Summary of a Recent
Judicial Development in
Animal Feeding Operations

Oil and Gas Lessee Entitled to Recover for
Damage Caused by Livestock Waste

Ross H. Pifer
National AgLaw Center Graduate Assistant

In Test Drilling Service Co. v. Hanor Co., 322 F.Supp.2d 965 (C.D. Ill. 2004), an oil and gas lessee sued various entities "involved in the design, construction, maintenance, and/or operation of hog confinement facilities adjacent to the land subject to [the] oil and gas agreements." Id. at 968. The plaintiff alleged that the oil removed from the land subject to the agreement "was contaminated by bacteria and microbes of the kind found in animal and livestock waste products" rendering the entire amount of the oil worthless. Id. After ruling that the oil and gas agreements provided the lessee with a property interest in the mineral estate, the United States District Court for the Central District of Illinois concluded that the lessee was entitled to recover for the "reduction in the value of the [lessee's] freehold estate in the mineral rights" caused by the leachate and animal waste. Id. at 970. The court also concluded, however, that the lessee could not "recover for the damage to the oil in and of itself because it had no property interest in the oil in the ground." Id. at 971. Furthermore, the court concluded that the lessee was "barred from recovering damages for any lost profits associated with the anticipated sale of oil." Id. at 972.

The case was decided on June 24, 2004; this summary was posted June 10, 2005.