Despite its name, the Railroad Commission of Texas (the “RRC” or “Commission”) no longer regulates railroads. Today, it serves as the primary state agency overseeing the oil and gas industry, as well as related energy and environmental sectors. The Commission’s jurisdiction, however, is not always straightforward. In oil and gas litigation, parties are sometimes required to exhaust administrative remedies before seeking relief in court. In such cases, the Commission must first address the dispute before judicial intervention is available.
The scope of the Commission’s jurisdiction is governed by Section 91.101 of the Texas Natural Resources Code. Under this section, the RRC has the authority to prevent pollution of surface and subsurface waters by adopting and enforcing rules and issuing permits related to:
(1) Drilling operations, including exploratory and production wells;
(2) Oil and gas production activities, such as the drilling of injection water source wells and cathodic protection holes, operations at gasoline plants, natural gas processing facilities, pressure maintenance or repressurizing plants, management of underground storage facilities for natural gas or hydrocarbons, and handling and transport of oil and gas before refining or end use;
(3) Operation, abandonment, and plugging of wells subject to Commission jurisdiction; and
(4) Oil and gas waste management, including the discharge, storage, transport and disposal of waste.
Oftentimes the question of whether the RRC has jurisdiction over a matter is clear and guided by statutory law, as listed above. More difficult questions arise, however, when a party asserts multiple claims, some of which fall within the Commission’s authority and others that arguably do not. The Texas Supreme Court addressed this issue in its 2017 decision in Forest Oil Corp. v. El Rucio Land and Cattle Company, Inc.
This case arose from a dispute between landowner James A. McAllen and operator Forest Oil Corporation over environmental contamination on approximately 1,500 acres of the McAllen Ranch. In the 1990s, McAllen sued Forest for underpayment of royalties and underproduction of the lease. This lawsuit was resolved with a Settlement Agreement and a Surface Agreement. Notably, the Surface Agreement required Forest to handle hazardous materials responsibly and contained an arbitration provision.
In 2004, McAllen discovered that Forest had contaminated portions of the Ranch. Around the same time, McAllen also discovered that oilfield tubing donated by Forest contained radioactive material. After McAllen was diagnosed with sarcoma, which he attributed to the contamination, he sued Forest for environmental damages, improper disposal of hazardous materials, and maliciously donating contaminated pipe. Forest sought to compel arbitration and McAllen objected. In 2007, McAllen asked the RRC to investigate the contamination of the Ranch. The RRC ordered Forest to participate in a remediation plan.
The arbitration panel ultimately awarded McAllen more than $22 million in actual, exemplary, and personal injury damages, as well as attorney’s fees, and ordered Forest to continue remediation. Forest moved to vacate the award, arguing that the RRC had exclusive or at least primary jurisdiction over McAllen’s claims.
The Texas Supreme Court rejected both arguments. Addressing exclusive jurisdiction, the Court explained that an agency has such jurisdiction only when the Legislature grants the agency sole authority to make the initial determination in a dispute. Forest relied on Section 26.131(a)(1) of the Texas Water Code, Section 401.415(a) of the Texas Health and Safety Code, and Section 85.231 of the Texas Natural Resources Code to claim that the RRC had exclusive jurisdiction over McAllen’s claims. Section 85.321 of the Texas Natural Resources Code expressly preserves a landowner’s right to seek damages and other relief at law or in equity when harmed by a violation of Chapter 85, another Texas law prohibiting waste, or a valid rule or order of the RRC. Forest’s best argument relied on Section 85.231 of the Texas Natural Resources Code, arguing that this section created an exclusive statutory remedy for waste-related claims.
The issue was whether the Legislature intended by Section 85.231 to abrogate a landowner’s common-law claims. For this to be true, the Legislature’s intent must have been expressed clearly, either explicitly or by necessary implication. The Court was unpersuaded here, explaining that it was certainly possible to read a negative implication into Section 85.231, but it was not necessary. Therefore, the Court held that the Legislature had not clearly intended to abrogate a landowner’s common-law rights to sue for damages by enacting Section 85.231 of the Texas Natural Resources Code.
The Court further rejected Forest’s claim of primary jurisdiction, a doctrine that defers judicial proceedings when an agency’s expertise or need for uniformity outweighs judicial determination. The Court reasoned that while the Commission’s regulations inform the scope of cleanup obligations, McAllen’s claims were inherently judicial which precluded application of primary jurisdiction. McAllen had asserted claims of trespass, negligence, negligence per se, breach of contract, and battery. The Court explained that the RRC could assist with technical issues like remediation, which it already had, but it could not oust the courts or arbitrators of authority to decide common-law disputes.
In summary, the Court concluded that the RRC’s statutory authority did not abrogate McAllen’s common law rights against Forest. The Court further held that the doctrine of primary jurisdiction was inapplicable because McAllen’s claims were inherently judicial in nature, including claims for trespass and negligence. Importantly, this holding confirms that the RRC does not possess exclusive or primary jurisdiction over disputes involving environmental claims if the underlying causes of action arise under common law and are inherently judicial in nature, such as those asserted by McAllen.
For practitioners and parties alike, the decision serves as a reminder that the mere presence of environmental contamination or regulatory oversight does not automatically place a dispute within the Commission’s control. When claims seek redress for private injuries or violations of common law rights, courts and arbitrators remain the appropriate forum, even where the RRC is simultaneously exercising its regulatory authority. Careful jurisdictional analysis at the outset of a dispute can therefore prevent unnecessary delay and ensure that claims are brought in the proper forum.
Kuiper Law Firm, PLLC specializes in oil and gas law; if you have any questions about the information in this article, do not hesitate to contact us.