The Exhaustion of Administrative Remedies Defense Takes Another Hit | JD Supra

The Exhaustion of Administrative Remedies Defense Takes Another Hit | JD Supra

The Supreme Court of Mississippi recently held in Tiger Production Company, LLC v. Pace, 2021-IA-00315-SCT, 2022 WL 11555295 (October 20, 2022) that surface owners are not necessarily required to exhaust administrative remedies prior to bringing claims of negligence, nuisance and trespass against oil and gas operators in trial court. This opinion continues a growing judicial trend trimming back the exhaustion defense to allow landowner’s common law claims against operators to go forward in court.

In this suit, surface owners John Webb Pace, Jeannette Pace, and John Gregory Pace (collectively “Pace”) owned 103 acres of land in Wayne County, and Tiger Production Company, LLC (“Tiger Production”) was the designated operator by the Mississippi Oil and Gas Board (“MSOGB”) of several oil wells, saltwater disposal wells and associated pipelines on and in proximity to the Pace property. Following a disposal line leak and non-closure of an existing drilling reserve pit, Pace alleged suffering numerous damages pertaining to real property and livestock operations upon those grounds. Pace brought suit against Tiger Production in Wayne County trial court seeking compensatory and punitive damages on claims of negligence, nuisance and trespass. Tiger Production sought to dismiss the claims for failure to first seek remedy through the MSOGB, the administrative agency that governs and regulates oil and gas activities in the State of Mississippi.

The trial court denied Tiger Production’s motion to dismiss, and held that the common law claims of negligence, nuisance and trespass did not relate to administrative remedies and that the MSOGB lacked jurisdiction over such claims.

Tiger Production sought interlocutory appeal to the Mississippi Supreme Court to determine whether the trial court correctly held that Pace was not required to exhaust administrative remedies regarding the claims.

During the pendency of Tiger Production’s appeal, the court decided a similar interlocutory appeal in Petro Harvester Oil & Gas Co., LLC v. Baucum, 323 So.3d 1041 (Miss. 2021). That appeal became an intervening decision by the court and heavily impacted the court’s review of Tiger Production’s appeal. In Baucum, the court found that the MSOGB does not have unlimited jurisdiction over oil-field waste issues. The Baucum case involved a waste water spill impacting the lands of the plaintiffs in Jones County. The plaintiffs alleged similar common law claims of trespass, nuisance, negligence, and personal injury, and the court determined that property and personal injury damages were not determinable by administrative agencies such as the MSOGB; and therefore the plaintiffs were correct to proceed directly to a trial court for resolution.

Ultimately, in Tiger Production Company, LLC, the supreme court affirmed the trial court ruling and concluded that 1) the Pace claims were not based on any violation of the MSOGB rules or regulations, 2) the MSOGB could not provide an adequate remedy for the Pace claims, and 3) the three variables influencing whether exhaustion of remedies was required supported the conclusion that Pace was not required to exhaust administrative remedies before bringing claims in trial court.

Operators should take note that in Mississippi, the MSOGB does not have unlimited jurisdiction over oil-field waste (as was long thought the case by many), and that relying upon regulatory agency assistance with landowner claims is no longer as strong a shield as once thought.

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