The State of Texas is the single largest domestic producer of natural gas in the United States. Most of the natural gas reserves in the state, and indeed in the nation as a whole, are commercially unproductive without the use of hydraulic fracture stimulation. This method, whereby voluminous amounts of fluid are pumped into a wellbore at enormous pressures to create cracks or fractures in the reservoir rock containing the oil or gas, can substantially increase the level of oil and gas production, not just for the individual well but for the entire field.

The Texas Supreme Court recently ruled, in Coastal Oil and Gas Corp. v. Garza Energy Trust, 268 S.W.3d 1 (Tex. 2008), that the rule of capture precluded any recovery of damages based on drainage resulting from a fracture stimulation which crossed property lines. The court refused to declare, however, whether such a fracture could constitute a trespass. Previous Texas Supreme Court cases included language which strongly suggested that conducting a fracture stimulation beneath another’s land was a trespass.

An analysis of the rule of capture doctrine, from its historic roots to its contemporary application, coupled with basic trespass examination suggests that the rule of capture is precluded from application due to the trespassory nature of effecting fractures beneath another’s property. Such conclusions, however, fail to take into account the role of public policy; the utility of fracture stimulation and its benefits to the industry and the economy must be weighted against the individual repercussions. Further, technical distinctions in trespass law, heretofore primarily applied only in landlord and tenant law allow the court to avoid declaring, one way or another, whether such a fracture stimulation can be a trespass in these particular circumstances.

In addition, the Railroad Commission, the administrative body which regulates virtually every other aspect of oil and gas exploration is conspicuously absent with regards to industry activity involving fracture stimulation. The Texas Supreme Court and its prior decisions are partly to blame for this. However, the Commission, as a result of this most recent decision, will now likely step in to fill the void.

Questions and uncertainty remain however as to the scope and implications of this recent decision. The possibility exists that liability, in some form, remains for fracture stimulation. This could potentially manifest itself in the form of an injunction, a suit for negligence, or – in the case of a lessor suing a lessee – a suit for breach of the implied covenants to develop and protect against drainage.