Face Challenges Confidently

331 Discovery Operating, Inc. v. BP Am. Prod. Co.

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.
Discovery Operating, Inc. v. BP America Production Co., 311 S.W.3d 140 (Tex. App.—Eastland 2010, pet. Denied,held that Tex. Nat. Res. Code Section 85.321 allows owners of production or property interests to bring negligence per se claims based on violations of the Texas Railroad Commission (“TRC”) rules and orders.  While drilling an oil well, Discovery Operating, Inc. (“Discovery”) ran into a “highly pressurized flow of brine water” that ultimately caused Discovery damages in the form of costs to contain the flow, costs to plug and abandon the well, and lost production profits.   Because Discovery had never encountered similar flows in the area of the well, it investigated subsurface injection activity conducted by other entities surrounding the well as a potential cause for the flow.   Discovery concluded that BP American Production Company’s (“BP”) nearby subsurface injection well was the cause for the flow, and it brought negligence per se claims against BP based upon assertions that BP had violated Section 85.045 (which provides that waste is illegal and prohibited based on the definition of “waste” in Section 85.046) of the Natural Resources Code as well as various TRC rules.
Based on the Texas Supreme Court’s opinion in Exxon Corp. v. Emerald Oil & Gas Co.,  the Eastland Court of Appeals ruled that the trial court was erroneous in granting BP’s summary judgment motion on the negligence per se claims.   The trial court did not have the benefit of the Emerald opinion when it rendered its summary judgment ruling, but the court of appeals held that Emerald expressly allowed the type of negligence per se claims asserted by Discovery.   Emerald dealt with a similar negligence per se claim that rested on violations of TRC rules brought by a subsequent owner of mineral interests.   The court stated that Emerald stood for the proposition “that [Texas Natural Resources Code] Section 85.321 creates a private cause of action” for violations of TRC rules or orders.   Moreover, the courts have no discretion to determine whether the statute will support a negligence per se claim.   However, the lessee in Emerald lacked standing, because it was a subsequent lessee, which was a limitation that did not apply to Discovery’s claims, because Discovery was not a subsequent lessee.  Because Discovery owned the mineral interests when the alleged injury occurred, Discovery had the right to bring its negligence per se claims regardless of “whether the claims are labeled as a private cause of action for violations of statutes and [TRC] rules and orders or as negligence per se claims for violations of the same statutes, rules, and orders.”
The significance of this case is the court’s recognition that Texas Natural Resources Code Section 85.321 creates a private cause of action for negligence per se claims arising from violations of any TRC rule or order, which may be asserted by the owners of the mineral interests who own those interests at the time the injury occurs.  This suggests there will be an expanding field of claims based on TRC rules and orders not previously seen as a basis for private causes of action.