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Texas Supreme Court Upholds $22.7M Award in Gas Production Contamination Case

Holding that the Texas Railroad Commission’s statutory authority to regulate contamination from oil and gas operations does not preclude private suits for damages, the Texas Supreme Court upheld a $22.7 million award in a suit alleging contamination from natural gas production.  Forest Oil Corp. v. El Rucio Land & Cattle Co., 518 S.W.3d 422 (Tex. 2017). 

For more than 30 years, the defendant, Forest Oil Corporation, produced natural gas on plaintiff James McAllen’s property.  In 2004, McAllen learned that Forest had contaminated the property and left behind oilfield tubing contaminated with naturally occurring radioactive material.  McAllen sued and the defendant compelled arbitration under an agreement settling a previous lease dispute.  Meanwhile, McAllen contacted the Texas Railroad Commission (RRC) about the contamination.  The RRC referred the defendant to a cleanup program under which the defendant would propose and implement plans to remediate the property.  The RRC approved parts of the defendant’s remediation proposal, but had not yet approved a final remediation plan.

The arbitration panel denied the defendant’s request to stay proceedings until the RRC completed its assessment of the remediation plan.  The panel awarded McAllen $16 million in damages and $6.7 million in attorney fees.  The panel further declared that, under the agreement between the parties, the defendant was responsible for all past and future investigation and remediation costs related to its production activities.

On review in the Texas Supreme Court, Forest argued that the RRC had exclusive, or at least primary, jurisdiction over claims for environmental contamination resulting from oil and gas operations. The defendant pointed to several statutes that it contended made the RRC “solely responsible” or gave it “sole authority” for prevention and abatement of pollution from oil and gas activities, or otherwise conferred enumerated statutory and regulatory causes of action to the exclusion of common law claims.   In each case, the court did not find the express legislative intent necessary under Texas law to abrogate private common-law claims.  The defendant also argued that allowing a private plaintiff to seek damages or injunctive relief for remediation while the RRC regulatory process was ongoing exposed defendants to potential double liability, which is reason enough to confer exclusive jurisdiction on the RRC.  The court acknowledged this possibility, but dismissed it as one “for the Legislature.”