Face Challenges Confidently

218 In re Discovery Operating, Inc.

Friday, September 4th, 2015

Richard F. Brown

The following is not a legal opinion. You should consult your attorney if the case may be of significance to you.
In re Discovery Operating, Inc., 16 S.W.3d 898, (Tex. App.—Eastland 2007, no pet.) holds that the Texas Railroad Commission (“Commission”) does not have exclusive or primary jurisdiction over claims for negligence, negligence per se, or common law and statutory waste. The claims arose from defendant BP America Production Company’s (“BP”) use of two saltwater injection wells in the vicinity of Discovery’s oil and gas lease. The trial court abated the judicial proceeding and referred the matter to the Commission.
Whether an agency has exclusive or primary jurisdiction is a question of law. An agency has exclusive jurisdiction when the legislature has granted to it the sole authority to make an initial determination in a dispute, i.e. when a pervasive regulatory scheme indicates that the legislature intended for the regulatory process to be the exclusive means of remedying the problem. BP relied upon the Natural Resources Code and the Water Code in claiming that the Commission had exclusive jurisdiction over underground injection control.
There are provisions in the Texas Natural Resources Code that preserve the private cause of action:

  • 85.321. Suit for Damages

A party who owns an interest in property or production that may be damaged by another party violating the provisions of this chapter that were formerly a part of Chapter 26, Acts of the 42nd Legislature, 1st Called Session, 1931, as amended, or another law of this state prohibiting waste or a valid rule or order of the [railroad] commission may sue for and recover damages and have any other relief to which he may be entitled at law or in equity. Provided, however, that in any action brought under this section or otherwise, alleging waste to have been caused by an act or omission of a lease owner or operator, it shall be a defense that the lease owner or operator was acting as a reasonably prudent operator would act under the same or similar facts and circumstances.

  • 85.322. Proceedings Not to Impair Suit for Damages None of the provisions of this chapter that were formerly a part of Chapter 26, Acts of the 42nd Legislature, 1st Called Session, 1931, as amended, no suit by or against the [railroad] commission, and no penalties imposed on or claimed against any party violating a law, rule, or order of the commission shall impair or abridge or delay a cause of action for damages or other relief that an owner of land or a producer of oil or gas, or any other party at interest, may have or assert against any party violating any rule or order of the commission or any judgment under this chapter.

Although the Texas Natural Resources Code does provide a pervasive regulatory scheme, the court  found  these  specific  provisions  preserving  the  private  cause  of  action  to  be  more persuasive.  The court reached the same conclusion as to the Water Code.
The primary jurisdiction doctrine allocates power between courts and agencies. Courts will defer to the administrative agency when “(I) 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.
The court held that the primary jurisdiction doctrine does not apply to actions or disputes that are inherently judicial in nature. The causes of action asserted in this case negligence, negligence per se, and waste are inherently judicial in nature. In addition. the court was persuaded that applying the judicially created doctrine of primary jurisdiction would be in direct contravention of the specific language in Tex. Nat. Res. Code § 85.322 (as quoted above) that a cause of action for damages or other relief shall not be impaired, abridged, or delayed.
The significance of the case is that the court gives strong deference to the statutory provisions preserving the right to litigate rather than to the administrative expertise of the Commission.