It Begins with Understanding Available Causes of Action and Damages
The firm recently concluded its defense of the owner and operator of a gas well located in the Barnett Shale following a brine spill from a buried discharge line. Nearby homeowners filed suit initially alleging numerous causes of action and conflicting damage models. But, discovery and motion practice forced the property owners to bring their claims in line with established law in Texas and the evidence developed through discovery. A successful defense of a brine spill case begins with an evaluation of what causes of action and damages are available and then building defenses, discovery and a trial plan based on such evaluation.
Background on a Brine Spill
Hydraulic fracking has exponentially boosted production of gas in shale formations in Texas. A byproduct of fracking is produced water, a salty mix of water, chemicals and petroleum hydrocarbons. After water and other chemicals have been introduced to a well, freeing up gas to be produced, this mixture is produced from the well. The produced water must be removed from the production line for disposal. After being removed using a separator, the produced water is pumped through a discharge line to a storage tank, where it is held until a water disposal company trucks it to a disposal well. The lines from the well to the tank are at risk of failure due to corrosion, equipment failure, or accidents. With or without negligence by the operator, spills do occur. When they occur, the produced water enters the soil and groundwater, contaminating both. This results in damage to land and, in extreme cases, may present a health hazard.
Available Causes of Action
When a brine spill occurs, a plaintiff’s lawyer is likely to assert a statutory claim based on Section 85.321 of the Texas Natural Resources Code and common law claims such as trespass, nuisance, negligence, and negligence per se.[1] As explained below, unless there is evidence of intentional conduct, each claim is fault-based, akin to a negligence claim. Thus, a defendant may contest liability for a brine spill based on the absence of fault.[2]
Section 85.321
Section 85.321 of the Texas Natural Resources Code provides a private cause of action to a landowner whose land is damaged by another party who violates Chapter 85 of the Code, another law prohibiting waste, or a rule or order of the Texas Railroad Commission. Typically, in a brine spill case, the plaintiff will allege a claim under Section 85.321 of the Texas Natural Resources Code based on a violation of Statewide Rule 8 promulgated by the Commission.
Statewide Rule 8 provides (in relevant part) that “no person conducting activities subject to regulation by the commission may cause or allow pollution of surface or subsurface water in the state.”[3] Section 85.045 of the Code also prohibits the production, storage, or transportation of oil or gas in a manner or under conditions that constitutes waste. Section 85.046 of the Code provides an expansive definition of waste.[4]
While Section 85.321 initially appears to establish no-fault liability, similar to strict liability, it also provides a defense when the plaintiff alleges waste to have been caused by the lease owner or operator. Specifically, the statute provides that it is “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.”[5]
Section 85.321 allows a party to recover damages and have any other relief to which it would be entitled at law or in equity. This has been interpreted to allow recovery of exemplary damages.[6]
Trespass
Texas common law recognizes a cause of action for trespass to real property when a plaintiff shows that the plaintiff owns or has the lawful right to possess real property, and the defendant physically, intentionally, and voluntarily entered the plaintiff’s real property without authorization, causing injury to the plaintiff’s right of possession.[7] In the absence of proof of intentional conduct, trespass is not available in a brine spill case. This cause of action is subject to traditional common law defenses (e.g., limitations, consent, proportionate responsibility).
Private Nuisance
A private nuisance under common law may be established by proof that (i) the plaintiff had a private interest in land, (ii) the defendant substantially interfered with the plaintiff’s interest in the use and enjoyment of the land causing unreasonable discomfort or annoyance to persons of ordinary sensibilities attempting to use or enjoy it,[8] (iii) the defendant acted intentionally or negligently, or by abnormally dangerous conduct created or maintained the condition, and (iv) the plaintiff was injured as a result of the defendant’s conduct. Similar to trespass, this cause of action is subject to traditional common law defenses. Unlike trespass, a private nuisance may be based upon either intentional or negligent conduct. Therefore, where intentional conduct cannot be shown, this claim becomes a fault-based claim similar to negligence.
Negligence and Negligence Per Se
A negligence claim requires proof that the (i) defendant owed a duty of care to the plaintiff, (ii) the defendant breached its duty, and (iii) the breach proximately caused the plaintiff’s injury. As applied to a brine spill, the focus of a negligence claim is on the care taken by the lease owner or operator to operate the gas well without discharging produced water into the environment. Negligence per se, as applied to a brine spill, requires proof that (i) the plaintiff belongs to a class of persons the statute is designed to protect (e.g., landowners whose property is damaged by a violation of Statewide Rule 8),[9] (ii) there is a violation of the law, and (iii) the defendant’s act or omission proximately caused the plaintiff’s injury. While no Texas appellate court has held that negligence per se is not available based on a violation of Statewide Rule 8 because the rule incorporates an ordinary prudent person standard, that argument might be viable.[10] When available, negligence per se is subject to the defense of excuse, including the defense that the defendant neither knew nor should have known of the occasion for compliance with Statewide Rule 8.[11] Both negligence and negligence per se are subject to traditional common law defenses.
Available Damages
Texas recognizes two types of damages: economic damages and non-economic damages.[12] In a brine spill case, both types of damages are typically asserted. First, a plaintiff will assert that its land has been damaged, as reflected by the loss of use of the land and/or the cost to repair the land or a diminution in the value of the land, or both if the land value remains diminished after repairs. Second, a plaintiff will assert personal injury or mental anguish damages. Which measure of damages is available depends on whether the damage to the land is permanent or temporary and whether the wrongful conduct was intentional or negligent. As discussed below, determining which measure of damages to apply in a brine spill case starts with the plaintiff’s pleading.
Cost to Repair v. Diminution in Value
As a general rule, a temporary injury to land is compensated by the loss of use of the land and the cost of restoring the land,[13] while permanent injury to land is compensated by the loss in the fair market value of the land.[14] An injury to land is considered permanent if (a) it cannot be repaired, fixed, or restored, or (b) even though the injury can be repaired, fixed, or restored, it is substantially certain that the injury will repeatedly, continually, and regularly recur, such that future injury can be reasonably expected.[15] This temporary-versus-permanent distinction is crucial to determining what property damages are available. While the plaintiff’s pleadings can narrow a plaintiff’s choices, ultimately the distinction is a question of law.[16]
The Texas Supreme Court has recognized one situation in which both cost to repair damages and diminished property value damages are recoverable: when the reduction in value remains even after repairs are made.[17] The Supreme Court also recognized that “stigma damages” may contribute to a reduction in value after repairs are made.[18] Stigma damages “represent … the market’s perception of the decrease in property value caused by the injury to the property.”[19] However, the Supreme Court has noted the difficulty of proving stigma damages.[20]
Texas also recognizes a limitation on recovering cost to repair damages known as the “economic feasibility”. Under this exception, if the cost to restore the land exceeds the land’s diminution in value, the injury is considered permanent and diminution in value is recoverable, not the cost to repair.[21] This exception can provide a valuable defense where the cost to repair is high in comparison to the diminution in value. This exception may apply to a claim for injunctive relief to clean up contaminated land where the cost to do the clean-up exceeds the value of the land. But, this issue has not yet been decided by the Texas Supreme Court.[22]
When diminution in value damages are available, proof of diminution in value must be shown by competent evidence. In order to prove diminution in value, a plaintiff must present evidence of the value of the impacted land both before contamination and after contamination.[23] This evidence will require either competent expert testimony or qualified property owner testimony.
Experts will find this area challenging since it requires a reliable foundation for the opinion of the value after contamination. Finding comparable contaminated properties to establish the loss in market value via the sales-comparison approach may prove to be difficult.[24] In essence, the expert must opine on the stigma on the impacted property caused by the contamination. This requires the expert to rigorously adhere to established appraisal practices.[25] And, property owner testimony, with its usually lax foundational requirements, may not pass the test for admissibility. Indeed, property owners are permitted to testify as to the value of their property, based on the presumption that an owner is familiar with his property and its value.[26] But, this testimony must be based on market, rather than intrinsic or some other speculative value.[27] The property owner must provide a factual basis for his opinion.[28]
Where a plaintiff seeks both injunctive relief—typically a mandatory injunction to restore the property to its prior condition—and damages, the plaintiff may be put to an election between the two forms of relief. Normally, if a legal remedy is available, a plaintiff cannot also recover an injunction addressing the same harm because recovery of both is an impermissible double recovery.[29]
Loss of Use
If a plaintiff is physically deprived of the use of even a portion of its property, loss of use damages are available.[30] However, this damage is only recoverable where the damage is temporary.[31] The loss of use damages are only available for the period reasonably required to repair the property.[32] The proper measure of this damage is the reasonable cost of renting a replacement.[33]
Intrinsic Value of Trees
Texas permits recovery of the intrinsic value of trees destroyed on real property where the plaintiff cannot show a significant diminishment of property value.[34]
Personal Injury and Mental Anguish
A plaintiff may recover personal injury damages upon an affirmative finding of negligence or nuisance, but such damages are limited to cases where the plaintiff shows it has actually suffered physical harm.[35] Typical personal injury damages include physical pain, mental anguish, loss of earning capacity, disfigurement, physical impairment, and medical care expenses.[36] Claims of personal discomfort, loss of peace of mind, annoyance, and inconvenience do not equate to claims of personal injury.[37]
Recovery of mental anguish damages is limited to claims involving intent or malice on the defendant’s part and suits involving injuries of such a shocking and disturbing nature that mental anguish is a highly foreseeable result.[38] The Texas Supreme Court refused to allow recovery of mental anguish damages in a case involving damage to property where a plaintiff was not physically injured. The Court held that damages where only property is injured are measured by the property’s value or the cost of repairing it.[39] The Court specifically rejected mental anguish based solely on negligent property damage, stating it is “not compensable as a matter of law.”[40]
Mental anguish must be proved by evidence of the nature, duration, and severity of the anguish, which must be “more than mere worry, anxiety, vexation, embarrassment, or anger.”[41] The Texas Supreme Court has recognized that evidence of negligence and property damage alone do not support an award of exemplary damages.[42]
Exemplary Damages
In order to recover exemplary damages, a plaintiff must show by clear and convincing evidence, and by a unanimous finding, that the harm resulted from fraud, malice, or gross negligence.[43] An award of exemplary damages must be specific as to each defendant.[44] The amount of exemplary damages that may be awarded is limited to the greater of $200,000 or two times the amount of economic damages and up to $750,000 in noneconomic damages.[45]
Leland C. de la Garza is a shareholder of the firm and chairman of its litigation section. Leland and associates Elizabeth Fitch and Katrisha Shirley handled this case for the firm.
[1] Texas courts have rejected the argument that only the Texas Railroad Commission has jurisdiction to determine claims resulting from spills at oil and gas well sites. See Forest Oil Corp. v. El Rucio Land and Cattle Co., Inc., 446 S.W.3d 58, 72 (Tex. App.—Houston [1st Dist.] 2014) aff’d 518 S.W.3d 422 (Tex. 2011); In re Apache Corp., 61 S.W.3d 432, 436 (Tex. App.—Amarillo 2001, orig. proceeding).
[2] This is not to say that the lease owner or operator will be able to avoid responsibility altogether since the Texas Railroad Commission will usually order the operator to clean up of the spill, and the Commission has the authority to enforce its clean-up order.
[3] 16 Tex. Admin. Code § 3.8(b).
[4] The definition includes “physical waste or loss incident to or resulting from drilling, equipping, locating, spacing, or operating a well or wells in a matter that reduces or tends to reduce the total ultimate recovery of oil or gas from any pool.” Tex. Nat. Res. Code § 85.046(a)(6).
[5] Tex. Nat. Res. Code § 85.321; Smith v. Basa Resources, Inc., No. 11-09-00339-CV, 2011 WL 1435273, at *3-*4 (Tex. App.—Eastland, Apr. 14, 2011, pet. denied) (mem. op.) (applying the reasonably prudent operator excuse to a violation of Statewide Rule 8).
[6] Exxon Corp. v. Miesch, 180 S.W.3d 299, 328 (Tex. App.—Corpus Christi 2005), judgment aff’d in part, rev’d in part on other grounds, 348 S.W.3d 194 (Tex. 2011).
[7] North Shore Energy, L.L.C. v. Harkins, 501 S.W.3d 598, 605 (Tex. 2016); Gregg v. Delhi-Taylor Oil Corp., 344 S.W.2d 411, 416 (Tex. 1961); Salazar v. Sanders, 440 S.W.3d 863, 876 (Tex.App.—El Paso 2013, pet. denied).
[8] Crosstex North Texas Pipeline, L.P. v. Gardiner, 505 S.W.3d 580, 593-597 (Tex. 2016) (requiring the interference to be substantial and not merely a “trifle” or “petty annoyance,” and the unreasonableness of the annoyance to be determined based on an objective standard of persons with ordinary sensibilities, not on the subjective response of any particular plaintiff).
[9] Mieth v. Ranchquest, Inc., 177 S.W.3d 296, 305 (Tex.App.—Houston [1st Dist.] 2005, no pet.).
[10] Supreme Beef Packers, Inc. v. Maddox, 67 S.W.3d 453, 456 (Tex. App.—Texarkana 2002, pet. denied).
[11] Impson v. Structural Metals, Inc., 487 S.W.2d 694, 696 (Tex. 1972) (adopting the Restatement (Second) of Torts § 288A (1965), which lists five categories of excuse to negligence per se, including lack of knowledge).
[12] Injunctive relief may also be available. See, e.g., Crosstex North Texas Pipeline, L.P., 505 S.W.3d at 610 (discussing nuisance claims).
[13] Crosstex North Texas Pipeline, L.P., 505 S.W.3d at 610.
[14] Gilbert Wheeler, Inc. v. Enbridge Pipelines (East Texas), L.P., 449 S.W.3d 474, 481 (Tex. 2014).
[15] Id. at 480.
[16] Id. at 483-84.
[17] Houston Unlimited, Inc. Metal Processing v. Mel Acres Ranch, 443 S.W.3d 820, 826 (Tex. 2014).
[18] Id. at 827.
[19] Id. at 824.
[20] Id. at 827.
[21] ExxonMobil Corporation v. Lazy R Ranch LP, 511 S.W.3d 538, 540 (Tex. 2017).
[22] Id. at 546 (court declined to address issue since it was not properly raised on appeal).
[23] Crosstex North Texas Pipeline, L.P., 505 S.W.3d at 611.
[24] See Mel Acres Ranch, 443 S.W.3d at 829-838.
[25] See id.
[26] Nat. Gas Pipeline Co. of Am. v. Justiss, 397 S.W.3d 150, 157 (Tex. 2012).
[27] Id. at 155.
[28] Id. at 159.
[29] See Boudreaux v. Culver, No. 01-03-01247-CV, 2005 WL 1111237, at *5 (Tex. App.—Houston [1st Dist.] May 5, 2005, no pet.) (mem. op.); see also Marin Real Estate Partners, LP v. Vogt, 373 S.W.3d 57, 76 (Tex. App.—San Antonio 2011, no pet.) (holding injunction and damages are not both available when the damages sought are “future” damages).
[30] See Lone Star Dev. Corp. v. Reilly, 656 S.W.2d 521, 525–26 (Tex. App.—Dallas 1983, writ ref’d n.r.e.) (building built over boundary line).
[31] Luna v. N. Star Dodge Sales, Inc., 667 S.W.2d 115, 119 (Tex.1984).
[32] Goose Creek Consol. School Dist. Of Chambers and Harris Counties, Texas v. Jarrar’s Plumbing, Inc., 74 S.W.3d 486, 496 (Tex. App.—Texarkana 2002, pet. denied) (finding error where jury instruction did not limit the jury’s consideration to the time period reasonably required for the plaintiff to repair the property).
[33] Id. at 497.
[34] Gilbert Wheeler, Inc., 449 S.W.3d at 483 (holding a 1% diminishment was nominal, justifying recovery of the intrinsic value of the trees).
[35] Port of Houston Authority v. Aaron, 415 S.W.3d 355, 364-65 (Tex. App.—Houston [1st Dist.] 2013, no pet.) (nuisance case); City of Tyler v. Likes, 962 S.W.2d 489, 495-96 (Tex. 1997) (nuisance and negligence case).
[36] See Tex. Pattern Jury Chg., § 28.3.
[37] Schneider Nat. Carriers, Inc. v. Bates, 147 S.W.3d 268, 269 (Tex. 2004).
[38] Likes, 962 S.W.2d at 496.
[39] Id. at 496-97.
[40] Id. at 497.
[41] Parkway Co. v. Woodruff, 901 S.W.2d 434, 444 (Tex. 1995).
[42] Id. at 445 (In a case involving flooding of a home, the Court held that proof that the plaintiff was upset was not enough. The Court noted that generally a threat to one’s physical safety or reputation, or the death or serious injury to a family member, would be necessary).
[43] Tex. Civ. Prac. & Rem. Code § 41.003.
[44] Tex. Civ. Prac. & Rem. Code § 41.006.
[45] Tex. Civ. Prac. & Rem. Code § 41.008.
