Monday, November 16, 2015

Should Oil Firms Be Held Liable in Earthquake Lawsuits?

Earthquake damage in Sparks, Okla., in 2011. The number of quakes in Oklahoma has soared. PHOTO: SUE OGROCKI/ASSOCIATED PRESS

Some argue liability is appropriate if disposal of fracking waste causes earthquakes. Others see a better way to resolve the issue.

In 2011, a string of powerful earthquakes struck near the town of Prague, Okla., part of a surge in seismic activity in the state.

Geologists eventually linked the quakes to increased oil and natural-gas production in the area—specifically, to the practice of injecting wastewater from hydraulic fracturing, or fracking, into wells deep underground.

Sandra Ladra, a Prague resident who was injured in the most severe of the quakes, brought a lawsuit against New Dominion LLC and other oil and gas companies that operate injection wells in the region, accusing the companies of engaging in “ultrahazardous activities” that led to her injuries.

In July, the Oklahoma Supreme Court allowed the case to go forward. So now it’s up to the courts to decide whether oil and gas drillers should be held liable for the damages caused by these quakes. Similar cases are pending in Texas and Arkansas.

It’s now widely acknowledged that the rapid increase in the number of wastewater injection wells has contributed to a surge in earthquakes in the region. But there’s still the difficulty of assigning responsibility to energy companies for damages stemming from a particular quake.

Blake Watson, a law professor at the University of Dayton who has studied the quakes, says the companies should be held liable. Catrina Rorke, director of energy policy at the R Street Institute, a free-market think tank based in Washington, D.C., says they should not.

YES: Companies Shouldn’t Be Shielded From Their Fracking Role

By Blake Watson

Oil and gas companies should be held liable—whether they have acted negligently or not—if their disposal of fracking waste causes earthquakes.

The argument for liability follows a simple progression:

Hydraulic fracturing produces large amounts of wastewater.

Oil and natural-gas companies have elected to dispose of their wastewater by underground injection.

The injection of wastewater into the ground has triggered earthquakes.

And those earthquakes have caused injury and property damage.

There is no question that oil and gas companies should be held liable if it can be established that negligence on their part caused the earthquakes that damaged the plaintiffs.

The more difficult question is whether companies should be liable for damages from fracking-related earthquakes when there is no negligence—that is, when fracking fluids are properly injected. Once again, the answer is yes. Courts should declare that the injection of fracking fluids is an abnormally dangerous activity and impose strict liability on the companies—the term for liability without the need to show fault, such as negligence.

In determining whether strict liability is appropriate, courts consider whether there is a high risk of harm, whether it is likely that the harm will be great, and whether the harm can be eliminated by reasonable conduct. That last point is crucial; if the harm can be eliminated, then companies can only be held liable if they neglect to do so. That’s not the case here. Earthquake damage occurs even when fracking fluids are properly injected.

The risk of earthquake damage is increasing, and the harms that may result could be quite significant. That’s because scientists aren’t yet able to predict which wastewater injection sites are likely to pose risks, and don’t yet know what operators might do to eliminate the hazard.

While plaintiffs in earthquake lawsuits shouldn’t be required to prove negligence, they should be required to prove causation. And there is plenty of evidence that a connection between injection and earthquakes does exist. An article by Julia Rosen in the journal Science in June 2015 reported “an astronomical rise in seismic activity across the central and eastern United States [linked] to wastewater pumped into the ground from burgeoning oil and gas production.” Oklahoma historically recorded an average of less than two earthquakes a year of 3.0 magnitude or greater. In 2013 the state experienced two 3.0 magnitude earthquakes each week. In April 2015 the Oklahoma Geological Survey reported on average about 2½ earthquakes of 3.0 magnitude or greater each day.

The idea that blame is difficult to assign and quantify because scientists haven’t been able to establish how much particular fracking activities contribute to specific seismic events is no reason to keep this issue out of the courts. We should allow people injured by earthquakes the opportunity to meet their burden of proving a connection between seismic activity and local increases in wastewater injection. I believe connections can be proved that are direct enough to justify and determine compensation.

The question of whether the legislative and executive branches are better equipped to balance the risks against the positives of fracking is moot. Unless states grant unprecedented immunity to the oil and gas industry from suits by people harmed by fracking-related earthquakes—a highly doubtful proposition—the courts must allow people to pursue compensation.

In any case, the benefits of fracking shouldn’t shield the oil and gas industry from liability for damages caused by this abnormally dangerous activity. Besides, penalizing companies this way need not cause them to shut down or even scale back their fracking operations. It might instead compel them to consider safer ways to dispose of their wastewater.

Mr. Watson is a professor in the University of Dayton School of Law. He can be reached at

NO: It Isn’t Fair to People And Firms, and Could Harm the Economy

By Catrina Rorke

Holding companies liable for damages caused by fracking-induced earthquakes is an unreliable way to manage this new risk. The courts simply aren’t equipped to handle this issue in a way that is fair to the companies and to the people who have been harmed while also taking into account the best interests of the broader population.

The science is straightforward. Increases in drilling activity, including hydraulic fracturing and deep-well injections, have caused dramatic changes in seismic activity. Last year, 5,415 earthquakes were documented in Oklahoma, making it the most seismically active state in the continental U.S. The frequency and severity of these earthquakes are both on the rise.

While the relationship between fracking and earthquakes may appear sufficient to hold companies liable, how to apportion liability is a much more difficult question. The devil is in the details. Scientists are only now beginning to connect seismic activity to certain types of drilling-related activities, and are still exploring whether a causal relationship between those particular activities and quakes can be determined. Drilling sites are extremely active and clustered, making it extraordinarily difficult to differentiate how each well or event contributes to the geologic stresses that cause earthquakes.

Research is beginning to connect discrete seismic events to discrete drilling phases in a few isolated incidents, but not with the confidence necessary to pinpoint how—and how much—oil and gas developments contribute to the timing and severity of those events. Earthquakes are a wickedly complex subject, even without any human activity involved. Indeed, the natural system is so complex that we rely on probability analysis, not true forecasts, to plan and prepare for earthquakes.

Meeting the conditions for liability in these circumstances is hugely complicated. But even if it was conceivable to meet such a threshold, it would still be inappropriate for the courts to make this decision.

Common-law liability is simply too blunt an instrument. It asks the court not only to sort through complicated and inconclusive scientific data, but also to judge, in effect, whether limited instances of earthquake damages should put an end to oil and gas operations that promote economic growth and enhanced energy security.

There is no doubt that oil and gas development in Oklahoma has enormous upside benefits. Oil production has nearly doubled in the state over five years, creating jobs and raising average wages, increasing revenue to the state treasury and holding state unemployment well below the national average. Other benefits accrue to the rest of the country, creating supply-chain jobs, lowering manufacturing costs and increasing the supply of stable, domestic energy resources.

These benefits must be balanced against the risks of increased seismic activity—not sacrificed to a tenuous connection between any one oil and gas operation and a particular seismic event.

Thankfully, the legislative and executive branches are designed to handle exactly such inherently political calculations. Limited state action, in cooperation with the oil and gas industry, to identify and codify the best technical practices to mitigate earthquake risk is a much more effective and efficient approach than litigation.

That doesn’t mean people shouldn’t be compensated for earthquake damages. Ideally that’s the role of the insurance market. In the absence of coverage, it may be necessary to create an alternative compensation pool funded by industry contributions or any other number of sources.

There is no doubt that aggressive development of shale deposits has increased the frequency and magnitude of earthquakes in the central U.S. Managing and mitigating practices that contribute to damaging earthquakes can be part of successful, continuing investment in oil and gas development, but not if the judgment is left to the courts.

Ms. Rorke is director of energy policy and a senior fellow at the R Street Institute in Washington. Email her at
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