The Texas Court of Appeals in Beaumont, Texas recently decided a very interesting the case that has huge implications for Texas land and mineral owners: Environmental Processing Systems LC v. FPL Farming Ltd. The Texas Supreme Court recently heard oral argument on this case.
As many Texas mineral owners are aware, salt water is often produced by an oil well in conjunction with the oil. Generally, this salt water is required by law to be collected and taken to saltwater injection wells that are licensed by the Texas Railroad Commission. The salt water is then injected back into the subsurface, where it came from. But one cannot always control where the saltwater goes after it is injected.
Environmental Processing Systems (“EPS”) operates injection wells in Liberty County, Texas for the disposal of industrial waste water. FPL Farming (“FPL”) alleged that waste water from these wells could or did migrate into and contaminate its aquifer. FPL had no present plans for the water in this aquifer, but was concerned that contamination would diminish the value of its land. The injection well itself was 400 feet away from FPL’s land, but EPS injected more than 100 million gallons of waste water into the injection well in question, making the underground footprint potentially substantial. There was evidence at trial that salt water already existed naturally at the depth used by the injection wells. This is important because salt water is also considered a waste product that is injected into disposal wells. The aquifer in question was more than a mile below the surface, but FLP alleged that they may want to use that water in the future. FPL did not claim that EPS’s pollutants have migrated to the surface or are affecting drinking water. Apparently, FPL had no evidence that migration had actually occurred: FPL brought suit because they feared “that EPS’s waste plume had or was about to enter the subsurface of its property”. FPL claimed that the waste water intrusion, whether threatened or actual, was a trespass and sought injunctive relief and damages for trespass and for negligence and unjust enrichment.
The jury in the trial court found that no trespass had occurred, that EPS was not negligent, and that EPS had not been unjustly enriched. The Beaumont Court of Appeals affirmed the trial court decision and FPL appealed to the Texas Supreme Court. The Texas Supreme Court in FPL Farming Ltd. v. Envtl. Processing Sys., L.C., 351 S.W.3d 306, 308, 314 (Tex. 2011), held that the fact that EPS had a permit from the Texas Railroad Commission for the injection well was not a shield against trespass and damages and sent the case back to the Beaumont Court of Appeals to consider all issues raised by the parties. The main issues were whether a trespass can exist for deep subsurface-water migration; whether a lack of consent must be proven as an element of trespass or whether it is an affirmative defense; and whether the trial court should have issued a directed verdict on the consent issue because FPL could not have consented to a trespass that did not occur.
On remand, EPS claimed that common law trespass does not extend to deep subsurface water migration. FPL contends that Texas landowners own the subsurface water below their land and should be allowed to use Texas trespass law to protect their subsurface rights.
Some oil and gas industry groups have filed amicus briefs supporting EPS. They worry that a decision in favor of FPL could expose oil and gas operators and injection well operators to substantial litigation, even when there is no evidence of migration. For example, a landowner who disagreed with energy development on nearby lands could threaten costly litigation over injection wells in order to obtain a better oil and gas lease. Of course, no one can guarantee that someone won’t file frivolous litigation. It happens. However, the possibility of frivolous litigation should never prevent the law from allowing a landowner to protect a valuable property right like subsurface water. This is especially true as water becomes more and more scarce and thus more and more valuable.
There has not yet been a case in Texas that recognizes a trespass via salt or waste water of a deep aquifer. Therefore, the outcome in this case will be closely watched by landowners, injection well operators and oil companies alike. Oral argument before the Texas Supreme Court took place on January 7, 2014. At the hearing, the justices did not show any signs of how they were leaning, except that Justice Paul Green said he had a hard time understanding a trespass that was under tons of rock and earth and noted it would be hard to determine when the trespass took place and how much of the groundwater was damaged.
Actually, the technology does exist to determine at least whether there is migration from an injection well to an aquifer by the use of dyes and radioactive particles. I searched the briefs of both parties (which you can access here), but neither indicated that this kind of testing had been done in this case. Obviously, without testing, it isn’t possible to determine if migration from an injection well has occurred.
This case involved waste water injection, not salt water. However, because salt water is so often produced along with oil, because the law requires that it be disposed of properly, and because that disposal often involves injecting it into a well, this case will be of great interest to Texas landowners and the operators of injection wells to see how the Texas Supreme Court decides. Stay tuned.