Environmental groups and public-policy thinkers continue to pursue a variety of arguments in their efforts to prevent or limit the claimed dangers of fracking, including the disposal of fracking byproducts in underground injection wells. Two recent developments in this area may be worthy of attention. First, a lawsuit filed in Oklahoma federal court indicates that environmentalists are attempting to apply a familiar environmental statute in the unfamiliar context of injection wells. Second, a proposal by an environmental law professor in Ohio would subject energy companies to strict liability for earthquake damage caused by fracking or injection wells. If either effort is successful, it could result in a greater number of insurance claims--and corresponding coverage disputes.
In the lawsuit, the Sierra Club seeks declaratory and injunctive relief against several energy companies based on alleged violations of the federal Resource Conservation and Recovery Act or “RCRA”. Since RCRA was enacted in 1976, it has become the primary federal law controlling the treatment, storage, and disposal of hazardous waste in the United States. The Sierra Club’s RCRA claim is based on the argument that the use of injection wells presents “an imminent and substantial endangerment to health or the environment.”
According to the firm representing the Sierra Club, the lawsuit represents the first attempt to apply RCRA to prevent earthquakes allegedly caused by underground injection wells. If the lawsuit is successful, it could result in a number of copycat lawsuits in other states that have seen a rise in seismic activity allegedly linked to injection wells. Success is not a foregone conclusion, though: many wastes related to oil and gas production are exempt from regulation under certain sections of RCRA, and thus the energy companies may argue that the disposal method for those wastes should be exempt as well. In addition, as previously discussed in this blog, the Sierra Club must carry the burden of proving a causal link between the defendants’ injection wells and the earthquakes.
If the Sierra Club’s lawsuit succeeds, it will open a new front in the battle between energy companies and environmental groups opposed to fracking. A substantial body of case law has developed around RCRA in the forty years since it was enacted--that case law may soon be supplemented by a new surge in RCRA insurance coverage cases involving the oil and gas industry.
In a recent article in the Texas Journal of Oil, Gas, and Energy Law, University of Dayton law professor Blake Watson argues that strict liability should be imposed on energy companies for damages due to earthquakes caused by fracking or injection wells. If Watson’s proposal is adopted, it would remove significant barriers from the path of plaintiffs.
When suing a wrongdoer that caused some damage to their person or property, most tort plaintiffs assert claims for negligence. Negligence generally requires showing four elements: the wrongdoer owed a duty of care to the plaintiff, the wrongdoer breached that duty of care, the plaintiff suffered some form of legally recognized harm, and the wrongdoer’s conduct was the cause of the plaintiff’s harm. For activities that are inherently or abnormally dangerous, however, tort law imposes strict liability. Under strict liability, the first two elements of negligence are removed and the plaintiff must only prove that they suffered legally recognized harm as the result of the wrongdoer’s conduct. Strict liability therefore allows the plaintiff to recover even if the defendant was not “at fault,” in the sense that the defendant cannot argue that the harm was accidental, that it occurred despite the defendant’s best efforts to prevent it, or that the defendant owed no duty to the plaintiff in the first place.
Watson argues that even when fracking and disposal of fracking waste in underground injection wells are done “properly,” the processes may still result in earthquakes that cause damage at the surface. Thus, Watson believes that the activities are abnormally dangerous and it is proper to impose strict liability for any damages caused by them. Interestingly enough, Watson concludes the article by discussing a letter in which the writer described his difficulty procuring an insurance policy to cover damages allegedly caused by fracking-related earthquakes. Characterizing the letter as a “common sense argument for strict liability,” Watson reasons that imposing strict liability would have the beneficial impact of encouraging energy companies to change or improve their techniques so that accidents never happen in the first place.
Even if a strict-liability standard is imposed, plaintiffs would still face the burden of proving a causal link between the earthquake damage and the fracking or injection-well activity. However, removing energy companies’ ability to argue that the earthquakes were accidental and therefore the companies did not breach their duty of care would be a significant victory for plaintiffs. It also bears noting that even if a strict-liability standard is not imposed by the courts, the same result could be achieved via statute: according to Watson, the Maryland Senate passed a bill that deemed fracking to be an abnormally dangerous activity and would have imposed strict liability, but in the end the state enacted a fracking moratorium instead.
Imposing strict liability for earthquake damages tied to fracking and injection wells could result in a significant increase in tort claims against energy companies--and a resulting increase in insurance claims. Energy companies, and their coverage counsel, would be well-advised to keep an eye on Watson’s proposal.