Golden Eagle Resources II LLC v. Rice Drilling D LLC. presents a small step in the development of subsurface trespass law in Ohio. The federal court considered a motion to dismiss, in which it evaluated the sufficiency of the complaint to state a cause of action. Such a motion is not a challenge to plaintiff Golden Eagle’s factual allegations. The causes of action were trespass and conversion.
Golden Eagle owns mineral rights in two tracts in Belmont County, 11.456 acres and 7.47 acres. Rice owns leasehold rights in the Marcellus Shale and Utica Shale. Minerals from the surface to the top of the Marcellus, between the bottom of the Marcellus and the top of the Utica, and below the base of the Utica were excluded from the lease. Rice drilled the “Big Tex” well, which is in the Big Tex 6 drilling unit. The unit overlaps with the entirety of the 7.47 acres and 9.05 of the 11.456 acres. Rice produces gas from the “Utica/Point Pleasant formations”. The Point Pleasant is below the Utica and not covered by the lease.
Under Ohio law a trespass is an interference or invasion of a possessory interest in property. An entity is liable for trespass if it intentionally enters upon land in the possession of another or causes a thing or third person to do so. Landowners’ rights include the right to exclude invasions that actually interfere with their reasonable and foreseeable use of the subsurface.
The interest at issue was the Point Pleasant formation. How Rice invaded the property was the question. The Big Tex wellbore did not pass under Golden Eagle’s tracts, so there was no physical trespass with the drill bit.
Golden Eagle alleged trespass by Rice’s improper pooling. The court concluded that Ohio law does not hold that improper pooling into a drilling unit constitutes a trespass.
The central question was whether Ohio law recognizes a trespass by subsurface injection of frac fluids into the Point Pleasant formation. Rice relied on the so-called “negative rule of capture” allowing a landowner to inject into a formation substances which then migrate through the structure of the land to the land of others even if it results in displacement under such land. Ohio courts have not accepted that doctrine, said the court.
Rice also argued that even if a claim for subsurface injectate is cognizable, it will fall short without allegations of physical damage or interference with use, assertions that were not in the complaint. Golden Eagle admitted that it did not specify the nature of the alleged physical invasion. The trespass claim fell short of the federal pleading standard and Golden Eagle was given 14 days to amend its complaint.
Golden Eagle alleged that Rice wrongfully converted oil and gas produced from the Point Pleasant formation that should belong to Golden Eagle. Ohio courts have held that the rule of capture does not apply to drainage or seepage of natural gas caused by the injection of frac fluids onto into another’s property. The court cited Briggs v. Southwestern Energy. The court concluded that the sparse Ohio case law on this topic recognizes a conversion claim predicated on natural resources that have been acquired by fracking that invades the plaintiff’s property. That is what Golden Eagle alleged and thus it adequately stated a claim for conversion.
It might not matter. The case has been stayed pending a motion for summary judgment ruling on a related case.
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