Texas Appellate Court Issues Oil, Gas Opinion Discussing When a Claim Based on the Spread of Contamination Accrues

Austin, TX (Law Firm Newswire) October 28, 2020 – Recently, a state appellate court issued an opinion in a Texas oil and gas case discussing when a party’s claim alleging that another caused damage to their leased minerals accrues. Determining when a claim accrues is critical because the accrual date will mark the beginning of running of the statute of limitations. In this case, the parties dispute focused on whether the plaintiff’s action was filed too late.

Swift Energy v. Regency Field Services: The Facts of the Case

According to the court’s opinion, the case involved damage allegedly caused by the underground spread of concentrated hydrogen sulfide (H2S) and carbon dioxide (CO2) gas from an injection well. Evidently, Swift Energy owned the rights for mineral leases in McMullen County. Regency Field Services was granted a permit to operate an injection well to dispose of hydrogen sulfide and carbon dioxide in McMullen County. Swift’s mineral leases were situated near Regency’s injection well.

When Regency sought its permit to operate the injection well, it forecasted that the injectate would spread horizontally by about 2,200 feet after forty years of injection. However, not long after Regency began its operations, in August of 2012, hydrogen sulfide was detected in one of Swift’s nearby wells. That well was more than 3300 feet from the injection well, which was well beyond the estimated spread. Swift was forced to plug and cap the well. A few months later, Swift learned that several other wells needed to be shut down due to the contamination. In addition to Swift, the alleged contamination also affected other parties’ wells.

In July 2014, several of the other well owners filed a lawsuit against Regency under trespass and negligence theories. In September 2015, Swift joined in the case, claiming “trespass, negligence, gross negligence and nuisance” for “present and future damage to seventy-four existing or planned wells.” Regency responded with an affirmative defense, arguing that Swift’s lawsuit was filed after the expiration of the two-year statute of limitations.

Swift responded to Regency’s defense by arguing that its claim did not officially arise until its mineral rights were affected. Regency, on the other hand, claimed that Swift’s claim accrued when the injectate physically intruded onto the land leased by Swift.

The Court’s Opinion

The court began by noting that the statute of limitations in each of Swift’s claims was two years. Thus, to be timely, Swift’s claim must have been filed within two years of the date it accrued. The court noted that Swift formally filed its claim in September 2015. Thus, if Swift’s claim accrued before September 2013, the claim was time-barred. Because Regency raised the statute of limitations issue, it had the burden to prove that Swift’s lawsuit was untimely.

Swift’s position was that the claim could not have accrued when the physical intrusion occurred because, at that point, its mineral rights had not yet been affected. Swift claimed that it was not until the “uninvited molecules” actually interfered with its rights that its claim accrued.

Regency responded by claiming that, due to the location of the first contaminated well discovered in October 2012, Swift should have known about the contamination of its other wells. The first well where contamination was detected was entirely surrounded by Swift’s other leaseholds, which were included in the case.

In coming to its conclusion, the court explained that the layout of the land would require Swift to drill any new wells through contaminated land. And, in fact, Swift received an email from the well operator in October 2012, notifying the company that the injectate “infringed on [Swift]’s ability to exercise its rights.” Thus, the court held that Swift’s claim accrued in October 2012, when the well operator informed the company that the injectate was interfering with its rights.

Notably, the court ruled that Regency failed to establish its statute-of-limitations defense regarding other Swift wells. However, the claim discussed above was determined to be time-barred.

Austin oil and gas attorney, Greg Jordan, reminds the owners of mineral rights of the importance of consulting with an attorney as soon as an owner realizes that their rights may be impacted by another’s negligence or improper conduct. Mineral rights can be extremely valuable and the laws governing the related legal issues can be complex, including the laws outlining the time in which a claim must be filed. By working with a knowledgeable attorney, owners of mineral rights can better protect their interests by ensuring they take any necessary legal action in a timely manner.

At the Law Offices of Gregory D. Jordan, attorney Jordan represents individuals and businesses in all types of Texas oil and gas cases and contractual disputes. Jordan has over 30 years of relevant experience helping clients confront the complex legal issues they face throughout Texas. Contact the Law Offices of Gregory D. Jordan at http://www.theaustintriallawyer.com/.

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