Thursday, March 23, 2006

Hog Nuisance Oil Drilling Case

Environmental contamination of subsurface oil allegedly caused by hog confinement operation.

Test Drilling Service Co. v. Hanor Co., 322 F.Supp. 2d 965 (D. Ill. 2004); 322 F. Supp. 2d 957.

Test Drilling Service Co. (“Test Drilling”) held oil and gas leases in Greene County, Illinois going back to 1994. Id. at 968. Test Drilling began producing oil on the property in September, 2000 and soon discovered that the oil it recovered was contaminated with bacteria of a type associated with animal waste. Id. Defendants Hanor Co. and Pig Improvement Co. operated hog confinement operations adjacent to the leased site and contracted with other defendants for the design and management of animal waste handling arrangements. Id. at 959-60.

Test Drilling originally filed suit in state court alleging a variety of causes of legal and statutory causes of action including negligence and negligence per se. Id at 968-69. Test Drilling alleged that the defendants allowed leachate and animal waste to flow from their property into the mineral leasehold, damaging the value of the oil in the ground and equipment used in extracting the oil. Id.

The case was removed to the U.S. District Court for Central Illinois.

The defendants moved to dismiss Test Drilling’s negligence claims. Id at 967. The court dismissed the plaintiff’s negligence per se claims because the statute cited as the basis of the claim did not provide for strict liability Id. at 964. The defendants argued that the claims of negligence should be barred by the economic loss doctrine which holds that economic damages are not recoverable in a tort action , but the court declined to agree because there was damage to other property.-in this case, the leasehold itself. Id. at 970-71.

The court noted that under Illinois law Test Drilling’s interest in the oil and gas leases was a property interest, and that recovery for damage to this interest and the damage to its pumping and storage equipment caused by a dangerous occurrence was not barred by the economic loss doctrine. Id. However, damage to the oil itself was not compensable as Illinois law holds that a mineral leaseholder does not have title to oil below the ground until it is reduced to possession. Id. at 971.

A footnote: You may have heard about this case *somewhere else*. Compare your dates carefully. This document was created February 16, 2005 and submitted *somewhere else* and yr obedient servant got *no answer* until something along the same lines appeared *somewhere else* three months later, all of which points to the old rubric about casting one's pearls before the subjects of this litigation.


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