Hydraulic fracturing involves the injection of fluids

Transcription

1 Tracking Fracking Case Law: Hydraulic Fracturing Litigation Barclay Nicholson and Kadian Blanson Hydraulic fracturing involves the injection of fluids and proppants into subsurface hydrocarbon formations in order to increase production of oil and natural gas wells. Proppants are silica and other particles pumped into a formation to keep fractures open and maintain permeability. Hydraulic fracturing (variously called fracking or fracing ) utilizes large volumes of water and, because the fluids pumped in during fracking need to be removed, the process also produces large volumes of fluids called flowback and produced water. Operators engaged in hydraulic fracturing dispose of their flowback and produced water in a number of ways, including injecting it into a well designated by the U.S. Environmental Protection Agency (EPA) as a Class II Well, treating and recycling the water, or treating and disposing of the water. Although hydraulic fracturing has been utilized in the United States for decades, within the past two years, hydraulic fracturing and its alleged impact on water quality has received increased attention and scrutiny from the media, EPA, Congress, and regulatory agencies throughout the United States. Various parties have raised concerns about the reduction of citizens water supplies due to the large volume of water used in the fracking process, the allegations that fracturing contaminates aquifers that supply drinking water, and the appropriate disposal of or recycling of the wastewater or flowback. At the heart of these concerns are the additives used in the fracking fluids, which some argue contain potentially toxic substances, such as benzene, toluene, xylene, methanol, formaldehyde, ethylene gylcol, glycol ethers, hydrochloric acid, and sodium hydroxide. While lawmakers debate potential policies and regulations, and environmental agencies prepare studies and conduct testing, the number of lawsuits that have been filed involving hydraulic fracturing continues to rise. Specifically, since September 2009, fifteen to twenty lawsuits have been filed by landowners in various states against oil and gas and drilling companies complaining of groundwater contamination. Nearly all of the plaintiffs in these suits are either landowners who leased oil and gas rights to the defendants or landowners who reside in close proximity to where hydraulic fracturing operations were conducted. This article discusses many of the recent lawsuits filed that Mr. Nicholson is a partner and Ms. Blanson is an associate with Fulbright & Jaworski L.L.P. in Houston, Texas. Both are members of the firm s Shale and Hydraulic Fracturing Task Force. They may be reached at bnicholson@fulbright.com and kblanson@fulbright.com. implicate hydraulic fracturing and the claims made in those cases. As you will see, there are many similarities among the cases. However, because most of the cases are still in the early stages of litigation, their outcomes have yet to be determined. In fact, the authors have not located any legal judgment to date against a well operator, drilling contractor, or service company for contamination of groundwater resulting from hydraulic fracturing. Pennsylvania Cases Some of the first cases involving hydraulic fracturing were filed in Pennsylvania. Zimmermann v. Atlas America, LLC, No (Pa. Ct. Com. Pl., Sept. 21, 2009), was filed in Pennsylvania state court in September 2009 against Atlas America, LLC. Plaintiffs George and Lisa Zimmermann, own only the surface rights to their property in Pennsylvania. After attempting to prevent Atlas from conducting drilling operations on their property, the Zimmermanns entered into a settlement agreement with Atlas. The claims of contamination in the pending lawsuit arose after drilling had commenced. The Zimmermanns, who in the settlement agreement allowed Atlas to conduct hydraulic fracturing operations on their farm, allege that Atlas used toxic chemicals during the fracturing process and that the use of such chemicals contaminated and polluted their freshwater aquifers. The Zimmermanns claim that their natural water aquifers and their previously pristine heirloom tomato farmland were destroyed as a result of Atlas s hydraulic fracturing operations. The Zimmermanns suit alleges claims of trespass, nuisance, negligence, negligence per se, res ipsa loquitor, fraud and misrepresentation, and breach of the settlement agreement. The Zimmermanns also allege that Atlas violated casing requirements of the Pennsylvania Oil & Gas Act. The Zimmermanns seek damages for lost profits and benefits associated with their property, including compensatory damages for the permanent destruction of property, permanent destruction of water aquifers, loss of water well use, and a reduction in property value as well as punitive damages. Two months after the Zimmermann lawsuit was filed, approximately nineteen families in Susquehanna County, Pennsylvania, sued Cabot Oil & Gas Corporation for state law violations and common-law claims, including negligence, gross negligence, negligence per se, nuisance, strict liability, fraudulent misrepresentation, breach of contract, medical monitoring trust fund, and violation of the Pennsylvania Haz-

2 ardous Sites Cleanup Act. According to the plaintiffs publicly filed pleadings in Fiorentino v. Cabot Oil & Gas Corp., et al., No. 3:02-cv (M.D. Pa., Nov. 19, 2009), Cabot released combustible gas into the headspaces of the plaintiffs water wells, caused elevated levels of dissolved methane to be present in their water wells, and discharged natural gas into their groundwater. The plaintiffs also allege that Cabot allowed excessive pressure to build up within gas wells near the plaintiffs homes and water wells, resulting in an explosion; spilled diesel fuel onto the ground near their homes and water wells; discharged drilling mud into diversion ditches; and caused three significant spills within a ten-day period. The plaintiffs in the Fiorentino case are seeking compensatory damages, including loss of property value, natural resource damage, medical costs, loss of use and enjoyment of property, loss of quality of life, emotional distress, and personal injury. The plaintiffs also seek punitive damages, the cost of remediation, the cost of future health monitoring, an injunction, and litigation costs and fees. Most recently, Cabot filed a motion to dismiss, which the court denied as to all claims, except the plaintiffs gross negligence claim. In addition to plaintiffs suit, the Pennsylvania Department of Environmental Protection (PDEP) instituted a separate action against Cabot on behalf of those plaintiffs whose water wells were contaminated by methane allegedly as a result of Cabot s nearby hydraulic fracturing activities. In December 2010, PDEP and Cabot announced a resolution of their action. As a result of the settlement, the families collectively received $4.1 million in compensation and other concessions and Cabot paid a $500,000 penalty to the PDEP. The settlement also allowed Cabot to resume its hydraulic fracturing activities and the families to maintain their suit against the company. Pennsylvania, Cabot Reach Settlement over Methane Contamination, Greenwire, Dec. 16, A third Pennsylvania fracking lawsuit was filed in September 2010 by a group of thirteen families in Susquehanna County, Pennsylvania, against Southwestern Energy Production Company and its parent organization. The case was removed to the U.S. District Court for the Middle District of Pennsylvania later that month and is now styled Berish v. Southwestern Energy Prod. Co., et al., No. 3:10-cv (M.D. Pa., Sept. 29, 2010). The complaint in the Berish case alleges that beginning in 2008 hydraulic fracturing and horizontal drilling in close range (700 to 1,700 feet) of the plaintiffs water wells caused the ground wells to become contaminated. The plaintiffs claim that Southwest Energy s natural gas well was improperly cased, allowing contaminants such as diesel fuel, barium, manganese, and strontium to migrate to the plaintiffs water wells. According to the allegations in the complaint, at least one plaintiff is exhibiting neurological symptoms consistent with exposure to heavy metals. The plaintiffs allege some of the same causes of action as the Fiorentino plaintiffs, namely, negligence per se, commonlaw negligence, nuisance, strict liability, medical monitoring trust fund, and violation of the Pennsylvania Hazardous Sites Cleanup Act. Interestingly, the plaintiffs also allege a cause of action for trespass, stating that while the company had permission to be on the land, it exceeded its permission by allegedly causing the contamination. The plaintiffs seek damages for lost property value, the cost of purchasing an alternative source of water, medical damages, medical monitoring costs, and compensatory and punitive damages. The complaint requests preliminary and permanent injunctions against future contamination, as well as attorneys fees. In October 2010, approximately one month after the Berish lawsuit, Judy Armstrong and two other landowners filed suit in Bradford County, Pennsylvania, against Chesapeake Appalachia LLC and two other companies. The plaintiffs own property and water wells located three miles from oil and gas wells owned and operated by the defendant companies. The complaint alleges that the defective cement casing of the defendants well caused methane, ethane, barium, and other harmful substances to be discharged into the plaintiffs groundwater wells. An amended complaint naming additional plaintiffs alleges that at least one family has been forced to evacuate their property. The plaintiffs complaint alleges the same causes of action and damages as the Fiorentino and Berish plaintiffs: negligence, negligence per se for violations of various state statutes, nuisance, strict liability, and trespass. The complaint also alleges a violation of the Pennsylvania Oil & Gas Act, which sets forth casing requirements for groundwater protection. The defendants removed the case to the U.S. District Court for the Middle District of Pennsylvania in December 2010, where it is now styled Armstrong v. Chesapeake Appalachia, LLC, et al., No. 3:10-cv (M.D. Pa., Dec. 6, 2010). A motion to dismiss is pending. Texas Cases Texas is another state in which there are a number of ongoing cases involving hydraulic fracturing. In Scoma v. Chesapeake Energy Corp., et al., No. 3:10-cv (N.D. Tex., July 15, 2010), Jim and Linda Scoma brought an action for negligence, nuisance, and trespass against Chesapeake Energy Corporation and two related companies. The plaintiffs own property in Johnson County, Texas, near oil and gas wells being developed by Chesapeake. The complaint alleges that Chesapeake stored drilling waste at sites and disposal wells near the plaintiffs property and disposed of fracturing waste in injection wells near the plaintiffs property. According to the complaint, the plaintiffs water well became contaminated as a result of Chesapeake s activities. The plaintiffs claim that test results show an increase in benzene, toluene, ethylbenzene, xylene, barium, and iron. The damages requested in this case include the cost of testing, loss of use of land, loss of market value of land, loss of intrinsic value of well water, emotional harm and mental anguish, nominal damages, exemplary damages, and injunctive relief. Several months later, in November 2010, the Sizelove family filed a lawsuit against Williams Production Company, LLC and five other companies in Denton County, Texas. The complaint in Sizelove v. Williams Prod. Co., LLC, et al., No

3 367 (367th Dist. Court, Nov. 3, 2010), alleges that the Sizeloves and their three children suffer severe headaches and respiratory problems because the defendants gas drilling and compressing operations are polluting the air and water surrounding the Sizeloves home. Defendants have allegedly installed a drill water collection site and a gas compressor station just 250 feet from the plaintiffs home, a gas pipeline just 400 feet from their home, and eight gas drills within a three-quarter mile radius. The complaint contends that the defendant companies wrongfully cut down trees on the Sizeloves property and allowed workers to use their land as a toilet. According to the complaint, these operations have lowered the plaintiffs property value with constant noise and toxic formaldehyde, sulfur dioxide, benzene, toluene, and xylene emissions. The plaintiffs have alleged claims for nuisance, trespass, and negligence, and seek property damages, loss of market value of the land, damages for mental anguish, and exemplary damages. Also in November 2010, Margaret Heinkel-Wolfe and her daughter, Paige Wolfe, filed suit in Denton County, Texas, against the same defendants as in the Sizelove case. As in Sizelove, the complaint in Heinkel-Wolfe v. Williams Prod. Co., LLC, et al., No (362nd Dist. Court, Nov. 3, 2010), includes causes of action for nuisance and trespass. The plaintiffs claim that the defendant companies installed a drill water collection site and a gas compressor station just 990 feet from the plaintiffs home, along with a gas pipeline just 700 feet away and eight gas drills within a three-quarter mile radius. According to the plaintiffs, these operations have lowered their property value with constant racket and toxic formaldehyde, sulfur dioxide, benzene, toluene, and xylene emissions. Moreover, the plaintiffs claim to suffer from headaches, respiratory ailments, and troubled breathing as a result of the defendants drilling and compressing operations, which are polluting the air and water surrounding the plaintiffs home. About one month later, in December 2010, plaintiff Grace Mitchell filed suit against Encana Oil & Gas (USA) Inc. and two other companies in the U.S. District Court for the Northern District of Texas. The complaint in Mitchell v. Encana Oil & Gas (USA), Inc., et al., No. 3:10-cv (N.D. Tex., Dec. 15, 2010), alleges that the defendants hydraulic fracturing and horizontal drilling activities and associated storage of drilling wastes have contaminated the plaintiff s water well. The plaintiff claims that after defendants commenced hydraulic fracturing operations near her property, her well water became slick to the touch and gave off a gasolinelike odor. According to the complaint, testing results revealed that groundwater was contaminated with various chemicals, including C12-C28 hydrocarbons, similar to diesel fuel. The causes of action alleged in the Mitchell complaint are nuisance, negligence, fraud (for failing to warn or concealing the danger that the plaintiff s water well would become contaminated with diesel fuel), and trespass (for exceeding defendants rights granted for drilling access, contaminating the plaintiff s groundwater, and allowing petroleum by-products to cross into the plaintiff s land). The complaint requests damages for cost of testing, loss of use of the land and groundwater, loss of market value of land, loss of intrinsic value of well water, emotional harm and mental anguish, physical injuries sustained from exposure to the contaminated groundwater, the cost of an alternative water source, nominal damages, exemplary damages, injunctive relief, cost of remediation, and medical monitoring. In Harris v. Devon Energy Prod. Co., L.P., No. 3:10-cv (E.D. Tex., Dec. 22, 2010), plaintiffs Doug and Diana Harris sued Devon Energy Production Co., L.P. for negligence, strict liability, nuisance, and trespass. The suit was filed in the U.S. District Court for the Northern District of Texas on December 15, The defendant, Devon Energy, had drilled bore holes under and near the plaintiffs property, allegedly resulting in groundwater contamination. Plaintiffs claim that after Devon Energy commenced hydraulic fracturing operations near their property, their groundwater turned gray and became contaminated. According to the complaint, testing results showed high levels of metals, including aluminum, arsenic, barium, beryllium, calcium, chromium, cobalt, copper, iron, lead, lithium, magnesium, manganese, nickel, potassium, sodium, strontium, titanium, vanadium, and zinc. Damages sought in this case include the cost of testing, loss of use of land, loss of market value of land, loss of intrinsic value of well water, emotional harm and mental anguish, nominal damages, exemplary damages, injunctive relief, medical monitoring, and cost of remediation. One Texas case was brought by a plaintiff other than a landowner. At the request of the EPA administrator, the United States filed a complaint for injunctive relief and civil penalties against Range Production Company and Range Resources Corporation. United States v. Range Prod. Co., et al., No. 3:11- cv (N.D. Tex., Jan. 18, 2011), was brought on January 18, 2011, in the U.S. District Court for the Northern District of Texas. Range owns and operates two gas extraction wells in the Newark East (Barnett Shale) Field in the Fort Worth, Texas, area. On December 7, 2010, EPA issued an Emergency Administrative Order pursuant to section 1431 of the Safe Drinking Water Act, 42 U.S.C. 300i (Emergency Order). According to the complaint, EPA, in the Emergency Order, identified contaminants that may present an imminent and substantial endangerment to the health of persons and determined that two water wells were affected by Range s drilling activities. The complaint also alleges that EPA found that state and local authorities had not taken sufficient action to address the endangerment. As a result, the Emergency Order required Range to perform certain actions, including submission of surveys of water wells to EPA; analyses of soil, gas, and air concentrations; and elimination of any gas flow to the affected aquifer. Range disputes EPA s findings and the validity of the Emergency Order. This action by the United States alleges violations of the Emergency Order and seeks permanent injunctive relief to require Range to comply with the provisions of the Emergency Order, as well as a civil penalty from Range for each day of each violation. On January 20, 2011, Range filed a petition for review of the Emergency Order with the Fifth Circuit Court of Appeals, arguing that the Emergency Order violated its dueprocess rights. The U.S. District Court for the Northern District of Texas entered an order on June 20, 2011, staying the suit

4 until the Fifth Circuit rules on Range s petition. The plaintiffs in another case, Parr v. Aruba Petro., Inc., et al., No (Dallas County Ct. at Law, Mar. 8, 2011), are a married couple in Wise County, Texas, owning property close to oil and gas wells being developed by defendants Aruba Petroleum, Inc. and eight other oil and gas and service companies. The plaintiffs claim that defendants natural gas drilling operations, including releases, spills, emissions, and discharges of hazardous gases, have caused the plaintiffs and their property to be exposed to hazardous gases, chemicals, and industrial wastes. Nearly all the plaintiffs in these suits are landowners who either leased oil and gas rights to the defendants or reside in close proximity to where hydraulic fracturing operations were conducted. As in the Fiorentino and Berish cases, plaintiffs in the Parr case allege negligence per se, common-law negligence, nuisance, strict liability, and trespass. Plaintiffs further allege causes of action for assault and intentional infliction of emotional distress, claiming that defendants made physical contact with the plaintiffs through the releases, spills, emissions, and discharges of hazardous gases, chemicals, and industrial wastes. Damages sought include actual damages for medical expenses, loss of earning capacity, loss of consortium, property damage, market value damages, replacement value damages, loss of use, exemplary damages, medical monitoring, cost of remediation, attorneys fees, and nominal damages. Arkansas On May 17, 2011, three hydraulic fracturing class actions were filed in the U.S. District Court for the Eastern District of Arkansas Ginardi v. Frontier Gas Services, LLC, et al., No 4-11-cv-0420 BRW (E.D. Ark. May 17, 2011); Tucker v. Southwestern Energy Co., et al., No. 1:11-cv-0044-DPM (E.D. Ark. May 17, 2011); Berry v. Southwestern Energy Co., et al., No. 1:11-cv-0045-BRW (E.D. Ark. May 17, 2011). Ginardi was filed on behalf of all Arkansas residents who live or own property within one mile of any natural gas compressor or transmission station. Tucker and Berry were filed on behalf of all Arkansas residents who live or own property within three miles of any bore holes, wellheads, or other gas extraction operations. The plaintiffs in all three actions allege that defendants hydraulic fracturing operations from the Fayetteville Shale pollute the atmosphere, groundwater, and soil with allegedly harmful gases, chemicals, and compounds. The plaintiffs causes of action include strict liability, nuisance, trespass, and negligence. The plaintiffs seek compensatory and punitive damages for loss of use and enjoyment of property, contamination of soil, contamination of groundwater, contamination of air and atmosphere, loss of property value, and severe mental distress. In addition to punitive and compensatory damages, plaintiffs further request establishment of a fund for monitoring future air, soil, and groundwater contamination, costs and attorney s fees, and prejudgment interest. Colorado On March 23, 2011, the Strudley family brought an action against Antero Resources Corporation and two drilling and service companies in Colorado state court. Strudley v. Antero Resources Corp., et al., No. 11-cv-2218 (Denver County Dist. Ct., Mar. 23, 2011). Defendants allegedly operate several natural gas wells in Garfield County, Colorado, within one mile of the Strudley family s residence and a water supply well used for drinking, bathing, cooking, washing, and other residential purposes. The Strudleys allege environmental contamination from the drilling activities of defendants, causing health injuries, loss of use and value of the Strudleys property, loss of quality of life, emotional distress, and other damages. Specifically, the complaint alleges that defendants negligence has caused the presence of hydrogen sulfide, hexane, n-heptane, toluene, propane, isobutene, n-butane, isopentane, n-pentane, and other toxic hydrocarbons and hazardous pollutants to be discharged into the air, ground, and aquifer near the Strudleys property. The Strudleys allege many of the same claims as the Fiorentino and Berish plaintiffs, namely, negligence per se, common-law negligence, nuisance, strict liability, trespass, and medical monitoring trust funds. The complaint also alleges that defendants activities have violated the Colorado Hazardous Waste Act and the Oil and Gas Conservation Act. Damages sought in this case include cost of remediation, cost of future health monitoring, compensatory damages, loss of use and enjoyment of property, loss of quality of life, emotional distress, personal injury, diminution of property value, and litigation costs and fees. Louisiana Plaintiff David Andre brought suit against EXCO Resources, Inc. and EXCO Operating Company (EXCO) on April 15, 2011 (Andre v. EXCO Res., Inc., et al., No. 5:11-cv TS-MLH (W.D. La. Apr. 15, 2011)). Andre filed suit on behalf of consumers of water in the immediate vicinity of DeBroeck Landing, Caddo Parish, Louisiana. Three days later, Daniel Beckman and seven other plaintiffs filed suit against EXCO as well (Beckman v. EXCO Res., Inc.; EXCO Operating Co., 5:11-cv TS- MLH (W.D. La. Apr. 18, 2011)). Because the plaintiffs in the Beckman case reside in Shreveport, Lousiana, they were not included in the Andre suit s purported class. However, both lawsuits

5 were filed as a result of the same alleged incident and seek the same relief. According to both complaints, on April 18, 2010, a natural gas well operated by EXCO near DeBroeck Landing experienced problems resulting in the contamination of the Caddo Parish aquifer and the plaintiffs property. While the complaints do not allege that EXCO engaged in hydraulic fracturing, they both seek to compel disclosure of the formulation of the drilling muds and solutions allegedly used by EXCO in the natural gas well in order for the appropriate tests and monitoring of the aquifer [to] take place. Both complaints allege causes of action for negligence, strict liability, nuisance, trespass, unjust enrichment, and impairment of use of property. The plaintiffs in both actions seek a variety of damages, including groundwater remediation costs, diminution of property value, and losses from property market value stigma. They also seek a declaratory judgment, general and equitable relief, economic damages, and mental anguish and emotional distress damages. Additionally, the plaintiffs in both actions seek an order requiring remediation by EXCO of the groundwater and development of a longterm monitoring program near the site of the alleged well failure and the allegedly contaminated aquifer. New York In February 2011, fifteen landowners filed suit in Chemung County, New York, against Anschutz Exploration Corporation, Conrad Geoscience Corporation, and another company. The plaintiffs in Baker v. Anschutz Exploration Corp., et al., No (N.Y. Sup. Ct., Feb. 11, 2011), claim that Anschutz s improper drilling, well capping, and/or cement casing caused toxic chemicals to be discharged into the plaintiffs groundwater. The plaintiffs also claim that when hired by Anschutz to investigate possible contamination, Conrad Geoscience failed to conduct a reasonable and prudent investigation that conformed with industry standards. The plaintiffs allege many of the same causes of action as the Fiorentino and Berish plaintiffs, namely, negligence per se, common-law negligence, nuisance, strict liability, and trespass. The plaintiffs also allege causes of action for premises liability, fear of developing cancer, future medical monitoring, and deceptive business acts and practices. West Virginia The Hagy family filed suit in West Virginia state court in October 2010 against Equitable Production Co. and three drilling contractors and service companies. The complaint in Hagy v. Equitable Prod. Co., et al., No. 10-c-163 (Jackson County Cir. Ct., Oct. 26, 2010), alleges contamination of the Hagy family s property and water well, which is located approximately 1,000 feet from the defendants natural gas wells. In their complaint, the plaintiffs claim to suffer neurological symptoms from exposure to heavy metals, including manganese. The alleged causes of action include negligence, nuisance, strict liability, trespass, and medical monitoring trust funds. The plaintiffs are seeking monetary damages and an injunction against further drilling. The case subsequently was removed to the U.S. District Court for the Southern District of West Virginia and is now styled Hagy v. Equitable Prod. Co., et al., No. 2:10-cv (S.D.W. Va., Dec. 10, 2010). The authors have not located any legal judgment to date against a well operator, drilling contractor, or service company for the contamination of groundwater resulting from hydraulic fracturing. The cases summarized in this article point to the concerns of landowners and citizens living near drilling operations that fracking is causing or will cause damage, not only to the environment and their property, but to their personal health and safety. As discussed, fracking case filings have been increasing through 2010 and into The rise in hydraulic fracturing litigation evidenced by the cases discussed may be attributed, at least in part, to increased drilling in proximity to populated areas and heightened media scrutiny of the process. With the extensive media coverage, both in newspapers and on television, and with the higher visibility of fracking operations near towns, more people have taken an interest in fracking, both positive and negative. Some praise fracking as an enabler in providing gas supplies for lower-carbon sources of electricity and as creating numerous industry-related jobs, while others fear that a major fracking catastrophe is waiting to happen. Given that most of the hydraulic fracturing cases are in the early stages of litigation, the claims and allegations being asserted are very fluid and change frequently. For example, the plaintiffs in Sizelove and Heinkel-Wolfe recently amended their petitions, dropping their negligence claims and allegations of water contamination. While it will likely be a number of years before any of these cases makes it to trial, if at all, a few courts have already granted partial summary judgment motions dismissing selected gross negligence and fraud claims. Notably, it will be interesting to see whether courts ultimately address the issue of water contamination before the final results of pending environmental studies and congressional investigations. With continued debates about state versus federal regulation, industry standards, and the facts in particular cases, more fracking cases will undoubtedly be filed and will continue to be filed until a set of best fracking practices are endorsed by the regulators and the energy industry and until the public is confident about the safety of fracking operations.