UPDATED

In light of the adverse effects the storm, floods and tornadoes will have on oil and gas production, transportation and processing operations, we offer several bits of advice:

Force majeure

Winds and floods are among the very reasons for the seldom-invoked force majeure provisions of your oil and gas leases, operating agreements, transportation agreements and other contracts. If your operations are affected by the storm, study your contracts and be mindful of what you will need to do and when in order to invoke the protections force majeure clauses offer. Continue Reading Hurricane Harvey and Oil and Gas Operations – What To Do

bad-dayIt was a bad day for the Parrs in Aruba Petroleum v. Parr. The trial court judgment was against the operator for intentional nuisance. The Parrs recovered $2.9 million for pain and suffering and mental anguish and for loss of market value of their home caused by Aruba’s gas wells in Wise County, Texas. (See our erudite discussions of this case at the trial court here, here and here.)

This, along with Cerny v Marathon Oil, makes one wonder what it might take for a Texas plaintiff with a nuisance claim arising out of oil and gas activities to recover personal injury damages, especially if there are operations in the area by non-defendants (there were no wells on the Parrs’ property and 87 other wells in the area).  As you will see, litigation by ambush is not likely to work.

The Parr’s claim was for “environmental contamination and polluting events” on their property by way of, among others, air contamination, light pollution and offensive noises and odors.

Recall Crosstex v. Gardiner, in which the Supreme Court described what is required to prove an intentional nuisance:

The actor desires to cause the consequences of his act or believes that the consequences are substantially certain to result from it. It is a subjective standard. It is not enough to conclude that the defendant intentionally engaged in the conduct that caused the injury.

The Parrs relied on three categories of evidence:

  • complaints by a neighbor to Aruba,
  • complaints to the Texas Commission on Environmental Quality,
  • complaints by the Parrs to Aruba.

Generalized, anonymous grievances fall short

For all their complaints, the Parrs never identified themselves or their specific problems to anyone in particular at Aruba. They failed to identify evidence that Aruba knew that the Parrs were complaining to the TCEQ or that complaints were about the Parr’s property.

The jury didn’t believe Aruba’s conduct was abnormal and out of place in its surroundings. Recall that after Crosstex that is an improper jury question anyway.

My guess is that the jury was persuaded by testimony of an Aruba witness that well sites are noisy, dusty, emitted odors, and result in underground vibrations and significant lights at night, that the Parrs “probably “ had complaints, that he considers smoke plumes a health hazard and a nuisance. That all might be true, but to the court that wasn’t the issue.

It’s all about the evidence

There was no evidence to support the jury’s finding that Aruba intentionally created or maintained a condition that substantially interfered with the Parrs’ use and enjoyment of their land. The Parrs couldn’t cite any evidence that Aruba knew who placed phone calls to Aruba and complained to the TCEQ, or that complaints were specific to the Parr’s property.

For our musical interlude, happy Valentine’s Day.

In my never-ending effort to improve my position in life by associating with people who are smarter and more knowledgable than I am (my wife being a notable example), this entry is by noted environmental lawyer Cynthia Bishop (cbishop@cbishoplaw.com) on a topic that is important to anyone in the energy business.

Cindy Bishop

If your E&P or service company is growing quickly, you could be overlooking environmental regulations that are triggered by the very growth and success your hard work has achieved. Fortunately, the EPA and many states, including Texas and Oklahoma, have voluntary disclosure or internal audit programs that can waive or greatly reduce penalties.

Most environmental regulations apply to operations with a capacity (such as throughput or equipment size) above a certain threshold. As a result, many startup companies are exempt at the outset of their operations, but later fall under permitting or reporting requirements as they expand. Examples are spill prevention plans, air permits, and annual EPA Form “R” reports. These companies are so focused on meeting the increased demand that they sometimes do not think about environmental compliance.

The disclosure programs allow a company to audit itself and then disclose and correct any violations identified during the audit. In return for the self-disclosure and corrective action, the agency will waive or greatly reduce typical penalties. Each audit program contains specific requirements that must be met in order to qualify for the penalty waiver, so be sure to check with applicable guidlines and regulations.

See the EPA’s Audit Policy

See the TCEQ Audit Privilege Act

The Oklahoma law can be found at OAC 252:4-9-5(a).