Gas in the Well, or Just Hot Air?

Last month, a high-profile Texas case involving hydraulic fracturing returned to the news.  On October 10, Texas's Second Court of Appeals in Fort Worth overruled requests for rehearing and en banc reconsideration.  That action preserved an April decision that allowed natural gas producer Range Production Company and its parent, Range Resources Corporation (together, "Range"), to proceed with defamation and business disparagement claims against homeowner Steven Lipsky.

Mr. Lipsky and his wife claim that they began noticing problems with their residential water well shortly after Range drilled a gas well near their property.  The Lipskys contacted Elisa Rich of Wolf Eagle Environmental, who conducted tests that she said confirmed the presence of gases in the Lipskys' well.  The Lipskys and Ms. Rich notified the EPA, which issued an emergency order finding that Range's activities had caused or contributed to the presence of gas in the Lipskys' water well and ordering Range to act in response.  The Justice Department later filed suit at the EPA's request alleging that Range had not complied with the terms of the emergency order.

Meanwhile, the Railroad Commission of Texas ("RRC") also investigated the Lipskys' well.  After a January 2011 hearing in which the Lipskys and the EPA declined to participate, citing inadequate notice, a panel of RRC commissioners unanimously found that Range had not caused or contributed to the presence of gas in the Lipskys' well.

In June 2011, the Lispkys filed a civil suit against Range and others based on the alleged contamination of their well.[1]  Range not only contested the lawsuit, but asserted claims against the Lipskys and Ms. Rich.  Range's claims for defamation, business disparagment, conspiracy and aiding and abetting were based on allegations that the Lipskys and Ms. Rich embarked on predetermined plan to trigger an EPA investigation and blame Range for contaminating the Lipskys' well based on data that they knew was misleading and contradicted by valid evidence.

The Lipskys and Ms. Rich filed motions to dismiss under the Texas Anti-SLAPP statute.  After the trial court denied the motions, the court of appeals allowed the Lipskys and Ms. Rich to pursue a petition for writ of mandamus.

In an April 22, 2013 opinion,[2] the court of appeals allowed Range to proceed with its claims against Mr. Lipsky, but called for the dismissal of Range's claims against Ms. Lipsky and Ms. Rich.  The court found that Range had presented sufficient evidence to establish a prima facie case against Mr. Lipsky for defamation and business disparagement, specifically citing Mr. Lipsky's comments to the effect that Range had secured the RRC determination through corruption.  But the court found that Range did not present enough evidence to proceed with its remaining claims, including all of its claims against Ms. Lipsky and Ms. Rich.

The case has a number of interesting wrinkles that generated attention, and not just for the obvious connection the hot-button issue of fracking.  Range's decision to assert claims against the Lipskys and Ms. Rich was widely discussed.  Range contends that it is fighting back against a concerted effort to spread false accusations against it.  Not surprisingly, Mr. Lipsky and environmental concerns view the matter differently.  They see an effort to intimidate outspoken critics not only of Range, but of fracking in general.

The interplay between state and federal regulators is another source of interest.  The RRC and the EPA made contradictory findings about the source of the gas in the Lipskys' well, raising questions about the relative authoritativeness of each agency's findings.  The EPA was also criticized for overstepping its bounds by bypassing state regulators, although the Lipskys and their supporters contend that the EPA only intervened because the Lipskys were getting "the runaround" from the RRC.

The EPA's involvement generated headlines in other ways as well.  After imposing the emergency order against Range and asking the Justice Department to file suit to enforce it, the EPA withdrew the order on March 29, 2012 and the Justice Department stipulated to dismissal of the enforcement suit the next day.  In June 2012, six U.S. Senators signed a letter in which they not-so-subtly suggested that the EPA may have overreached in issuing the order and making public statements "definitively incriminating Range."  But others have suggested that the EPA's seeming about-face came not because the emergency order was ill-considered, but because of threats by Range to refuse cooperation with a national study on fracking.[3]  (Still another possibility is that the EPA's decision was based entirely on the U.S. Supreme Court's May 21, 2012 decision in Sackett v. EPA, 566 U.S. ---, 132 S. Ct. 1367 (2012), as discussed in a prior entry on this Blog.)

There is also a connection to controversial former EPA Region 6 Administrator Alfredo Armendariz, whose involvement and statements were prominently featured in Range's trial court pleadings.  In April 2012, shortly after the EPA withdrew the emergency order against Range, Dr. Armendariz resigned from his EPA post after video surfaced of him likening his philosophy on the use of EPA enforcement actions against industry to the tactics of Roman conquerors who crucified newly subjugated villagers to "make examples out of them."  Some saw a connection between those comments and the EPA's actions in the Lipsky case.

Dr. Armendariz was not the only figure in the case who stepped aside in 2012.  In June 2012, the trial court judge assigned to the case recused himself after Mr. Lipsky filed a motion based on campaign fliers in which the judge trumpeted his decisions as having caused the EPA to "back down" — an obvious reference the Lipsky case.[4]

These factors and others have combined to make the Lipsky case a particularly interesting one for both proponents and opponents of fracking.  It will continue to draw interest as it winds its way through the courts.

 


[1]           The Lipskys' claims were later dismissed on jurisdictional grounds. 

[2]           In re Lipsky, --- S.W.3d --- (Tex. App. Ft. Worth 2013), 2013 WL 1715459.

[3]           Ramit Plushnick-Masti, Associated Press, "EPA Changed Course After Oil Company Protested" (Jan. 16, 2013), available at http://news.yahoo.com/epa-changed-course-oil-company-protested-082012084.html (accessed Nov. 19, 2013).

[4]           See, e.g., Mark Drajem, Bloomberg, "Texas Judge Steps Aside in Gas Case He Used in Campaign" (June 7, 2012), available at http://www.businessweek.com/news/2012-06-07/texas-judge-steps-aside-in-gas-case-he-used-in-campaign (accessed Nov. 19, 2013).

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