Murphy Exploration & Production Company et al. v. Dimmit County, Texas
On October 3, 2018, the Fourth Court of Appeals in San Antonio granted a Mandamus motion reversing an opinion rendered by the 365th District Court in Dimmit County, Texas, which could have greatly affected the entire oil industry by exposing oil and gas operators and service companies to exposure for using public roads in their course of business.
Dimmit county initially sued two related operators and one service company— Murphy Exploration & Production Company, Murphy Oil Company and Murphy Oilfield Trucking Company—alleging that those companies had greatly damaged a county road, the Diamond H. Ranch Road. The county argued that the companies used the road in a negligent manner, damaging the road with their oilfield trucks. After initial discovery, Dimmit county chose to widen the scope of its suit, suing an additional twenty-six oil and gas operators and service companies and making the same negligence allegations against those companies.
At the trial court level, twenty-two of the companies filed a Rule 91a Motion to Dismiss. Their motion was based on the assertion that Dimmit county did not specify its negligence allegations against any of the individual defendant, but instead broadly asserted that all were negligent in their use of the road. The county pointed to several instances in which the companies used the dirt and caliche road after downpours causing damage. That said, there were no signs posted which prohibited use of the road after rain, a point that the Motion to Dismiss made as well.
The trial court, after a contentious hearing, denied the Motion to Dismiss. The twenty-two Defendants then filed a Mandamus brief to 4th Court of Appeals, asking the court to overturn the ruling. After briefing, the Appellate court sided with the operators and service companies.
In its opinion, the court utilized prior case law that analyzed how publicly-owned property was alleged to have misused. It reasoned that in the Dimmit county case, the county had not alleged or provided evidence that the Diamond H. Ranch Road was intended only for use by specific vehicles, and that Dimmit county had not posted any signs prohibiting use of the road by heavy commercial vehicles or after rain events. “Although [Defendants] may have a moral duty not to damage the road, we cannot say they had a legal duty,” the Appellate Court reasoned. It ruled that the trial court erred in denying the Motion to Dismiss and ordered the trial court to grant it.
Dimmit county has filed for a time extension to ask for a rehearing on the ruling and still has the option to appeal to the Supreme Court. At this time, however, the oil and gas industry should breath a sigh of relief. If Texas courts were to allow counties to sue oil companies for using public roads, the additional cost would greatly impact our industry.
The caveat here, however, is that companies should be aware that savvy counties will likely implement restricted use signs for roads such as the Diamond H. Ranch Road in Dimmit county. Beware and train employees to be on the lookout for signage to this effect. We will see if the ruling is ultimately appealed and overturned, but for now, the 4th Court of Appeals rightly declined to allow Texas counties to implement what in essence appears to be a de facto additional tax burden on the oil industry.