From Law360

Pittsburgh (October 25, 2018, 8:58 PM EDT) — The Pennsylvania Supreme Court’s recent ruling reaffirming constitutional protections on clean air, pure water and environmental preservation continues to confound oil and gas operators as they try and determine how it could impact their activities, according to a panel of attorneys speaking at an industry conference in Pittsburgh.

The high court’s landmark ruling in Pennsylvania Environmental Defense Foundation v. Commonwealth of Pennsylvania last June tossed out a decades-old balancing test for determining whether land-use and permitting decisions passed muster under the state’s so-called Environmental Rights Amendment.

In striking down the balancing test, however, the justices left what K&L Gates LLP partner Anthony Holtzman said during a panel discussion at the annual Shale Insight conference on Tuesday was a string of questions about what standards should apply when mulling compliance with the amendment.

“This case leaves a number of issues open,” he said. “There are a number of unresolved questions in the aftermath of this PEDF decision that are being considered in real time right now by tribunals across the commonwealth and will be taken up in case after case as time goes on.”

Under the text of the amendment, the commonwealth acts as a trustee of “public natural resources” and is required to “conserve and maintain them for the benefit of all the people.”

In determining how to apply the amendment to specific governmental actions, the justices said in the PEDF decision that courts were required apply private trust principles that were in effect at the time the provision was adopted in 1971.

Aside from questions over how trust principles from the 1970s should be brought to bear on permitting decisions by state agencies, Holtzman said there were even more basic questions about what should count as a public natural resource and whether local government, in addition to the state, should be considered a trustee.

And if local governments are trustees under the amendment, he said, it’s uncertain what might happen if local officials disagree with state agencies on how to manage trust assets.

“There’s a lot of uncertainty,” he said.

In addition to questions about the Environmental Rights Amendment, the panel also said that oil and gas operators were struggling to grapple with a recent Superior Court decision — Briggs v. Southwestern Energy Production Co. — greenlighting a lawsuit claiming that hydraulic fracturing on a Susquehanna County property had allowed a driller to improperly tap into natural gas below a neighboring property.

The ruling rejected the industry’s long-standing understanding of the so-called rule of capture, which for more than a century has shielded drillers from facing trespass claims over drainage of free-flowing oil and gas from below adjacent properties.

The decision stemmed from a lawsuit in which a landowner claimed that fractures emanating from the well on his neighbor’s property had extended below his property, allowing for capture of gas that would’ve otherwise remained trapped there.

“We’ve thought since the dawn of time that we had a rule of capture for all wells drilled in Pennsylvania,” said Lisa McManus, vice president and general counsel with Pennsylvania General Energy Co. “This decision has upended settled principles of law in Pennsylvania.”

She said she hoped the state’s Supreme Court would grant a pending petition for allowance of appeal in the case and correct what she said was a clearly faulty decision.

“I’m just hoping we hear something soon from the Supreme Court,” she said.

If not, she said she expected a rise in claims of alleged subsurface trespassing, and that drillers would have to push their wells as far back as perhaps 500 feet from property lines because it was so hard to predict how far and in what direction fractures could travel from an unconventional well.

But she said that drillers would be unhappy with a 500-foot setback because of the potential that gas closer to the property line would not end up being recovered.

“When I suggested that at least 500 feet would be appropriate, my team laughed at me,” she said.


Legal Notice