex.App-
S.W.3d
tract,
as to
liable to
into his
so
become
denied).
2004, pet.
Antonio
San
prevent
the owner of the
capture there
In considering the effects of the rule of
enjoying
adjoining tract
benefit
capture, the
is that a
underlying premise
might
oil as
his land or as
such
minerals, including
landowner owns the
oil
except
come there
for these struc
might
gas,
property.
underneath his
Elliff
tures.”).
key
“legally.”
word is
With
Co.,
Drilling
v. Texon
146 Tex.
it,
only a
capture
rule of
becomes
out
(1948).
Halbowty,
In
manner,
license to obtain minerals
succinctly
property
Court
harmonized this
wells, and
including unauthorized deviated
rule
the rule of capture:
pumps and whatever other method
vacuum
capture gives
To infer that the rule of
operators
oilfield
can devise.
legally protected
the landowner
Today
says that because Sali
the Court
underly-
right
capture
the oil and
claim the
Fee No.
nas does not
entirely
ing
neighbor’s
his
tract is
incon-
*40
regulation,
a
or
the
well violates
statute
theory.
the
To
ownership
sistent with
through
artificially
the
gas that
traveled
rules,
cap-
the
of
harmonize both
rule
fractures from
propped-open
created and
ture can mean little more than that due
not
“simply
to the well
does
Share 13
nature,
fugitive
hydrocar-
to their
him.” But that conclusion does
belong to
captured belong
bons
to the owner
when
underlying
rationale
square
not
flowed,
they
of the well to which
irre-
capture
expressed
of
as we
for the rule
spective
they may
of where
have been
only logical
and as seems
Halbowty,
liability to his
place originally, without
owns the
just:
operator
an
such as Coastal
say
neighbor
drainage.
for
That is to
captured. See
gas
legally
oil and
that is
gas
that
in a continuous reser-
since
“legal
And
Halbouty,
plied protecting promoting covenants trespass issue. goals of mineral leases and lessors. See II. The 1977 Memorandum Brooks, 329, 127
Bender v. 103 Tex. S.W. (1910) (“The controversy 170-71 memorandum, to the 1977 Turning arises over the method which prior moved for its exclusion rights parties adjusted.... of the shall be trial brief as well as separate trial rights The law will determine the trial, trial court admitted it. during yet the adjust will the account parties, equity “illiter- referencing sentence The offensive Co., them.”); Mexicans,” between Hunt v. HNG Oil the rest along with most of ate memorandum, jury (Tex.App.-Corpus was read to the denied). examined Coastal’s when Salinas’s counsel writ Christi (4)To (C) administration ac- Implied relating manage- seek favorable covenants the lease. ment and administration of tion. (1) produce and market. To Hemingway, Gas 8.1 The Law of Oil and R. (2) operate with reasonable care. To (1971). (3) To use successful modern methods of development. *44 corporate representative. attorneys prepared The memoran- who and tried again dum when Salinas’s probably posi- was discussed this case were in the best plaintiff Margarito counsel asked Salinas predict the inflam- tion to memorandum’s language how the of the memorandum matory jury. recog- effect We made him feel. He testified that he and measuring that one method of nized family his other members felt infuriated prejudicial impact of evidence is to consid- it they and insulted when saw because by empha- er “the efforts made counsel to insulted his ancestors. The court then size the erroneous evidence.” Nissan Mo- granted request pub- Salinas’s counsel’s Armstrong, tor Co. Ltd. jury. to the
lish the exhibit (Tex.2004). intensity The extent and opposing attempts to exclude counsel’s up again The memorandum came evidence, exclusion, failing to neu- argument. out in the closing As set effects, consid- tralize its should also be opinion, argued Court’s Coastal’s counsel attorneys po- ered. Id. Coastal’s saw the attempt jury: that it was an to inflame the language and “They figure they get you angry that if can tential effect of the offensive you to exclude it enough, going multiple then are to throw sound tried on occasions counsel, judgment your out the window and that from evidence. Salinas’s on the will hand, decisions be based on sentiment and other never offered the memoran- argument not on reason.” on the Coastal’s language without dum the offensive clearly attempt issue was an to defuse the made sure that the memorandum was wo- problem by created the offensive evidence Further, trial. ven into fabric of the testimony. although attorney did not men- Salinas’s language tion the memorandum’s offensive Rule of Evidence states: “Al-
Texas at- argument, his one of Coastal’s two relevant, though evidence excluded torneys gave closing argument who devot- if probative substantially value is out- argument ed his entire to the memoran- weighed by danger prejudice, of unfair attempt dum in a clear to diminish its issues, misleading confusion or attorney referenced effect. Coastal’s jury, delay, considerations of undue offended “gringos,” stated he was presentation or needless of cumulative evi- Mexicans,” spoke the term “illiterate Balancing probative dence.” value of arguing that Spanish jury to the when unfair against the evidence the risk of jury accept not invita- should Salinas’s prejudice, evidentiary rulings, like other judgment out the tion “to throw sound left trial discretion. Tex. to the court’s See then ad- window.” Salinas’s counsel Able, Dep’t Transp. v. argument dressed the memo rebuttal (Tex.2000). instance, In this the in- ethnicity-based ap- with a less-than-subtle flammatory language nature of the all-Hispanic jury: to the peal apparent and had no relevance to is- being sue tried. Yeah, were maybe people at one time we But, know, you some of focuses on the relevance of the of the land. Salinas got They educated. people document to land title issues. Salinas also these They learned how unfairly not learned how to read. claims that the document was know, Coastal, thing -you And prejudicial the cases Coastal to write. the— it shows the they concern about that memo is cites are irrelevant because Coastal, attitude, part attitude on the and it was jury arguments, notice, corpo- Salinas, you’ll If unity. corporation. racial plea that made a bring person in one ration did not persuaded. I am not memo, bring in the Kenneth W. Gra- received the did not Wright Alan ChaRles & the memo he author of to tell us what FEDERAL PROCEDURE HAM, Jr., PRACTICE & *45 No, really they rely (1978). meant. on some of § 5179 paid experts like who these Rick Garza has that is long recognized This Court 50,000 got to or paid prepare map, to attempt to in acceptable advocacy not lawyers nothing of the to some that have jury with irrelevant evidence of flame do coming with this who are now to such “hot-button” matters or reference explain for this trying something $10- sex, race, nationality, or reli ethnicity, as corporation didn’t care billion that courts gion. Texas have not hesitated to enough bring that actu- person and com treat such irrelevant evidence the memo ally wrote or received incurable ments as error. See Standard they you they can tell what memo so Reese, 835, Fire Ins. Co. v. 584 S.W.2d 840 really Why referring meant. they are (Tex.1979) (“The injection of new and in Why a—1977 to illiterate Mexicans? through flammatory matters into the case land, just call them owners of cases been argument exceptional has royalty owners interest? regarded by as incurable an instruction. added). (emphasis prejudice An racial falls into appeal to what Paraphrasing we said in General Tex. Ins. Ass’n category.”); Employers’ v. Iracheta, 462, v. Corp. Motors 161 S.W.3d 242, 856, Tex. Haywood, 153 266 S.W.2d (Tex.2005), the harm is of this evidence (1954) (holding although inflam manifest. The was intended memorandum is matory argument usually regarded as inject and did racial prejudice into the “curable,” argument racist “was so inflam question trial. The we to ad- are bound matory prejudicial its harmful system to our justice dress related ness could not have been eliminated how to minimize cases best the number of instruction”); retraction or either Tex. that appear to or are tried under the Guerrero, Ins. Employers’ Ass’n v. cloud of mistrust that admission of this 859, (Tex.App.-San Antonio type engenders. of evidence One commen- denied) (“[IJncurable 1990, writ reversible tator problem has addressed the as fol- attorney sug error occurs whenever lows: gests, openly subtlety either or with It important recognize rejec- finesse, jury solidarity that a with or feel race, religion tion and sex as classifi- a witness litigant animus toward be in rulings cations on is not relevance or ethnicity.”); cause of race Penate v. entirely based on the that there notion (Tex.Civ. Berry, 348 S.W.2d 168-69 logical can resting be no distinctions on (find n.r.e.) App.-El Paso writ ref 'd instead, bases; these it rests on the ing argument appealing nationality society belief that in a like multi-cultural error); prejudice was incurable Tex. Em ours, adjudication fairness does not Jones, Ass’n ployers’ Ins. 361 S.W.2d entirely in accuracy consist of the 1962, writ (Tex.Civ.App.-Waco require factual determinations n.r.e.) (prejudicial argument referring ref 'd of accuracy some sacrifice to avoid the error); religion of witness was incurable suspicion prej- that the decision rests Lines, Basanez v. Union Bus disguised udice Trial science.... (Tex.Civ.App.-San 432-33 Antonio judges expect leeway can much less writ) rulings (stating review of that comments that appellate relevance that involve such plaintiffs classifications. were Mexicans and defendant was “one of our testimony citizens” were reversible Salinas’s about how the memo- error). feel, randum made him and family his major part damage would have been held, recently We in the jury context of accomplished by the mere asking of the argument, that some matters are not sub- question making objec- and Coastal’s ject analysis to harmless error because objection tion. An highlighted would have they “at appearance strike of and the language as well as the fact that Coast- actual impartiality, equality, and fairness recognized al nature. offensive justice rendered Living courts.” *46 Tex., Peñalver, Ctrs. Inc. v. 256 S.W.3d Salinas has not claimed that the offen- (Tex.2008). 678, 681 held that phrase We such sive was relevant to an issue re- “incurably matters are only race, discrimination, harmful not garding such as or litigants because of harm to the damage [their] that Coastal’s causing actions involved, but also because of capaci- racially [their] were motivated. The trial court or ty to damage judicial system.” lawyers Id. We Salinas’s could have found some gave, paradigm as the example way of such to introduce the contents of the mem- error, incurable “appeals preju- to racial introducing racially orandum without dice adversely affect they truly [that] the fairness oriented if language felt the equality justice rendered courts memorandum’s contents were relevant for they improperly because induce purpose arousing consider- some other than racial party’s ation of a prejudice. they race to be used as a example, For could have factor in jury’s decision.” I Id. would language, redacted the offensive or read apply analysis the same appeal where to the into memorandum’s contents the rec- racial prejudice is made though admission ord offending language. minus the Admit- And, of documentary evidence. I ting entirety would the memorandum in its made hold that pleas solidarity for ethnic part all its contents of the trial. It was racial prejudice unacceptable witnesses, are published even used to examine when not in explicit made terms. jury, See was available for counsel to Cantu, Freedom Newspapers jury Tex. v. during argument, 168 reference trial and (2005). jurors and was available for the to review during their deliberations. I would hold case, In this the offensive language analysis unnecessary. that a harm In- could have been redacted. While a redac- tentional introduction of evidence such as tion probably jurors’ would have drawn offending phrase memorandum with its might attention to the redaction and only particular affects not case misinterpretation, caused confusion or re- admitted, prece- which but also sets a screening dactions or other methods of appearance dent and strikes at the of and irrelevant and passion-inducing evidence actual impartiality, equality, and fairness allowing are better than admission of evi- justice judicial system. in our rendered fact-finding pro- dence that distorts the I would hold that of the memo- admission cess. The term “illiterate Mexicans” randum requires reversal and remand for have been one of historical fact rather than conducting a new trial a harm without a racial slur. But even if the words were Ctrs., analysis. Living See originally only intended to be historical 680-81. fact, at the present phrase time the un- doubtedly strong feelings along induces ra- I capture would not hold that the rule of cial argument lines. And as to the applies gas produced Share 13 object timely Margarito Coastal did not fracture. I hydraulic means of the would judgment on the render for Coastal capture claim based on the rule of as to and would consider Coastal’s issue consti- hydraulic fracturing
whether can trespass. I agree
tute a subsurface case to requires 1977 memorandum Otherwise, join I the Court’s reversed.
opinion agree that must be the case a new
remanded for trial.
FOREST OIL CORPORATION Worden, Petitioners,
Daniel B. Argyle McALLEN, El Rucio
James Inc., Company,
Land and Cattle San Partnership,
Juanito Land and McAl Partnership, Respondents.
len Trust
No. 06-0178.
Supreme Court Texas.
Argued Oct. 2007. Aug. 29,
Decided
Rehearing Denied Nov.