Face Challenges Confidently

391 FPL Farming Ltd. v. Envtl. Processing Sys., L.C.

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.
FPL Farming Ltd. v. Environmental Processing Systems, L.C., 351 S.W.3d 306 (Tex. 2011), FPL Farming Ltd. v. Envtl. Processing Sys., L.C., 383 S.W.3d 274 (Tex. App.—Beaumont  2012, pet. filed) (op. on remand),  held that a wastewater permit does not shield the permittee from possible tort liability.  FPL Farming, Ltd. (“FPL”) owned land adjacent to land on which Environmental Processing Systems, L.C. (“EPS”) was operating two deep wastewater injection wells.  After the Texas Commission on Environmental Quality (“TCEQ”) issued permits for the injection wells, EPS asked the TCEQ to extend the permitted injection rate; FPL objected.  In a contested case hearing, the administrative law judge granted the amended permit, despite finding that the wastewater injected would naturally migrate into FPL’s land.  On appeal, the Austin Court of Appeals “assumed without deciding that FPL had property rights in the subsurface land and would have standing to sue for damages if the wastewater migrated into FPL’s land.”
Three years later, FPL filed this suit against EPS claiming trespass among other causes of action.  After the jury found no trespass occurred and the trial judge entered a take-nothing judgment against FPL, FPL appealed to the Beaumont Court of Appeals on a number of jury charge and other trespass issues.  The Beaumont Court of Appeals did not consider the merits of the appeal, but affirmed by holding: “‘[W]hen a state agency authorized deep subsurface injection, no trespass occurs when fluids that were injected at deep levels are then alleged to have later migrated at those deep levels into the deep subsurface of nearby tracts.’”  The Texas Supreme Court then reviewed whether a permit shields its holder from tort liability for actions that the permit authorizes.
The Texas Supreme Court explained that under the general rule and Texas caselaw, holders of wastewater injection well permits issued by an agency are not immune from civil liability, or in other words, “a permit is not a get out of tort free card.”  Additionally, the Injection Well Act does not authorize an agency to determine issues of trespass or ownership rights of the deep subsurface and explicitly provides that that a permit does not shield its holder from civil liability.  Further, the Texas Administrative Code “specifically states that a permit does not authorize invasion of property rights.”
The Texas Supreme Court then distinguished two of its earlier opinions upon which the Beaumont Court rested its decision.  Manziel involved a suit to set aside and cancel a Railroad Commission permit authorizing the injection of water to flood a reservoir to recover oil on the grounds that the injected water would constitute a trespass.  In Manziel, the court expressly did not determine whether a permit shields its holder from civil liability for trespass; rather it held that the validity of a permit was unrelated to the rules of trespass.  In Garza a mineral owner brought a trespass suit against its lessee alleging the lessee invaded the mineral owner’s underground interest by injecting proppant to recover minerals from the adjoining land that the lessee was also leasing.  In Garza, the court held that a complainant without a possessory interest in the mineral estate, like the lessor in Garza, must prove actual injury in a trespass suit.  The Garza court held that the rule of capture precluded damages for drainage by fracturing, and thus the mineral owner lessor could not recover.  In the present case, the court noted that both Manziel and Garza dealt with recovery of oil, not injection of wastewater.  The court distinguished these cases by noting the rule of capture does not govern injection of wastewater like it governs recovery of oil and because public policy does not favor injection of wastewater like it favors recovery of oil.
The court in FPL Farming did not decide whether subsurface wastewater migration can constitute a trespass, or whether it did in this case.  Rather, the court restated established law: a regulatory permit to drill an injection well does not absolve the holder from civil tort liability for conduct authorized by the permit.
This case is significant because the Texas Supreme Court found the rule of capture and public policy in favor of oil recovery to be distinguishing characteristics of its prior subsurface trespass opinions and that neither was applicable to injection of wastewater.  Although the court made clear that no permit will provide complete tort immunity, the type of activity permitted may be a factor considered by the court in determining a permit holder’s liability.