Federal judge knocks lawyering, sends fracking case to state court

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An oil and gas industry case was remanded to state court by a federal judge who expressed little admiration for the work of counsel on each side.

The suit was filed in the Tioga County Court of Common Pleas by the owner of oil and gas rights arguing that he is entitled to compensation from UGI Storage Co., which had planned to build a nearby gas storage facility that would effectively encroach on his land. After removing the case to federal court, UGI failed to prove that it turned on federal law, ruled U.S. District Judge Matthew W. Brann of the Middle District of Pennsylvania.

“This case should be remanded to the Court of Common Pleas because UGI has not met its burden of establishing federal jurisdiction,” Judge Brann said.

“That said, neither party in this case has done much to persuade the court. The parties’ briefs are, to put it lightly, not exemplary, and certainly do not meet the complexity of the issues involved. This is unfortunate because, generally, thoughtful and amply-supported legal opinions are built, if at all, upon thoughtful and amply-supported briefs from the parties, especially when fairly discrete areas of the law — e.g., the Natural Gas Act, de facto condemnation in Pennsylvania — are involved.”

The plaintiff, Fayviard LLC, brought the case under the state’s Eminent Domain Code and Oil and Gas Act, arguing that it is owed damages due to UGI’s de facto condemnation of its interests in the oil and gas underneath Scott Fay’s property. UGI had proposed building a gas storage facility that would have a 3,000-foot buffer zone in which hydraulic fracturing can’t be used to extract natural gas.

“Fayviard’s oil and gas interests are ‘very valuable,’ but UGI’s actions have destroyed their value because entities that would otherwise lease the right to exploit them ‘know’ that hydraulic fracturing will be prohibited in the Meeker Storage Facility and buffer zone. Consequently, such entities ‘will not lease oil and gas rights nor will they drill … in the … Meeker Storage Facility or the buffer zone,’ ” Judge Brann said.

The judge had also said in a footnote that “the complaint is sloppy in communicating whether drilling is currently prohibited.”

Since UGI didn’t notify either Fayviard or Mr. Fay of its application to the Federal Energy Regulatory Commission for a certificate of public convenience and necessity for the facility, the effect of its project on Mr. Fay’s land constitutes a de facto taking of the oil and gas interests there, Fayviard had argued.

UGI argued that questions of federal law were implicated since the claims require interpretation of the federal Natural Gas Act and an application in front of the FERC, which could put the case in Judge Brann’s court.

The judge, however, found that Fayviard’s complaint is not sufficiently based on a question of federal law.

“Federal law is implicated in some of the elements of Fayviard’s de facto condemnation claim, but not in a fashion that gives rise to federal jurisdiction,” Judge Brann said.

He added in a footnote that “UGI should be excused for misconstruing Fayviard’s inartfully drawn complaint in this respect.”

The judge also noted that UGI didn’t cite a single federal statute or regulatory provision that would have a material impact on Fayviard’s claim.

“Attempting to manufacture jurisdiction, UGI posits that Fayviard has alleged a violation of the Natural Gas Act,” Judge Brann said. “This is a red herring.”

The judge sent the case back to state court.

Pace Reich, an Elkins Park attorney who is representing Fayviard, described Fayviard only as a limited liability company that owns the oil and gas rights under Mr. Fay’s land. He said he didn’t know if it owned the rights to any other oil and gas deposits.

J. David Smith of McCormick Law Firm in Williamsport represented UGI and couldn’t be reached for comment.

Saranac Hale Spencer can be contacted at 1-215-557-2449 or sspencer@alm.com. Follow her on Twitter @SSpencerTLI. To read more articles like this, visit www.thelegalintelligencer.com.

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