Five Fast Facts on Misguided Court Ruling

A recent Pennsylvania Superior Court ruling upends more than a century of settled property law and injects uncertainty to safe, responsible oil and gas development, the Marcellus Shale Coalition and Pennsylvania Chamber of Business and Industry said in court filings this week. The court’s recent decision involving the “rule of capture” departs from past precedent and calls into question tens-of-thousands of lawfully drilled wells throughout the Commonwealth.

Should the ruling stand, the panel’s decision discourages growth among a key driver of Pennsylvania’s economy. Natural gas development supports more than 178,000 jobs and has contributed $24.5 billion to the state’s economy. What’s more, tax revenues, including $1.5 billion in natural gas impact tax, serve as a key funding source for hundreds of community grants and projects throughout the Commonwealth.

Here’s what you need to know about the case.

Partial panel, reflecting views of two judges overturns 100+ years of settled Pennsylvania property law

MSC’s Amicus Brief: “The partial panel’s decision upends settled rules, contradicts policy, and injects considerable uncertainty in the industry.”

PA Chamber of Business & Industry’s Amicus Brief: “The firmly established Rule of Capture has served an important and logical purpose for more than a century, and it should not be judicially discarded. Given the significance of this precedential decision, any ruling should be one of the full Court.”

Southwestern Energy’s (SWN) Application for Rehearing: “The two-judge panel’s decision, representing the views of only one commissioned judge, threatens to set back this industry and is contrary to settled Pennsylvania Supreme Court precedent.”

The panel relied on out-of-state, inconsequential court decisions to break with established Pennsylvania law.

SWN’s Application: “The panel’s decision breaks with established Pennsylvania law, and in so doing, it relies upon out-of-state cases that do not support its decision. A long line of Pennsylvania cases establishes that the rule of capture precludes trespass liability for the seepage of oil and gas resulting from extraction activities on one’s own property.”

Hydraulic fracturing is not a new activity that requires the application of new legal principles.

MSC’s Amicus Brief: “Hydraulic fracturing and other related well-stimulation techniques are not new. The industry developed the more modernized form of hydraulic fracturing in the late 1940’s. … The rule of capture does not change with the advancement of new technology.”

The decision will hamper oil and gas production.

MSC’s Amicus: “The panel’s decision significantly disrupts the natural gas industry to the detriment of the Commonwealth’s citizens. … The risk of complex litigation may lead to a vast reduction of development activities throughout the Commonwealth and the economic benefits that flow from those activities. The Court should restore the rule of capture to maintain legal certainty and foster the continued growth of the natural gas industry and the economy in Pennsylvania.”

PA Chamber’s amicus: “The decision would make hydraulic fracturing subject to so much litigation that it will likely have the ultimate effect of significantly curtailing this activity which has been so valuable to Pennsylvanians in so many ways.”  

The decision will upend property rights.

SWN’s Application: “The decision prevents property owners from using any portion of their property for hydrofracturing activities that might result in seepage of oil and gas from neighboring property, without facing liability for trespass.”

MSC’s Amicus: “The decision benefits individual interests to the detriment of many other landowners with oil and gas rights and to the greater public interest. The rule shields property owners from liability for developing natural resources underlying multiple tracts and encourages neighboring owners to do the same. If the decision stands, unleased landowners can prevent natural gas development on all surrounding properties to the detriment of all others who exercised their rights to develop their oil and gas interests.

As the MSC concluded in its filing, “the Court should restore the rule of capture to maintain legal certainty and foster the constituted growth of the natural gas industry and the economy in Pennsylvania.”