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Forest Oil Corp. v. El Rucio Land & Cattle Co. - 518 S.W.3d 422 (Tex. 2017)

Rule:

Tex. Health & Safety Code Ann. § 401.415(a) gives the Railroad Commission (RRC) sole authority to regulate the disposal of oil and gas naturally occurring radioactive material (NORM) waste. But the provision is part of a subchapter requiring the Texas Commission on Environmental Quality, the Health and Human Services Commission, and the RRC to define their respective duties (Tex. Health & Safety Code Ann. § 401.414) under the Texas Radiation Control Act. Tex. Health & Safety Code Ann. § 401.0005. It does not exclude judicial authority over common-law claims. None of the statutes authorizing the RRC to regulate hazardous waste associated with oil and gas operations remotely suggests, let alone clearly indicates, that the RRC's authority is intended to be exclusive of common-law actions.

Facts:

Through family entities, respondent James A. McAllen controls the 27,000-plus-acre McAllen Ranch once owned by his great-grandfather. Petitioner Forest Oil Corporation ("Forest") has produced natural gas on the ranch for over 30 years. Forest's leases cover about 1,500 acres, and it maintains a processing plant on 5.75 acres. In the 1990s, McAllen sued Forest for underpayment of royalties and underproduction of the lease. The parties resolved their disputes with a "Settlement  Agreement" and a "Surface Agreement". The Surface Agreement also incorporated an arbitration provision in the Settlement Agreement.

In 2004, McAllen learned from a former Forest employee that Forest had contaminated the property. Also, McAllen was told, used oilfield tubing Forest had donated to him for construction of a rhinoceros pen was contaminated with naturally occurring radioactive material (NORM). When McAllen was diagnosed with sarcoma in his ankle, resulting in the amputation of his right leg below the knee, he blamed Forest. McAllen sued Forest for environmental contamination, improper disposal of hazardous materials on the ranch, and maliciously donating the contaminated pipe that caused his injury. Forest moved to compel arbitration, McAllen objected, and the trial court denied the motion.

Issue:

Did the Railroad Commission have exclusive or primary jurisdiction over claims for environmental contamination, thus precluding property owners' suits for damages and other judicial relief?

Answer:

No

Conclusion:

Affirming, the Supreme Court of Texas held that the Railroad Commission (“RRC”) did not have exclusive or primary jurisdiction over claims of environmental contamination by a property owner (“PO”) against a natural gas lessee, despite that the RRC regulated oil and gas operations in Texas. Because the PO's claims for damages and other judicial relief were inherently judicial, litigation was not precluded. The arbitration award did not require vacatur under Tex. Civ. Prac. & Rem. Code Ann. § 171.088(a), as there was no evident partiality of a neutral arbitrator due to the PO's objection to him serving as a mediator in an unrelated action, as there was not even direct evidence that the arbitrator knew of the possible mediation. The arbitrators did not exceed their powers by awarding exemplary damages, as such were permitted, and were not reviewable, pursuant to the terms of the parties' settlement agreement.

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