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Hill v. Southwestern Energy Co.

United States Court of Appeals, Eighth Circuit

May 22, 2017

Robbie Hill; Gwenna Hill; Joseph Smith; Catherine Smith; Kathy L. Hamilton; Jerry Van Wormer; Randy Palmer; Joyce Palmer; Larry King; Margaret King; Adam Kofoid; Bradley Hooper; Crystal Hooper; Corey Warden; Julie Warden, Plaintiffs
v.
Southwestern Energy Company, Defendant-Appellee Dale Stroud; Kari Stroud, Plaintiffs-Appellants Chesapeake Energy; XTO Energy, Inc., Defendants SEECO, Inc., Defendant-Appellee

          Submitted: December 14, 2016

         Appeal from United States District Court for the Eastern District of Arkansas - Little Rock

          Before WOLLMAN, SMITH [1] , and BENTON, Circuit Judges.

          BENTON, Circuit Judge.

         Southwestern Energy Co. disposed of fracking waste near the property of R. Dale and Kari B. Stroud after they refused to lease their property to SWE. The Strouds sued, claiming SWE's waste migrated onto their property. The district court granted SWE's motion for summary judgment based on the insufficiency of the Strouds' proof. Having jurisdiction under 28 U.S.C. § 1291, this court reverses and remands.

         I.

         The facts are "viewed in the light most favorable to the [Strouds]." See Torgerson v. City of Rochester, 643 F.3d 1031, 1042 (8th Cir. 2011) (en banc). SWE extracts natural gas through hydraulic fracturing, breaking open natural rock formations and extracting the natural gas. As part of those operations, SWE must dispose of chemical-containing waste water.

         On the Strouds' property is an exhausted and plugged production well. In 2009, an SWE representative (a "landman") approached Dale about disposing of fracking waste on their property. Negotiations were unsuccessful. SWE leased the right to dispose of its fracking waste through a well on neighboring property. According to Stroud's affidavit, the landman later told him he had been greedy and that SWE would "use the well on [the neighbor's] property to fill up the empty gas space under [the Strouds'] property since it was all connected."

         The well SWE drilled-the "Campbell well"-is 180.3 feet from the Stroud property line. SWE leased a surface area of 3.29 acres and disposed of approximately 7.6 million barrels of fracking waste. If the leased area were 100% porous (which it is not), it would hold just under 1.1 million barrels. As the district court noted, experts unanimously agree that this volume of waste "could not possibly fit in the reservoir space directly beneath the leasehold."

         Before drilling the Campbell well, SWE got approval from the Arkansas Oil and Gas Commission. In those proceedings, it was assumed the waste would migrate radially-the general presumed movement pattern for unimpeded liquids. However, the Commission's primary focus was not the migration pattern of the waste, which was not questioned or scrutinized.

         The Campbell well drilled into the Barton B. Sands reservoir, a formation thousands of feet underground that is depleted of natural gas and was available for fracking waste. The Sands reservoir runs beneath the Stroud property. The reservoir is heterogeneous, with both sand and rock. Obstacles capable of sealing fluid flow-clay shales and silica overgrowths-are in the area. However, there is no evidence that any of these impediments would prevent fracking waste from the Campbell well from flowing onto the Stroud property.

         The Strouds claim that-based on the volume of disposed waste, the small volume under the leased area, the proximity of the Strouds' property, and the assumed radial flow-the fracking waste migrated into the subsurface of their property, resulting in trespass and unjust enrichment. There is no evidence of surface contamination on the Strouds' property. Instead of drilling to obtain a sample or creating a computer model based on seismic data-both, according to the Strouds, prohibitively expensive-they hired an expert to calculate the radial flow of the fracking waste. The district court ruled his report unreliable.

         The district court had ordered phased discovery, the subject of multiple disputes. It ordered: "The first, and primary, issue for discovery is whether the waste fluid has migrated to the subsurface strata of the [Strouds'] real property."

         SWE moved for summary judgment at the end of the first phase of discovery. The district court granted SWE's motion, despite acknowledging it "seems likely, considering all the circumstances, that the waste migrated under the Strouds' land" and that the remaining evidence "adds up to a strong 'maybe.'" The court thought that a reasonable "juror would have ...


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