Fourth Court Narrows TCPA Application in Oil and Gas Drainage Dispute: Implied Covenant Claims Survive Anti-SLAPP Motion
EOG Resources sought dismissal under the Texas Citizens Participation Act of CNH's failure-to-protect-from-drainage claim, arguing the claim was based on its Railroad Commission permit application for a Gary 2H Well drilled 148 feet from the lease line in the Eagleville Field. The San Antonio Court of Appeals affirmed denial of the TCPA motion, holding that CNH's implied covenant claim was based on EOG's failure to drill an offset well to prevent drainage from the 276,420-barrel producer, not on EOG's communications with the Railroad Commission.
Background and Parties
CNH Enterprise Holdings, Ltd. succeeded to the lessor interest in the Hundley Lease, a 3,517-acre oil and gas lease in McMullen County originally executed in 2009 in favor of Mitchell Petroleum Land Services, Inc., which later assigned its lessee interest to EOG Resources, Inc. CNH's petition asserted multiple theories, including that the Hundley Lease terminated in 2014 except for four 80-acre tracts around producing wells, and that EOG subsequently trespassed by drilling additional wells outside the retained acreage. Alternatively, CNH pled that if the lease remained in effect, EOG breached the implied covenant to protect from drainage.
The Drainage Dispute and TCPA Motion
CNH's seventh claim concerned the adjoining Gary Lease, where EOG obtained a Railroad Commission permit to drill the Gary 2H Well at a location 148 feet from the Hundley Lease boundary—significantly closer than the Eagleville (Eagle Ford) Field Rules' 330-foot minimum lease-line distance. According to CNH's pleadings, EOG "without notice or consent from the Hundley Lessors, waived any notice or hearing on the Rule 37 exception, and granted itself permission to drill the Gary 2H Well at a location closer than allowed by the general lease line rule." The well's 4,548.7-foot lateral ran approximately 150 feet from the lease line, and CNH alleged the hydraulic fracturing operations extended beyond that distance, draining substantial hydrocarbons from the Hundley Lease. Railroad Commission records showed the Gary 2H Well produced 276,420 barrels of oil and 231,980 mcf of natural gas, yet neither Mitchell nor EOG drilled an offset well on the Hundley Lease to prevent drainage.
EOG filed a TCPA motion seeking dismissal of the failure-to-protect claim, arguing that its drilling permit application and Rule 37 exception application to the Railroad Commission constituted an "exercise of the right to petition" under the statute, and that CNH's claim was "based on" and "in response to" those communications.
The Court's Narrow Construction of TCPA Nexus
The Fourth Court of Appeals conducted a de novo review of whether the TCPA applied, focusing exclusively on the first step of the three-step TCPA analysis: whether CNH's legal action was "based on or is in response to" EOG's exercise of its right to petition. The court noted that the Legislature amended the TCPA in 2019 to narrow the required nexus between the action and the protected activity by deleting the broadest connective language—"relates to"—and replacing it with the more restrictive "based on or is in response to" standard. The court emphasized that this amendment required a more direct connection between the challenged claim and the petitioning activity.
Applying this standard, the court concluded that CNH's failure-to-protect claim was not based on EOG's communications with the Railroad Commission, but rather on EOG's alleged failure to drill an offset well to protect the Hundley Lease from drainage. The court explained that while EOG's permit applications were mentioned in CNH's pleadings as background facts establishing the existence and location of the draining well, the gravamen of the claim was EOG's inaction—its failure to drill a protective well—not its communications with a governmental body. Because the TCPA did not apply, the court affirmed the trial court's denial of EOG's motion to dismiss.