Sue Your Neighbor

Note:  There is a question whether NY case law supports this interpretation but we welcome any research on this question.

Basic real estate law could stop gas drilling in the Northeast.

Andrew Reinbach Journalist

Posted: November 24, 2010 10:21 AM

Stop Gas Drilling — Sue Your Neighbor

Basic real estate law could stop gas drilling in the Northeast.

Here’s the idea. When you bought your house you didn’t buy just dirt and bricks; you bought what your lawyer calls a bundle of rights. That includes what he or she calls the right of quiet enjoyment.

Quiet enjoyment means more than the right to sit on your porch and watch the sunset; it includes the right to enjoy the value of your property. If your neighbor does something to hurt this right, he has to pay you the before-and-after difference — to make you whole, as they say.

It’s called nuisance law, and means everybody has the right to do what they want with their property — as long and they don’t hurt anybody else. If they do, they have to pay.

So, since banks won’t lend on a house near a gas well unless the owner can prove their water supply will always be safe, and that can’t be done — i.e.: where there’s gas drilling, property values collapse — it follows as the night the day that if your neighbor leases his land for gas drilling, you can sue said boneheaded neighbor to make you whole.

“It’s just Real Estate 101,” says the co-chair of one of the American Bar Association’s practice groups. “I’m surprised nobody’s using it now.”

As it happens, it is being done now. Two recent Pennsylvania lawsuits, filed separately against Southwest Energy Co. and Chesapeake Energy Corp., claim that their gas drilling has contaminated local water supplies and harmed the related property values.

That first claim — that gas drilling contaminated the local water — is the hot button issue for anti-drilling activists. But Peter Cambs, the partner in Parker Waichman Alonso LLP fighting the suits, likes the property value issue better.

“It’s the stronger claim,” he says. “I don’t think there is a defense” against it. Nationwide, the statistical case that gas drilling depresses property values is practically bullet-proof.

On the other hand, says Cambs, defense attorneys can try to play out the clock on the water contamination claim with what you could call the tobacco defense — first deny there was any contamination, then that gas drilling caused it, then insist the issue needs more study, and finally say there’s no way to quantify the damage.

By the time they’re ready to settle, it’s many years later, and drilling’s gone on apace. He says his case will be an appeal to common sense — that the water was fine until drilling began, so it obviously caused the contamination.

How useful common sense will be in a court room remains to be seen. In any case, says Cambs, he expects the case to last at least two years — before appeals.

Of course, the problem for many property owners living near gas drilling is that they didn’t buy their rural property to live in an industrial zone. And they’re remarkably uninterested in being hurt in the first place.

Enter Gregory Alexander, A. Robert Noll Professor of Law at Cornell University. He says there’s a well-trodden legal path that could stop drilling before it begins.

Called anticipatory nuisance, it’s basically the notion that you can stop your neighbor from doing something if waiting to sue until you’re harmed is ludicrous. In a western, this is where the marshal says you shot in self-defense.

“It’s a doctrine that’s established in common law,” says Alexander. “A court would not be making new law” by supporting such a claim, and “it presents a plaintiff with a lot of ammunition.”

The beauty here is that applying the case law to gas drilling is no stretch. According to George P. Smith, II, who wrote an article about this in the Vermont Law Review, it was established in 1864 America, when a court found that one Mr.Tipping’s property rights would be harmed by a proposed smelting operation, even though there were several factories nearby. More rulings followed.

These are really two different sorts of lawsuits; one compensates you if drilling’s already taken place and the other would stop it before it happened. And anybody can tell you that what anti-drilling activists want to do is the latter — which is why they’re trying, at least in New York, to convince Governor-elect Andrew Cuomo to either throw out the regulations already drawn up by the state’s Department of Environmental Protection and start over (they’re not yet adopted), or ban modern, horizontal gas drilling — so-called “fracking” — altogether.

Only Mr. Cuomo knows if he’ll ever do that, and so far, he hasn’t committed himself. But even if he did completely disappoint the anti-drilling forces, they could use Prof. Alexander’s idea in a test case that would tie up drilling for a long time — and maybe stop it altogether. It would cost plenty; but the money and legal talent could probably be found, if it came to it.

Since each state has their own case law in these matters and states like Texas and West Virginia don’t favor such lawsuits, this leaves us with the problem of what to do in Pennsylvania, New York, and, maybe, Ohio. It’s where things will get messy and people will have to get their hands dirty.

Here’s the scenario. Most gas leases in New York, Ohio, and much of Pennsylvania are running out and need to be renewed. It’s one of the big reasons drilling’s taking place now; if they are renewed, the lease prices will jump, but if the well’s drilled before the lease expires, the old deal still holds.

This is where you get together with the neighbors who don’t want drilling around them, and then explain to the neighbor with the lease that if he does drill, he’ll have to make their neighbors whole, and if he renews, he’ll be sued for anticipatory nuisance.

If, in the first case, he’s looking forward to getting, say, $10,000 a month in lease payments, he’ll suddenly be looking at paying it all out to make his neighbors whole — not much of a deal for him. And of course, in the second case he won’t be drilling at all — just fighting a lawsuit he has a good chance of losing.

Of course, many landowners in both states have joined coalitions to get themselves the best possible deal. And in those cases, there’s a clause in the uniform lease that indemnifies each of them from legal fees.

The problem? Those indemnification clauses typically only cover the first $2 million in legal fees, with a $10 million cap on total legal expenses. That sounds like a lot, sure — but it’s not. It’s only enough to trap them in a case that could drag on for years and cost multiples of those amounts. As for the neighbor who signed an individual lease at his kitchen table; he’s out of luck, big time.

As for you and your friends willing to sue; as I said earlier; it’s not impossible you could find some group interested in backing a test case — a case that would establish a new, exact legal precedent anybody could invoke to stop their neighbor from making money at their expense.

Taking this approach probably wouldn’t make your neighbor your best friend; but a cynic might point out that he probably wasn’t thinking about you when he signed the lease in the first place. And it does offer the promise of letting you sit on your porch for years, watching the sunset.

Pa. farmer: Natural gas drilling ‘a nightmare’ Nov. 16, 2010

Pa. farmer: Natural gas drilling ‘a nightmare’

By Derrick Ek
Posted Nov 16, 2010 @ 11:44 PM

Elmira, N.Y. —

Ron Gulla, a farmer from Hickory, Pa., says he had no idea what he was getting into when he leased his land for gas drilling.

“When I saw what was happening on my property, I couldn’t believe it,” Gulla said. “They totally misinformed us and misrepresented the lease.”

Over the past few years, he saw his farm – in a rural area just south of Pittsburgh – become a large industrial site over which he had no control, and had his water supply tainted by high levels of toxic chemicals, he said.

Gulla – who also sells construction and forestry equipment and once spent six years working in the oil and gas industry – tried to take out a mortgage loan to finance a lawsuit against the well operator, Range Resources, but was told by the bank that his land was basically worthless because of the drilling activity there.

Gulla told gutwrenching stories of other farmers in Washington County whose property was virtually ruined by drilling. Many of their calves have been born with strange deformities, he said. Cows and horses – even dogs – have been sickened or killed from drinking the water from streams and ponds near the well pads. Folks living near compressor stations have had serious health issues from air pollution, he added.

The farmers affected in his area have received nothing in compensation, he said.

“It’s been a nightmare for a lot of people,” Gulla said. “You’re going to hear some people say this is the best thing that’s happened to them, that it’s the best thing since sliced bread. And they’re making money, granted, but at what price, and what risk?”

Gulla was one of a half-dozen speakers to tell cautionary tales about the gas rush under way in Pennsylvania – and on the horizon in New York – at a public forum Tuesday night in a crowded parish hall at Trinity Episcopal Church in downtown Elmira.

The event was organized by area environmental groups People for a Healthy Environment, Coalition to Protect New York, Committee to Preserve the Finger Lakes, and Pax Christi Upstate New York. It was clearly not a balanced panel on the issue, although recent chamber of commerce forums touting the economic benefits of gas exploration haven’t been either: those have mostly featured speakers from the gas industry and pro-drilling elected officials.

Not all of Tuesday’s speakers spoke directly against drilling.

One of them, Lou Allstadt, is a retired Mobil Oil Corp. executive vice president and a past director of the U.S. Oil and Gas Association. A Cooperstown resident, he has extensively reviewed the state Department of Environmental Conservation’s proposed permitting guidelines – now being finalized – for high volume, horizontal hydraulic fracturing, and believes they are insufficient.

In his remarks, Allstadt gave a list of suggestions on how gas drilling might proceed safely in New York, some of which are being developed but are not yet widely implemented, he said.

Among them:

Developing a “green” fracking fluid, and ending government exemptions that allow the industry to use the fracking fluid it currently does. In the meantime, identifying markers should be added to fracking fluid, so if there is a case of suspected water contamination, it can be traced to the source, he said.

Using a closed loop system for drilling wastewater, rather than storing it in open, lined ponds where toxins can evaporate into the atmosphere. “It’s a bad system, and it doesn’t have to be that way,” said Allstadt, who also called for greater recycling of fracking fluid at well sites.

Allstadt also called for seismic testing prior to each time a well is fracked, to identify underground cracks and fissures that could lead to toxins migrating to aquifers, he said.

Better standards are needed for the casings that line well bores near the surface and protect aquifers, he claimed.

There should also be greater setback distances for well pads from drinking water sources and residential areas. Also, the state should give local governments a say in regulating drilling locations, Allstadt said.

Saying human error contributes to most drilling accidents, he called for more stringent training for drilling crews, which often have a high turnover, he said. He also called for making gas companies post multi-million dollar “performance bonds” to fund cleanups should any incidents occur.

Allstadt also said the DEC needs to greatly increase its mineral resources staffing levels, saying it would be “impossible” to properly monitor a shale drilling boom with its current staffing levels. He also called for the state to form a separate agency to issue permits and collect revenues, so the DEC can focus solely on protecting the environment.

Organizer Susan Multer of People for a Healthy Environment said she counted approximately 240 people at Tuesday’s forum.