## Facts

- Fred and Zola Schneberger owned approximately 155 acres in Washita County, Oklahoma.
- Apache Corporation drilled and operated an oil and gas well on the Schnebergers’ tract in 1982 and operated another well upstream.
- The Schnebergers alleged that drilling operations contaminated their land and groundwater.
- In 1984, the Schnebergers sued in federal court alleging pollution-related property and personal injury damages.
- In 1986, the parties executed a settlement agreement: Apache paid for past damages and agreed to perform remedial work to reduce groundwater contaminants to specified levels, subject to oversight by the Oklahoma Corporation Commission (OCC) and potential OCC modification.
- Years later, the Schnebergers asserted Apache breached the settlement by failing to achieve the specified contaminant levels and sought damages measured by approximately $1.3 million in remediation costs; Apache asserted the property-value loss was about $5,170.
- The federal district court certified two questions of Oklahoma law to the Oklahoma Supreme Court concerning the proper measure of damages and, if remediation cost applied, whether a jury could consider a plan different from the OCC-approved plan.

## Issues

1. Under Oklahoma law, what is the proper measure of damages for breach of a settlement agreement requiring reduction of water pollution caused by oil and gas operations: cost of remediation or diminution in property value?
2. If remediation cost were the measure of damages, may a jury consider a remediation plan different from the plan approved by the OCC when the OCC has exercised jurisdiction over cleanup and the settlement contemplated OCC modification?

## Decision

- The court held that diminution in value is the proper measure of damages and the maximum recoverable amount for breach of a settlement agreement to reduce water pollutants affecting real property.
- Because remediation cost was not the proper measure, the court declined to answer whether a jury may consider a remediation plan different from the OCC-approved plan.
- The court answered the certified questions accordingly and returned the matter to federal court for application of Oklahoma law.

## Legal Principles

- A settlement agreement is a contract; damages for breach are governed by contract-damages rules as applied to injury involving real property.
- For injury affecting real property, the difference between the property’s value before and after the injury (diminution in value) operates as the standard measure and caps recovery in this context.
- Contract damages are compensatory and may be limited to avoid economic waste where the cost of restoration is grossly disproportionate to the resulting increase in property value.
- Framing the claim as breach of a cleanup promise does not permit recovery exceeding the loss in the property’s value when the promised performance relates to remediation of property conditions.

## Conclusion

The Oklahoma Supreme Court held that, for breach of a settlement agreement requiring pollution abatement affecting real property, damages are capped at the property’s diminution in value rather than the cost to perform remediation, and it therefore did not reach the certified question concerning alternative remediation plans beyond the OCC-approved approach.


Schneberger v. Apache Corp., 890 P.2d 847 (Okla. 1994)