665 Forest Oil Corp. v. El Rucio Land & Cattle Co., Inc., 518 S.W.3d 422 (Tex. 2017)

Wednesday, February 14th, 2018

Richard F. Brown

The following is not a legal opinion. You should consult your attorney if the case may be of significance to you.

Forest Oil Corporation v. El Rucio Land and Cattle Company, Inc. Forest Oil Corp. v. El Rucio Land & Cattle Co., Inc., 518 S.W.3d 422 (Tex. 2017) (TRC jurisdiction over claims for environmental contamination), held that the Texas Railroad Commission (“TRC”) did not have exclusive or primary jurisdiction over claims for environmental contamination. Forest Oil Corporation (“Forest”) held a mineral lease and operated a natural gas plant on the McAllen Ranch. Various owners of the ranch (“McAllen”) sued Forest alleging environmental contamination and improper disposal of hazardous materials on the ranch. McAllen asserted multiple claims, including trespass, negligence, negligence per se, fraud, assault, intentional battery, and breach of contract. McAllen won in arbitration. While the matter was pending, McAllen had also requested that the TRC investigate whether contamination had occurred on the ranch. The TRC placed Forest in its voluntary Operator Cleanup Program. At the time the opinion was issued, the TRC had approved some of Forest’s proposals, but the TRC had not yet approved Forest’s proposed final remediation plan. Forest sought to vacate the arbitration award because the TRC had exclusive or primary jurisdiction over McAllen’s claims, precluding the arbitration.

The threshold question for exclusive jurisdiction is whether “the Legislature gives the agency alone the authority to make the initial determination in a dispute.” If an agency has exclusive jurisdiction, parties must utilize all administrative remedies before seeking judicial review of the agency’s action. Thus, if the TRC had exclusive jurisdiction, the arbitration panel lacked jurisdiction to enter the award, and the trial court lacked jurisdiction to confirm it. The court notes that abrogation of common-law rights is disfavored and that Legislative intent to abrogate common-law rights must be clearly indicated. Forest identified multiple Texas statutes as examples of the Legislature’s intent to abrogate common-law rights. The Court stated that these statutes allow the TRC to regulate and oversee environmental issues in oil and gas production and operations; however, none of the statutes clearly indicate Legislative intent to abrogate or foreclose common-law rights.

The court then considered whether the TRC has primary jurisdiction over environmental contamination claims. Primary jurisdiction is a prudential doctrine that resolves authority issues when both an agency and the courts have the right to make an initial determination in a dispute. Trial courts should allow an agency to make the initial determination when: “(1) an agency is typically staffed with experts trained in handling the complex problems in the agency’s purview; and (2) great benefit is derived from an agency’s uniformly interpreting its laws, rules, and regulations, whereas courts and juries may reach different results under similar fact situations.” The primary jurisdiction doctrine “does not apply to claims that are inherently judicial in nature.” The Court held that McAllen’s claims are all inherently judicial in nature.

The Court also determined that McAllen’s “common-law claims are not dependent on the standards of regulatory compliance.” Although the TRC may make determinations as to McAllen’s contamination claims, it cannot oust the court of jurisdiction to decide those claims. Forest complained that this subjected Forest to the risk of double liability: damages payable to McAllen (who could pocket the money) and a TRC order to clean up the mess. The Court responded that Forest could manage its risk by complying with TRC statutes and orders.

The significance of this case is the holding that the TRC does not have exclusive or primary jurisdiction for environmental claims.