Summary
stating that discovery is based on matters relevant to the claims pleaded
Summary of this case from In re BurkettOpinion
No. 08-19-00224-CV
10-30-2020
IN RE PLAINS PIPELINE, L.P. and Plains All American Pipeline, L.P. Relators.
OPINION
Rodgers and Hammerstein famously asked in the musical "Oklahoma!" why can't the farmer and cowman be friends. In this case, we could pose the same question about two companies, one in the oil business, and the other in the water business. Both claim to have surface rights to a 160-acre tract of land in rural Winkler County; one party operates a petroleum tank farm on the property, and the other purportedly has the right to drill for water resources below the surface. The precise issue before us is whether in a suit to adjudicate their respective rights, and for damages by the water company, the trial court erred in allowing the party with the water rights to drill seven test holes on the tank farm. After an evidentiary hearing punctuated by a classic battle of dueling experts, the trial court entered its order allowing the seven test holes under the authority of TEX.R.CIV.P. 196.7. We conclude that the trial court did not abuse its discretion in that regard and deny mandamus relief.
"Oh, the farmer and the cowman should be friends.
One man likes to push a plough, the other likes to chase a cow, but that's no reason why they cain't be friends."
Oklahoma ! (Rodgers & Hammerstein Productions 1955).
I. BACKGROUND
The disputants here are an oil gathering/storage company, Plains Pipeline, L.P. and Plains All American Pipeline, L.P., (collectively, Plains), and a water exploration company, Winkler Land, LLC, and Winkler Services, LLC (collectively, Winkler). The Honorable John L. Pool, judge of the 109th District Court of Winkler County, entered an order allowing Winkler to drill seven test holes on a 160-acre tract that is leased to Plains. Plains then filed this mandamus challenging that order, which we stayed. The disputed order arises out of the following pertinent background.
A. Factual History
In July 1999, Plains acquired the rights under a 1928 lease to a 160-acre surface estate in Winkler County, Texas (the Property). The lease gave the leaseholder the right to store, handle, treat, and transport oil, gas, and other minerals, including the right to construct, maintain, and operate oil tanks and pipelines on the premises. The lease contains a 20-year primary term and states that after the expiration of the primary term the lease "shall continue in effect ... for so long as the premises or any part thereof shall be used ... for any of the purposes of this lease." Plains asserts that since July 1999, it has continuously used the Property for storing, handling, treating, and transporting oil. Specifically, it maintains the Wink East Terminal on the Property, which is a crude oil tank farm consisting of nine 270,000-barrell storage tanks, 11 active high-pressure oil pipelines, an office, a crude oil manifold system, and other equipment and facilities to transport oil to other parts of the Permian Basin.
Plains asserts that the Texas Water Code gives the surface lessee the exclusive right to possess and use the groundwater beneath the property. See TEX.WATER CODE ANN. § 36.002 (landowner owns the groundwater below the surface of the landowner's land as real property and landowner's lessee has certain production rights). Winkler, however, believes that it controls the groundwater below the surface of the Property. Winkler claims that the groundwater rights had previously been severed from the surface estate and that it holds groundwater rights to the Property by virtue of a groundwater lease it received in 2014 when Winkler acquired rights to a 28,840-acre property known as the Roark Ranch, which includes the Property. It also claims to have an undivided surface interest in the entirety of the ranch. Winkler maintains that its rights to the groundwater also gives it an implied easement in the surface estate that requires Plains to reasonably accommodate its interests. And in any event, Winkler contends that the 1928 Lease by which Plains claims an interest in the surface estate expired because the land was not continuously used for production purposes.
To resolve these differences, Winkler sued Plains seeking a declaratory judgment stating, inter alia , that as owner of the dominant groundwater estate, Winkler is entitled to develop the groundwater estate by making use of the surface of the Property, and that there are no other reasonable and efficient means of producing groundwater off the Property. According to Winkler's complaint, the Property "sits directly above one of the most productive strata of groundwater on [the Roark] Ranch." In its live petition, Winkler maintains that it and Plains are tenants-in-common of the Property's surface estate and that Plains's use of the surface has ousted Winkler from the surface estate and prevented it from developing and producing groundwater under the surface in contravention to the groundwater lease. Winkler also brought claims for nuisance, tortious interference with contract (Winkler's deed and groundwater lease), injunction, and an accounting for profits.
In its answer, Plains denies any liability because Winkler owns only "a contingent future interest in the right to the groundwater under the subject 160 acres" which is subordinate to the 1928 Lease. Plains asserted several equitable defenses and argued in the alternative that if the 1928 Lease had expired, Plains had obtained entitlement to the 1928 Lease rights by means of adverse possession and, if not, that Winkler's drilling activities would be subject to the accommodation doctrine.
B. Procedural History
1. The inspection order request
As part of the discovery conducted in this litigation, Winkler filed a motion for a pre-trial inspection of the Property under TEX.R.CIV.P. 196.7. When it first filed the motion, Winkler sought three things:
(1) a surface geophysical survey that involved placing electrical probes and sensors connected by a grid of wires over the entire 160 acres for a two-week period;
(2) drilling eleven test holes at designated locations on the 160-acre property; and
(3) complete two actual test water wells on the Property.
Plains objected, arguing that the request to enter and test the Property was not relevant to any claim or defense, and the burden on Plains far outweighed any evidentiary benefit to Winkler.
On May 8, 2019, the trial court heard the motion in an evidentiary hearing. At that hearing, Plains presented Justin Nicholson, its facility manager for the Property, to explain the risks of Winkler's proposed inspections. The Property is completely fenced with controlled access. He testified that there are five active high-pressure pipelines that run underneath the property. Given the age of the facility, there are other abandoned lines which are not shown on the maps. The complex also uses high voltage lines, both above and below grade. Just with its own contractors, Nicholson noted in a one-year period, the facility experienced four incidents of workers striking either marked or unmarked facilities.
Nicholson opined that Winkler's proposed network of connected sensors would cross roadways and pipelines. One of the proposed working water wells was placed in the retaining basin for one of the oil storage tanks. And he analyzed Winkler's proposed placement of the eleven test holes and testified to the danger and potential effect on operations for each. Moreover, the facility is undergoing a $750 million dollar expansion and generally has 15 to 20 contractors on the property, with 140-180 workers on the premises. Plains is also obligated to conduct background checks and meet security requirements set by the U.S. Department of Homeland Security for any third-party contractors. Each contractor is required to execute indemnity/insurance agreements. No provision in the proposed inspection met these requirements.
After hearing argument, the trial court denied Winkler's request to inspect the Property.
2. The motion to reconsider
But the issue did not end there. Winkler filed a motion to reconsider Plains's objections, contending that based on new information it obtained by deposing Nicholson, Winkler could amend the location of its test holes so as not to interfere with Plains's current operations. Also, as part of its motion to reconsider, Winkler dropped its requests to perform a surface survey with sensors, and dropped its request to complete test wells. It further narrowed its request to seven test holes and placed them in areas where Plains had no current operations. Plains resisted the reconsideration request, again contending that the discovery was not relevant to the claim, that the discovery would disrupt ongoing operations, and that Winkler could obtain the hydrological data through other means.
The trial court held another evidentiary hearing on the motion. Winkler called two witnesses; Plains called one. For the reader's benefit, we add an exhibit showing the property and location of the seven proposed test holes:Winkler supported its need for the test holes through Michael Thornhill, a hydrogeologist. Winkler hired Thornhill to assess the amount of, and means to optimally recover, groundwater from the 160-acre property. Thornhill explained that the ranch sits atop the Pecos Valley Aquifer. Geologically, the area had been a shallow ocean that collapsed, infilled, uplifted, then collapsed again, all resulting in an irregular trough filled with various layers of sediment that are permeated with water. The sediments, however, vary between layers of larger rocks, gravels and sands, or clays and silts. The kind of sediment dictates the access to the water: gravel and sand give up water easily, while clay and silt do not. Some information on the underground formations is already available from prior well logs in the area and a U.S. Geological Survey, which allowed a third party to create a contour map of the underground strata of the Pecos Valley Aquifer. But by considering additional data from the Texas Water Development Board, Thornhill identified significant differences in the estimated depth of saturated thicknesses of the formation. And Thornhill had not seen, nor was he aware of any drilling data available within the Property itself.
Thornhill opined that because the formation was irregular, he needed additional data before he could recommend where to place production wells on the 160-acre tract. Given that the formation can be variable over short lateral distances, the more data points he can consider, the more accurate the model. He sought that data from test holes, which are essentially small diameter holes that allow for the collection of core samples. Once completed, the hole is plugged. The entire process of boring and then closing a test hole can typically be completed in two to three days.
Thornhill based the location of the proposed test holes on Nicholson's deposition testimony. Two of the test holes were to be drilled on a site that Nicholson identified as the future site of a retention pond that Plains would be excavating to 20 feet in any event. Three of the test holes are near the Property boundary in an area Nicholson testified "would not be an issue." Two other test holes were proposed for the middle of the Property, but away from the tanks and any pipelines as shown by Railroad Commission files. Thornhill agreed that he could not estimate the recoverable reserves without the data from the test holes. Rather, he needs to know the total thickness and character of the formation, which can vary over "pretty short distances laterally." Nor would he advise on any final large diameter and expensive production wells without test holes on the 160 acres.
On cross-examination, Thornhill admitted that several of the test holes located near the perimeter of the Property could be moved 100 feet away off the tract and still provide useful information for the formation. But Thornhill maintained that he still would not be able to get a precise estimate of the groundwater without test holes drilled toward the center of the tract. Thornhill also conceded that two of the proposed test holes were on the site of a roadway, but he stated that those could be moved up to 250 feet and still provide useable information. Based on the information already available to him, Thornhill estimated that the tract had 24,210,729 barrels of recoverable water assuming a 60 percent recovery rate.
Winkler also called Randy Taylor, a water well driller who has drilled around 100 test holes in and around Winkler County. Drilling test holes requires a drilling rig, a water truck with pipe trailer, a vacuum truck, and two support vehicles. Taylor would use a four-person crew and require an area approximately 60 feet by 120 feet for his trucks and equipment. Each hole would take two or three days to drill. Once the location for the hole is flagged, Taylor would use the "811 dig test" system to locate utilities, and he can use a "hydrovac" system to drill a pilot hole with a high pressure water stream (to avoid striking an underground obstruction with a drill bit). Plains uses that same technique to locate underground piping when it does its own on-site excavation activities. And from his experience in drilling test holes on the Roark Ranch, he testified that moving a test hole 300 to 400 feet will show a change in the underground formation ("the chances of drilling two test holes 300 feet apart and them being exactly the same is very unlikely"). Taylor carries insurance for his company but declined to assume liability for anything that happened because of the drilling that was not his responsibility.
In response, Plains called David Vance, a bio-geo-chemist who assesses hydrological systems, and regional groundwater systems. He testified that the aquifer has "a texture and a fabric" in the geological deposits, but that it is essentially a linear trough running parallel to the Property boundary in a north-northwest to south-southeast direction. The Property is not over the bottom of the trough, but rather on the slope of one side. He agreed that five of the test holes that were proposed near the boundary of the Property could be moved 100 feet and drilled outside the 160-acre boundary line and still give a valid assessment of the formation. On cross-examination, Vance admitted that based on what he knew, he could not tell somebody where to put production wells on the site and that more information would be helpful. He conceded that an earlier government study stated the "sediment packages" were not "laterally continuous over large distances" and they are not present at the same depths, suggesting "sections of the trough may have collapsed at different rates."
3. The trial court's discovery order
Following the second hearing, the trial court reversed course and granted Winkler's request to inspect the Property. In its order, the trial court stated that the modified version of Winkler's request to inspect fell within the scope of discovery, was of minimal interference and burden to Plains, and that the necessity of the information to be gleaned from the inspection outweighs any burden to Plains. The order also set a variety of conditions for the drilling of the test holes.
The order provides:
The Plaintiffs are granted the right to drill and log the seven test holes shown on Exhibit A.... The work at each site will include staging the drill site and work areas, either using a probe to check for any unknown pipelines or excavating a pilot hole with water to check for any unmarked buried lines, drilling to total depth, obtaining a geophysical log of the hole, and plugging and abandoning the hole per state regulations. The equipment to be brought on site includes: drilling rig, water truck, contractor pick-up trucks, logging truck, a back hoe, vacuum truck, and pipe trailer. At each test hole location, a site area of 60’ x 120’ will be used during the pendency of drilling the hole. The contractor shall have 72 hours at each location. Each hole will be approximately 4-3/4" in diameter as it proceeds downhole. The depths of the holes will be 800-1000 feet. The contractor may, but is not obligated to, drill simultaneously at two locations. The hole locations may be adjusted, as necessary, to ensure they are in safe locations as close to the locations on Exhibit A as possible. The drilling contractor shall submit its employees' information to Defendants for background checks, as necessary and on request, to comply with any government regulations. The Plaintiffs shall instruct the drilling contractor to take those steps necessary to ensure that the work done onsite is performed in a safe and prudent manner. Upon request, Defendants shall promptly mark the location of all known underground pipelines in the area of the drill sites.
This mandamus action followed. We granted a temporary order staying proceedings pending resolution of the proceeding.
II. DISCUSSION
A. Standard of Review and Applicable Law
Mandamus relief may be granted where a relator shows that a trial court has clearly abused its discretion and the relator has no adequate remedy by appeal. In re Sun City Gun Exchange, Inc. , 545 S.W.3d 1, 5 (Tex.App.--El Paso 2017, orig. proceeding). Texas courts, including this Court, have held when a trial court erroneously grants an order permitting the entry upon land under Rule 196.7, the property owner lacks an adequate remedy by appeal. Id. at 8. As such, we focus on the first mandamus element of whether the trial court's discovery order constitutes an abuse of discretion because it exceeds the scope of discovery permitted by procedural rules. Id. at 5.
Discovery can take several forms, and our rules contemplate entry onto property as one possible discovery avenue. TEX.R.CIV.P. 196.7. That rule allow a party to file a request or motion to "gain entry on designated land or other property to inspect, measure, survey, photograph, test, or sample the property or any designated operation or operation thereon[.]" Id. at 196.7(a). "The request for entry upon a party's property ... must state the time, place, manner, conditions, and scope of the inspection, and must specifically describe any desired means, manner, and procedure for testing or sampling, and the person or persons by whom the inspection, testing, or sampling is to be made." Id. at 196.7(b).
Only a paucity of reported decisions interpret Rule 196.7. See In re Goodyear Tire & Rubber Co. , 437 S.W.3d 923, 928 (Tex.App.--Dallas 2014, orig. proceeding) ; In re Kimberly-Clark Corp. , 228 S.W.3d 480, 486 (Tex.App.--Dallas 2007, orig. proceeding) (interpreting Texas rule in light of analogous Rule 34 of the Federal Rules of Civil Procedure's case law due to recognized dearth of on-point Texas-specific decisions). Nevertheless, certain principles have emerged from those decisions. First, Rule 196.7 "does not permit blanket discovery on a bare skeletal request when confronted with an objection." In re Kimberly-Clark Corp. , 228 S.W.3d at 487. Heightened review is required, "[b]ecause discovery involving entry onto the property of another involves unique burdens and risks[.]" In re Sun City Gun Exch., Inc. , 545 S.W.3d at 7. "Federal cases recognize the unique burdens and risks inherent to entry onto land, e.g., confusion and disruption of defendant's business and employees." In re Kimberly-Clark Corp. , 228 S.W.3d at 486.
Second, Rule 196.7 inspections are subject to the overriding restrictions applicable to discovery generally. Id. at 486-87. For example, a Rule 196.7 inspection order is subject to the requirement that the request be relevant under Texas Rule of Civil Procedure 192.3. Id. That said, "[a]lthough a request for entry upon land must satisfy the general requirement of relevance, mere relevance is not sufficient to justify a request for entry upon the property of another." In re Goodyear Tire & Rubber Co. , 437 S.W.3d at 928. Texas Rule of Civil Procedure 192.4, which also applies to inspection orders, provides that the scope of discovery should be limited by the court if it determines the discovery sought is obtainable from: (1) a more convenient, less burdensome, or less expensive source; or (2) the burden of the proposed discovery outweighs its likely benefit. In re Kimberly-Clark Corp. , 228 S.W.3d at 487, quoting TEX.R.CIV.P. 192.4. "In conducting this inquiry, the trial court must balance the degree to which the proposed inspection will aid in the search for truth against the burdens and dangers created by the inspection." In re Sun City Gun Exchange, Inc. , 545 S.W.3d at 7.
In sum, a Rule 196.7 order permitting inspection is not an abuse of discretion if (1) the request is relevant and (2) the discovery sought cannot be obtained from a more convenient, less burdensome, or less expensive source, and (3) if the burden of the proposed discovery does not outweigh its likely benefits.
When an inspection order is sought against a non-party , Rule 196.7 imposes an additional requirement that an order for entry onto non-party property "may issue only for good cause shown[.]" Tex.R.Civ.P. 197.6(d). Because this case involves entry onto the land of a party opponent, Rule 197.6(d)'s good cause requirement does not apply here.
B. Application
Plains argues that the discovery order is improper under these circumstances because (1) Winkler's discovery request does not seek information that is relevant to the issue of who holds superior title to the groundwater, and (2) even if the discovery request is somehow relevant to the lawsuit, the trial court's order did not properly balance the competing interests.
1. Relevance
Relevance for purposes of discovery is broader than relevance under the Texas Rules of Evidence. Information is relevant for discovery purposes even if it "will be inadmissible at trial if the information sought appears reasonably calculated to lead to discovery of admissible evidence." In re Kimberly-Clark Corp. , 228 S.W.3d at 487, citing TEX.R.CIV.P. 192.3(a). And a party may discover "any matter that is not privileged and is relevant to the subject matter of the pending action, whether it relates to the claim or defense of the party seeking discovery or the claim or defense of any other party." TEX.R.CIV.P. 192.3. To determine the subject matter of the action, and the claims and defenses urged, we logically start with the parties' pleadings. See In re Compton , No. 11-20-00154-CV, 2020 WL 4519562, at *3 (Tex.App.--Eastland Aug. 6, 2020, no pet.) (mem.op.).
Winkler asserts that the information gleaned from the test holes will be relevant for at least two reasons. First, Winkler contends that the test holes are relevant to its declaratory judgment action because if Winkler holds title to the groundwater, then Plains as the surface estate holder must accommodate Winkler's interests. See Coyote Lake Ranch, LLC v. City of Lubbock , 498 S.W.3d 53, 60 (Tex. 2016) (accommodation doctrine requires mineral and surface estates to exercise their respective rights with due regard for each other, and further applies the doctrine to owner of groundwater). The test holes help map the underground geology of the Property to allow the trial court to formulate an accommodation plan. That is, the test holes show the total thickness of the formation and its character (i.e. sands, clays, silts) which in turn would show where water wells might be drilled on the 160 acres that would best accommodate both Plains's use of the surface and Winkler's right to develop the water resource. Second, Winkler asserts that the information gleaned from the test holes is relevant to the damages portion of its nuisance claim because it will give a more precise estimate of how much groundwater is located on the tract.
Winkler has sought a declaration regarding "a drilling and development plan on the subject property that is reasonably necessary to Winkler Services' commercial enjoyment of the groundwater estate."
Plains counters that this case revolves around the issue of title, and that Winkler's stated reasons for the discovery do not help resolve that dispute, making Winkler's request irrelevant. While Plains is correct that Winkler's damages claim, and the accommodation plan, both depend on Winkler having a right to the water resources in the first place, the trial court was not required under the procedural posture of this case to resolve the merits of the title issue in order to resolve a discovery dispute. That is to say, one or both parties here could have filed summary judgment motions to have the trial court construe the ground water lease, or the original 1928 surface lease, and resolve what rights they have to this tract of land. Neither did so, nor did either move to proceed with separate trials on the title issues. See Liberty National Fire Insurance Company v. Akin , 927 S.W.2d 627 (Tex. 1996) (trial courts have broad discretion to sever a lawsuit into separate suits); Womack v. Berry , 156 Tex. 44, 291 S.W.2d 677, 683 (1956) (trial courts have broad discretion to order separate trials on claims or issues). Given that state of the record, we return to the bedrock principle that the scope of discovery is generally within the trial court's discretion. In re CSX Corp. , 124 S.W.3d 149, 152 (Tex. 2003). And the trial court did not abuse its discretion in finding that the test holes were relevant to the pleaded allegations of the parties. Just because the title issue might be the predominant dispute between the parties, Winkler was not relieved of its burden to prepare other facets of its case for a final hearing. If it prevails on its title claim, and advances to the point of arguing for an accommodation plan, it would require evidence to support that plan. Just because one element of a claim might be more highly disputed, does not relieve a litigant from proving every element of their case.
At the end of the second hearing, the trial court suggested the option of a bifurcated trial, but the parties could not reach an agreement on that issue, and no formal motion, nor order denying that kind of relief is in our record. This case is therefore different than those cases cited by Plains where the trial court erred in allowing merits discovery before resolving a discreet pending issue on the merits, such as a plea to the jurisdiction. See In re Hoa Hao Buddhist Congregational Church Texas Chapter , No. 01-14-00059-CV, 2014 WL 7335188, at *6 (Tex.App.--Houston [1st Dist.] Dec. 23, 2014, no pet.) (mem.op.). We do not decide here whether a bifurcated trial, or some other segmentation of the litigation is appropriate or required, only that the trial court did not err in failing to resolve the merits of the lawsuits in order to resolve a discovery dispute.
Plains also addresses the relevance argument another way. It notes that Winkler has not included the groundwater lease upon which its rights are based in the mandamus record. The lease was not attached to its petition, nor was it was offered into evidence in either of the two hearings below. Plains candidly admits that it is not asserting that such a lease does not exist. Rather, it claims the lack of the lease as an exhibit means the trial court abused its discretion in assuming that it gave Winkler a right to the groundwater beneath the Property. But again, if Plains wants to assert that Winkler has no right to access to the surface of the Property under the lease, then Rule 166(b) offers it a means to have the trial court resolve the merits of the question. Winkler pled that the lease provided its right to develop water resources, and when left unchallenged, the pleading is a sufficient hook to measure relevance.
Winkler did include as a part of the record an affidavit of David Lynch who swore that Winkler "is the Lessee and owner of the groundwater rights in, on and under the Roark Ranch" which it acquired through a groundwater lease in February 2014 and that it separately has an ownership in the entirety of the surface estate. Winkler also included in the filings germane to its motion a certified copy of the "Memorandum Giving Notice of Groundwater Lease" that is filed in the real property records of Winkler County, Texas.
Finally, Plains urges that a party cannot use a discovery request to grant them the ultimate relief that they seek in the lawsuit. The concept behind that claim makes sense. A party's ultimate claim should be resolved by the factfinder and incorporated into a judgment. A party should not be able to gain their ultimate relief through a discovery order decided only by the trial court. Consequently, in Uvalde Rock Asphalt Co. v. Loughridge , the court overturned a discovery order that allowed plaintiffs access to the books and records of the corporation, which was all of "the relief sought in the main suit." 425 S.W.2d 818, 820 (Tex. 1968) ; see also In re Kimberly-Clark Corp. , 228 S.W.3d at 490 ("Allowing discovery that provides a party the relief sought in the main suit severely compromises or vitiates the other party's ability to present his claim or defense during a trial because the issue would be moot.").
Here, Plains points out that Winkler is seeking access to the Property for the purpose of drilling one or more water wells as part of the ultimate relief sought. And indeed, Winkler is seeking an injunction that restrains Plains from "interfering with the drilling and production efforts of [Winkler] to produce groundwater on the Subject Property from the groundwater estate." It also seeks a declaration for a "drilling and development plan" so it can make use of the groundwater rights and estate. Plains reasons that to allow Winkler to gain that relief through a discovery order short circuits the judicial process. We reject the argument, however, because Winkler is not seeking to gain access to the property for the sake of access, or for the purpose of drilling test holes. Its ultimate objective is to drill and develop a water well. The test holes might aide it in that process, but they are not the end relief that Winkler is asserting.
Under the lenient relevance standard set by the Texas Rules of Civil Procedure, we find that the test holes Winkler proposes are ostensibly relevant to its claims. The first part of the test is satisfied.
2. Balancing the equities
Relevance alone, however, is not enough to support an inspection request. The trial court must also properly balance the equities. An inspection order is appropriate only where (1) discovery cannot be obtained from a more convenient, less burdensome, or less expensive source, or (2) the burden of the proposed discovery outweighs its likely benefits. See In re Kimberly-Clark Corp. , 228 S.W.3d at 487.
On this issue, each side comes armed with a prior precedent they claim supports their position. Plains heavily relies on the Dallas Court of Appeals decision in In re Kimberly-Clark Corp. which involved a plaintiff desiring to obtain environmental testing on the defendant's property. In contrast, Winkler directs us to the San Antonio Court of Appeals decision of In re SWEPI , which deals with an inspection order for an oil-and-gas well. 103 S.W.3d 578 (Tex.App.--San Antonio 2003, orig. proceeding). Both cases are instructive, but neither is binding, nor factually on point.
The court in In re Kimberly-Clark Corp. disallowed a plaintiff permission to go onto the defendant's land to conduct soil tests. The case arose on these facts: the plaintiff contracted to buy Kimberly-Clark's building in downtown Houston. 228 S.W.3d at 482. After the "as-is" contract for sale was executed, but before the transaction closed, the plaintiff learned that there were underground storage tanks on the premises. Kimberly-Clark had previously represented that it had no knowledge of any contamination. Id. After an inspection period expired, the plaintiff sent inspectors unannounced to the property. Kimberly-Clark denied them access, and the property sale never closed. In the lawsuit that followed, the plaintiff asked for an order to conduct soil testing around the storage tanks so it could complete "Phase II environmental testing." The lawsuit sought damages under several fraud, misrepresentation, and non-disclosure theories.
During pre-trial discovery, the trial court ordered Kimberly-Clark to allow the plaintiff's agents to come onto the property to conduct the testing, but required the results to be shown only to the trial judge in camera , and not to be disclosed to the parties. Id. at 485. The court of appeals overturned that order for several reasons. First, the testing might show the existence of contamination, but not Kimberly-Clark's knowledge, which was core to the fraud and failure to disclose claims. Accordingly, the test results would be only marginally relevant. Second, if the testing showed contamination, Kimberly-Clark might be irreparably injured because it would be exposed to remediation requirements. Id. at 489. Third, the plaintiff had not shown it could not have developed its fraud and non-disclosure case through other means that would avoid the burdens and risks to Kimberly-Clark. Id. Finally, allowing the testing would grant the plaintiff complete relief under two of its pleaded causes of action: the plaintiff sought a declaration that it was entitled to conduct soil testing, and specific performance of a term in the sales contract allowing for soil testing. Id. at 491.
Conversely, Winkler focuses on the San Antonio Court of Appeals decision in In re SWEPI. There, Shell Oil had previously held a mineral lease on the landowner's tract of land but never produced oil from the land. 103 S.W.3d at 582. After a new lessee began producing from the same tract, the landowners sued Shell claiming it breached the terms of its lease by failing to drill a productive well. Id. Shell, which continued to hold a productive lease on an adjoining tract of land, contended that the landowner's tract was unproductive and that the only way the new lessee could be producing oil was that its wellbore was slanted toward Shell's adjoining tract. Id. Thus, the central defensive question in that lawsuit was whether a wellbore on the landowner's tract was vertical, or whether it slanted onto an adjacent property.
All the parties' experts agreed that the only way to know where the well production originated from was to perform a directional survey, which would take about a day and would require the well to be shut-in. Id. The alternate option, a more-invasive bottom pressure survey, would also require shutting-in the well for several days with loss of production, and it was unclear whether that test would result in permanent damage. The plaintiff's well was owned by a new operator--a non-party to the litigation--so Shell also was required to make a good cause showing. TEX.R.CIV.P. 179.6(d). Shell offered to file a bond to cover any losses. Id. at 584. The trial court denied Shell's inspection request for either test, but the San Antonio Court of Appeals issued a writ of mandamus vacating that order, allowing both proposed tests. It found the tests relevant and the only means to determine the bottom location of the well. Id. at 585.
Neither In re Kimberly-Clark Corp. or SWEPI line up on all fours to the dispute here. The relevance question in In re Kimberly-Clark Corp. asked whether the results of the soil testing would in turn tend to show a party's knowledge of a claimed fraud. The test holes here are directed at showing the physical characteristics of the property itself--no further inference is required. Also, Plains does not claim the drilling of test holes exposes it to any risks of remediation for contamination. The risk of harm is confined to the unintended damage to facilities, that we discuss below. Conversely, SWEPI , involved outcome-determinative tests done to a single well over the course of a few days to resolve the central defensive question in the case.
We ultimately resolve the case on the standard that governs mandamus actions: we only step in to correct clear abuses of discretion. Discreet legal issues, and undisputed factual records are prime candidates for mandamus relief while disputed factual issues and unquantifiable risks are not. We have more the latter here than the former.
a) Less burdensome source for the data
Plains argues in part that the information Winkler seeks is available without entry onto the property. We might agree that some of the test holes that are located near the property line might be drilled just off-site and on land that Winkler otherwise has access to. But the critical test holes are in the center of the property and the trial court had testimony before it that Winkler could not provide an accommodation plan with a proposed drilling site without mapping the strata from an on-site test hole. Plains also points out that Winkler already has an estimate of how much groundwater exists under the Property. Winkler's expert, using sources and information available to him, has estimated that there are approximately 24 million barrels of groundwater under the 160-acre tract. In response, Winkler put on evidence that further study of the tract's specific geology is necessary to get an even more precise estimate because, for example, water that is trapped in clay is much more difficult to process economically than water located in sand. Winkler is not compelled to accept its current estimate of water resources if additional data will reasonably provide it a more accurate estimate.
b) Balancing benefits verse the risks
In balancing the competing interests, Plains emphasizes the risk to its facilities. In particular, it argues that drilling the test holes could disrupt its on-going business operations, and potentially the flow of oil owned by third parties. Balanced against that risk, Plains asserts the marginal relevance of the test holes pales. These arguments, however, were all contested and are bound up in factual disputes that the trial court could have fairly weighed in favor of Winkler. Plains first suggested that drilling the test holes might strike a high pressure underground pipeline. At the first hearing, the Plains's district manager, Justin Nicholson, testified there are five underground pressurized pipelines on the Property. When later deposed, he identified only one or two underground pipelines. That leaves the risk of striking an abandoned underground line that Plains is not aware of, or its one or two active underground lines. Winkler's driller, however, intended to have all the underground facilities marked and use a hydrovac system to probe for underground facilities with a jet of water--the same system that Plains already uses in its own construction activities.
He testified at the hearing as follows:
Q. And are there active pipelines that run under this 160 acres?
A. Yes, sir. There are at least five pipelines underground, coming and going from the facility and running operationally at 1440 pounds on any given day.
He was asked at his deposition:
Q. Right. Of -- of the 11 active pipelines that are on the property, how many of those are above ground?
A. Ten of them.
Q. Within the 160-acres fence line, ten of the pipelines are above ground?
A. Where they enter the property, they typically come above ground
Q. Okay.
A. -- and tie into station piping.
Q. Got you. So, there is only one below that pipeline that's in -- that you-all know of?
A. That I'm aware of today, yes.
Q. If there were other active pipelines within your 160 acres, wouldn't you-all be aware of that?
A. I take that back. There is two.
Plains also raised the risk that Winkler's contractor might just as easily strike the above ground facilities, even if inadvertently. But the facility already has 140 to 180 contractor employees on the premises most days, and in two and a half years, there have been four incidents, two where vehicles backed into above ground improvements like bollards or light standards and two incidents of persons hitting subsurface pipes. Plains's contractors already operate heavy equipment, such as cranes and backhoes on the property.
The trial court also had the benefit of two additional pieces of information. First, it heard from the driller, Randy Taylor, who would actually do the work. He has been in the water well drilling busines for 35 years. He has drilled "100ish" test holes in Winkler County. His company has worked on sites designated as "critical facilities" by the Transportation Security Administration. His employees participate in safety training and in thirty years of drilling, he recalled only one incident where his crew struck an underground pipe. If allowed to drill the test holes, he would use a portable mud system that requires no excavation for settling pits. He would have the owner flag any underground facilities it knows of, use the 811 dig test system, and use the hydrovac system to probe for underground facilities with a jet of water. His apparatus requires a 60 by 120 foot area to operate. Each of the holes would take two to three days to drill, after which they would then be filled and restored to their original condition. His company is insured for incidents where he is at fault.
Under the order, discovery at each of the seven sites is permitted only for a period of 72 hours. But the order does not require multiple holes to be drilled at once, meaning that if the seven holes are drilled sequentially, drilling discovery could take as long as 504 hours, or 21 days.
The other piece of information that the trial court had was the location of the proposed test holes. Each had been selected based on deposition testimony from Plains's district manager, Justin Nicholson. Test holes one, two, and three were set near the north boundary of the Property, are not near any tanks in the area, and Nicholson said those would not be a concern. Test holes four and five were in the middle of the property where Nicholson said he would place a hole if one was to be drilled there. And test holes six and seven were chosen because they were located at the site of a future retention pond that was planned for a 20-foot excavation in any event.
The risk to the facility was disputed and unquantified. The relevance of the test holes was explained in plausible, but qualitative terms. Balancing of these two interests against each other strikes us as more of an art than a science. We cannot conclude the trial court abused its discretion in striking the balance that it did.
* * * * *
Long ago our Supreme Court noted that with respect to resolution of factual issues or matters committed to the trial court's discretion, a "relator must establish that the trial court could reasonably have reached only one decision." Walker v. Packer , 827 S.W.2d 833, 839-40 (Tex. 1992). "Even if the reviewing court would have decided the issue differently, it cannot disturb the trial court's decision unless it is shown to be arbitrary and unreasonable." Id. Here, the questions of relevance, less burdensome avenues of discovery, and balancing the risk were bound up in disputed factual issues fleshed out by the trial court in two lengthy hearings. We find no reason to disturb the trial court's resolution of these issues under our limited mandamus review.
III. CONCLUSION
Plains Pipeline's mandamus application is denied, and our order staying the discovery order below is withdrawn.
Rodriguez, J., dissenting
DISSENTING OPINION
YVONNE T. RODRIGUEZ, Justice
I, respectfully, dissent. The majority has held the trial court's inspection order was permissible. Because I believe Winkler did not make a showing that sufficiently established that the need for this discovery outweighed the burden the inspection order would place on Plains Pipeline under these circumstances, I respectfully dissent. The question presented by this mandamus application is whether the trial court abused its discretion by allowing Winkler to drill seven 800- to 1,000-foot deep exploratory holes on the Subject Property subject to the terms of the inspection order as part of pre-trial discovery authorized by TEX.R.CIV.P. 196.7. Plains Pipeline currently operates pipelines and maintains other facilities and equipment on the Subject Property.
While the scope of discovery is generally within the trial court's discretion, a trial court abuses its discretion by ordering discovery that exceeds the scope permitted by the rules of procedure. In re Sun City Gun Exch., Inc. , 545 S.W.3d 1, 5 (Tex.App.--El Paso 2017, orig. proceeding). The purposes for which a person is permitted entry onto the property of an adversary are limited. In re Kimberly-Clark Corp. , 228 S.W.3d 480, 487 (Tex.App.--Dallas 2007, orig. proceeding). Because discovery involving entry onto the property of another under Rule 196.7 involves unique burdens and risks, the trial court is required to conduct a greater inquiry into the necessity for the inspection, testing, or sampling. Id. at 7. In conducting this inquiry, the trial court must balance the degree to which the proposed inspection will aid in the search for truth against the burdens and dangers created by the inspection. Id. Mere relevance is not enough to justify an inspection order. Id.
Texas Rule of Civil Procedure 192.4, which also applies to inspection orders, provides that the scope of discovery should be limited by the court if it determines the discovery sought is obtainable from a more convenient, less burdensome, or less expensive source; or if the burden or expense of the proposed discovery outweighs its likely benefit, taking into account the needs of the case, the amount in controversy, the parties' resources, the importance of the issues at stake in the litigation, and the importance of the proposed discovery in resolving the issues. Id. (quoting TEX.R.CIV.P. 192.4 ).
As the majority points out, case law applying this balancing test is sparse, and the contexts in which the test has been applied are not necessarily analogous to our current situation. See, e.g., In re Goodyear , 437 S.W.3d at 928 (mandamus granted to overturn an order allowing opposing side access to factory site in order to create a demonstrative film at the site of an accident); In re Sun City Gun Exch. , 535 S.W.3d at 7 (mandamus granted to overturn an order allowing entry into a non-party's "bunker" to search for guns that were subject to secured transaction agreement); In re Kimberly-Clark Corp. , 228 S.W.3d at 486-87 (mandamus granted to overturn order allowing for environmental inspection of property at the center of a real estate closing dispute involving an allegation of fraud by nondisclosure in an as-is property sale).
Only one case, In re SWEPI , deals with an inspection order in the oil-and-gas discovery context. It is not a perfect match to this case factually, but it is somewhat helpful. 103 S.W.3d 578 (Tex.App.--San Antonio 2003, orig. proceeding). In that case, the San Antonio Court of Appeals held it was an abuse of discretion not to grant an inspection order to a defendant because the only way to determine whether the bottom of a well was within the boundary lines of certain property was to perform an invasive test that would disable the well for a few days. Notably, the party seeking discovery offered a bond to cover any damage. Using this case as a guide, I would find that the trial court abused its discretion because the facts here are very different.
The first part of the balancing test deals with the burden on Plains Pipeline. The majority cites evidence from the discovery hearings in which Winkler allegedly offered to make its water testing operations less burdensome than the plan it proposed in a prior discovery request that was rejected. Assuming Winkler is correct and the seven well sites and methods of testing were selected to minimize risk to infrastructure and possible abandoned pipelines, the invasive testing process itself is still inherently disruptive. Disruption to business activities is a unique burden inherent to entry onto land that must be accounted for. In re Kimberly-Clark Corp. , 228 S.W.3d 480, (Tex.App.--Dallas 2007, orig. proceeding).
Even with the accommodation proposed by Winkler, the disruptions here are not trivial. Per the terms of the order, a drilling rig would need to work on a 60-foot-by-120-foot piece of property for each of the seven holes. Although discovery at each of the seven sites is permitted only for a period of 72 hours, the order permits but does not require multiple holes to be drilled at once, meaning that if the seven holes are drilled sequentially, drilling discovery could take as long as 504 hours, or 21 days, not including any logistical delays that may occur as personnel and materiel move from drill site to drill site. That seven-site, 21-day disruption exceeds the disruption of several days caused at one site that was deemed to be reasonable in SWEPI. This disruption, in turn, would also impact not only Plains Pipeline's business but potentially also third parties who use pipelines on the Subject Property to transport oil throughout the Permian Basin region. Furthermore, unlike in In re SWEPI , there is no bond or other indemnity offered to protect Plains Pipeline against risks associated with the testing, including damage or injury. Under the balancing test, the scope, conditions, and risks associated with these tests are significantly greater and more disruptive than the tests at issue in SWEPI were.
We must balance these risks and burdens against Winkler's need for this evidence. Winkler is correct that mapping out the groundwater would be relevant to the damages element of its claim so that it could have a proper damages estimate. But "mere relevance" is not sufficient to obtain an inspection order allowing it to drill test wells on land currently controlled by its adversary. In re Kimberly-Clark Corp. , 228 S.W.3d at 489. Winkler must go beyond mere relevance and show that the value of the information the tests would yield outweighs the disruption Plains Pipeline would suffer. I do not believe Winkler can meet that burden as a matter of law.
The trial court in making its decision was required to balance the risks and burdens to Plains Pipeline with "the importance of the issues at stake in the litigation" and "the importance of the proposed discovery in resolving the issues" in making its discovery decision. TEX.R.CIV.P. 192.4. The information being sought by invasive discovery here, while relevant, critically does not deal with a dispositive issue and is not outcome-determinative. Winkler wishes to use discovery to get a more precise geological picture of the Subject Property's groundwater holdings, but this case is at its core a title dispute case over who holds the groundwater rights, not how extensive those groundwater rights are or how those rights may be accommodated. The invasive testing proposed does not resolve the core issue at the heart of the dispute (title), and so I believe Winkler must make a higher showing of need. Compare this case with SWEPI. In SWEPI , the only way the parties could determine the dispositive issue of whether a well's origination point was within property lines was by performing the invasive test. Consequently, the San Antonio Court of Appeals held it was an abuse of discretion not to let the test be performed because the results of that test could end up resolving the case in its entirety if the test showed slant-drilling occurred.
Furthermore, with respect to the issue of estimating the amount of groundwater under the tract for damages purposes, the record shows that Winkler has already obtained such an estimate from the less burdensome source of open geological records reviewed by its expert, who determined the tract has about 24 million barrels of groundwater. See TEX.R.CIV.P. 192.4 (discovery should be limited if information is obtainable from a more convenient or less burdensome source). Winkler's argument that knowledge of the geological specifics of the tract will provide better insight into a potential damages claim or accommodation plan may be true, but it is unclear how much refining value this invasive discovery request would add here, much less how this further invasive discovery, which is disfavored, justifies the potential significant disruption to Plains Pipelines' activities on the Subject Property under Rule 196.7's heightened scrutiny standard.
While Winkler's stated purposes for the discovery passes the relevance test, I would conclude Winkler's discovery request does not pass beyond mere relevance. Mere relevance is enough to obtain discovery in most cases, but not in cases involving inspection orders. The purpose of discovery, including inspectional discovery, is to "aid in the search for truth." See In re Sun City Gun Exch., Inc. , 545 S.W.3d at 7. At most, the "truth-seeking" value of this invasive inspectional discovery is marginal to the core issues at the center of this dispute, and at the very least, this invasive discovery only serves to refine estimates of information Winkler already has. In counterbalancing the truth-seeking value this discovery would have in the context of this litigation with the significant disruption the discovery testing will cause, I would find that, on balance and based on the record before us, Winkler did not meet its burden in showing the value of the information sought through inspection justified intrusion onto property currently held by Plains Pipeline as a matter of law. As such, the trial court's order exceeded the bounds of permissible discovery. For these reasons, I dissent.