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Producer seeks dismissal of closely watched 'rule of capture' case in Pennsylvania

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Producer seeks dismissal of closely watched 'rule of capture' case in Pennsylvania

Houston — In arguments Thursday before the Pennsylvania Supreme Court, lawyers representing Southwestern Energy warned that any changes made to the state's rule of capture doctrine could have dire consequences for the state's exploration-and-production industry.

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A seven-justice panel of the high court heard oral arguments in the case of Adam Briggs et al. v. Southwestern Energy Production, in which a Pennsylvania family claims the producer trespassed on their property by extracting gas from an 11-acre parcel of family-owned land by drilling and hydraulically fracturing a well sited on a neighboring property.

The case involves the rule of capture, a 19th century legal doctrine that holds that oil and gas belongs to the driller that is able to produce it.

"We believe we have clearly shown how the trial judge's original ruling in Southwestern Energy's favor follows 100-plus-year-old law, avoids speculative litigation between neighbors, and preserves the economic benefits to Pennsylvania brought about by the past decade's shale boom," Southwestern spokesman Jim Schwartz said in an email statement about the case.

Attorneys for Southwestern argued that the case should be dismissed because the plaintiffs were unable to prove that the gas produced came from beneath their property, Harry Weiss, an oil, gas and environmental attorney, said in an interview Thursday.

"The plaintiffs in the case argued that hydraulic fracturing could cause a trespassing," said Weiss, who is not involved in the case, but who is writing a treatise on the litigation.

Industry advocates have argued that a decision in favor of the plaintiffs would create a new legal climate in Pennsylvania, one in which producers would be exposed to endless litigation from property owners intent of pursuing trespassing claims against the drillers.

"I think it's the position of the industry it would create new law," Weiss said of a possible ruling in the plaintiffs' favor.

CASE GENERATING STRONG RESPONSE FROM INDUSTRY GROUPS

The case has generated a great deal of support for Southwestern's position from groups advocating for the E&P industry. API-PA, the state affiliate of the American Petroleum Institute, the Marcellus Shale Coalition and the Pennsylvania Independent Oil and Gas Association have all filed amicus briefs in support of the producer.

The case made its way to the Supreme Court after Southwestern appealed an April decision by a two-judge panel, which reversed an earlier ruling by a trial court. Citing the longstanding rule of capture, the trial court had ruled in Southwestern's favor in a summary judgment.

However, a Superior Court panel found that the rule of capture should not apply to hydraulically fractured wells because the driller is unable to control the direction and lengths of the fracks.

"Without hydraulic fracturing, there would be no economically viable production from shale formations such as the Marcellus and Utica," the MSC argued in its brief. "The Superior Court's contrary decision represents a drastic change in established precedent."

However, Laurence Kelly, an attorney representing the plaintiffs, said that by extending its fractures beneath the Briggs' property, Southwestern was guilty of trespassing. "Nobody is entitled to trespass," he said in an interview on Thursday.

Weiss said it's anybody's guess as to how the Supreme Court panel would rule in the case.

"It's looking like a split decision," he said. While some of the justices "had some sympathy for Southwestern's argument," others on the panel seemed to be more swayed by the plaintiffs' arguments. "You just can't figure it out," he said.

-- Jim Magill, jim.magill@spglobal.com

-- Edited by Gail Roberts, newsdesk@spglobal.com