Commentary: Court cases suggest Texas is heading to a subsurface lease market

06 June 2014 Publication

With a subsurface trespass case pending before the Texas Supreme Court and a recent $3 million nuisance verdict that has been called the nation’s “first fracking trial,” the industry may be wondering whether Texas is headed toward a subsurface lease market. At least that’s what FPL Farming v. Environmental Processing Systems and Parr v. Aruba Petroleum seem to suggest.

The Supreme Court has already once considered FPL Farming, when it rejected the operator’s argument that a valid injection permit immunizes a wastewater injector from trespass liability. After a jury found no trespass upon remand, the Beaumont Court of Appeals held — for the first time ever — that neighboring landowners have valid a claim for trespass.

Now that the Supreme Court stands poised to finally rule on the trespass issue, the Texas Association of Oil & Gas and Association of Energy Services Companies of Texas argue that transactional costs to the entire industry will rise dramatically if a jury can hear trespass claims without regard to a plaintiff’s injury. Given the high cost of trespass litigation, AESC argues that it could become cheaper just to pay neighboring landowners for subsurface leases to keep them from suing — a modern take on what the industry has traditionally called a holdout.

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