Texas Supreme Court Clarifies that the Texas Railroad Commission Does Not Have Exclusive or Primary Jurisdiction Over Environmental Claims

The Texas Railroad Commission extensively regulates oil and gas operations in Texas. In addition to regulating normal oilfield operations, the Commission’s broad authority includes the regulation of waste disposal, investigation of possible soil and groundwater contamination, ordering and overseeing the clean-up of contamination, and verifying that the cleanup is complete. The Commission thus provides a mechanism for investigating and remedying environmental contamination resulting from oil and gas operations.

Despite the Commission’s broad authority to force polluters to remediate environmental contamination, Texas landowners sometimes file lawsuits or arbitrations against oil and gas companies claiming the companies contaminated their property and seeking to recover environmental cleanup costs and other damages. In these cases, the jurisdiction of the Texas Railroad Commission can overlap or even conflict with the relief sought by the claimant. But what is the effect of this on the litigation?

The Texas Supreme Court recently addressed these issues in Forest Oil Corporation v. El Rucio Land and Cattle Company, 60 Tex. Sup. J. 773 (April 28, 2017) (No. 14-0979). In Forest Oil, the owners of a ranch in South Texas initiated an arbitration proceeding against Forest Oil for environmental contamination and toxic tort injuries stemming from oil and gas operations on their property. Because the clean-up of the alleged contamination was before the Texas Railroad Commission and awaiting a final decision, Forest Oil asked the arbitrators to abate the proceeding until the Commission proceeding was final. The arbitrators refused to abate the proceeding and ultimately awarded the claimants over $20 million in damages.

In the Texas Supreme Court, Forest Oil argued that the arbitrators had no authority to grant relief because the Railroad Commission had primary or exclusive jurisdiction over claims of environmental contamination stemming from oil and gas operations (an argument that would apply equally to trial-court litigation). Forest Oil pointed to multiple Texas statutes giving the Commission “sole authority” over contamination claims, including abatement and prevention, but the Texas Supreme Court determined that the statutes were only intended to resolve a jurisdictional question between competing regulatory agencies. While the Railroad Commission clearly has “extensive statutory authority to regulate contamination from oil and gas operations,” the court held that the Commission’s authority did not oust trial courts (or arbitrators) of jurisdiction to hear such claims.

The court also held that the Railroad Commission did not have “primary” jurisdiction. Under the primary jurisdiction doctrine in Texas, trial courts must abate their proceedings to allow an administrative agency to decide an issue when the subject is within the purview and expertise of the administrative agency and a great benefit will come from the agency’s uniform interpretation of its laws, rules, and regulations. The doctrine, however, does not apply to claims that are “inherently judicial in nature,” and the Texas Supreme Court held that an arbitration involving common-law claims such as trespass, negligence, fraud, and breach of contract was inherently judicial in nature. Thus, the primary jurisdiction doctrine did not apply. The Railroad Commission has neither exclusive nor primary jurisdiction over environmental claims.

So what, then, would be the effect of the Railroad Commission’s findings and orders with respect to a pending suit over environmental contamination? The Texas Supreme Court’s opinion in Forest Oil is mixed. On one hand, the court stated that “[b]y seeking an RRC determination of contamination allegations and complying with RRC cleanup orders, an operator can reduce or eliminate a landowner’s damages.” That is encouraging for defendants, which might reasonably fear being subjected to double liability or inconsistent results. On the other hand, the court held that “while RRC regulations and orders certainly inform the extent to which remediation of contamination is required by law, they do not supplant Forest Oil’s common-law duties, which are also required by law.” This suggests that even if a defendant fully complied with the Commission’s remediation orders, it could still be liable for violating common-law duties based on the same underlying conduct. Thus, while oil and gas defendants may argue that their compliance with Railroad Commission orders eliminates the plaintiff’s damages, it appears that claimants still have a pathway to argue that the defendant nevertheless has liability under common law.