Upstream activities in fracturing have seemed to miss the aim of the plaintiffs bar. Now, that could change based on a recent case in "oil-friendly" Texas: Parr v. Aruba Petroleum, No. 11-1650 (Dallas Co. Ct. at Law, filed March 2011).
Since the advent of hydraulic fracturing and horizontal drilling for use in natural gas development, there has been a stream of legal activity pursued by private plaintiffs, municipalities and environmental groups alleging various types of individual harms or harm to the environment. Initially, this litigation focused on common-law actions such as negligence, nuisance and trespass claims alleging personal injuries and property damage related to exploration activities, well pad development, and hydraulic fracturing. The defense bar for the oil and gas industry anticipated a surge of litigation on the upstream side similar to the MTBE (methyl tertiary-butyl ether) groundwater litigation and asbestos cases that have been ongoing for decades. "Anti-fracking" litigation was generally viewed as the next big thing. But based upon court activity, it appeared that the litigation efforts had been slowly redirected from a focus on the upstream side of development (at the wellhead or well pad) to midstream development; that is, a focus on pipeline construction and expansions, compressor stations, etc.
All of that changed April 22, when a historic "first" occurred in a Dallas County, Texas, court—a jury awarded $2.925 million to a family (Lisa and Bob Parr, as well as Lisa Parr's daughter) for personal injuries based upon a private nuisance claim. The Parrs filed their initial complaint in March 2011 against Aruba Petroleum and 10 other defendants, alleging nuisance, trespass and property diminution claims related to nearby natural gas drilling and production operations. They requested an astonishing $66 million in damages. The Parrs live on a 40-acre ranch in the Barnett Shale play, which has seen substantially increased drilling activity since 2008. Aruba alone has 22 natural gas wells within a two-mile radius of the Parrs' home. Aruba refused to settle with the Parrs, and the remaining defendants were either dismissed or settled the claims filed against them.
The Dallas County court granted Aruba's motion for summary judgment as to all claims except for the private nuisance claim. That claim proceeded to a jury trial with witnesses for the Parrs arguing that the family suffered personal injuries as a result of alleged exposures to chemicals associated with Aruba's wells. For its part, Aruba argued that it was in compliance with state and federal laws, including the Clean Air Act. Aruba also contended that the Parrs could not prove causation since its wells are among hundreds of wells within the area. Nonetheless, the jury agreed with the Parrs, finding that the natural gas drilling and production was the cause of their illnesses. The jury did not award punitive damages, however, since it did not believe that Aruba acted with malice.
The immediate and long-term impact of theAruba case is being debated by commentators and counsel for both the plaintiffs and defendants alike. Many state the obvious—it's a nuisance case and therefore fact-specific with little consequence to other companies in the industry. But don't be so sure. The smart money says that the Aruba case provides impetus to the plaintiffs' bar leading to a second and more formidable surge of litigation against hydraulic fracturing and natural gas development.
Numerous nuisance-based cases involving hydraulic fracturing activities are still pending throughout the nation, and the jury verdict in Aruba may serve to embolden the plaintiffs' counsel as they proceed through settlement negotiations, and will undoubtedly be a big boost that encourages the plaintiffs to litigate for jury verdicts. Companies will need to consider the possibility of nuisance claims filed by the plaintiffs bar notwithstanding the fact that they are in material compliance with the terms of permits and operating conditions.
There are already cases in the starting gate. Some are in the U.S. District Court for the Middle District of Pennsylvania—the heart of natural gas development and ground zero for national opponents of fracturing. The claims in these cases sound a lot like those in Aruba and include nuisance claims alleging, inter alia, adverse health impacts allegedly caused by hydraulic fracturing. In Berish v. Southwestern Energy Production, Docket No. 3:10-cv-01981, 13 families claim that their well water became contaminated in 2008 when drilling activities commenced near their drinking water supplies. The plaintiffs say that improper casing is the culprit and their drinking water wells became contaminated with diesel fuel, barium, manganese and strontium. One plaintiff claims to have suffered neurological symptoms. In addition to a private-nuisance claim, the plaintiffs also brought claims for anticipatory trespass, negligence, negligence per se, gross negligence and strict liability. The case is nearing the discovery deadline, currently set for May 23.
Another case is Manning v. WPX Energy Appalachia, Docket No. 3:12-cv-00646. The plaintiffs claim private nuisance in that the defendants' drilling activities involving 15 wells within 1,000 to 7,390 feet of their homes have caused contamination of their water, exposure to hazardous chemicals, and a decrease in property values. The plaintiffs also have claims under the Pennsylvania Hazardous Sites Cleanup Act, negligence, strict liability and trespass. In 2014, the Pennsylvania Department of Environmental Protection released the results of tests showing that the methane in the wells is naturally occurring shallow gas, and is not attributable to nearby drilling activities. This conclusion has recently been bolstered by an important new study by Fred Baldassare showing that naturally occurring methane, even deep Marcellus methane, in shallow groundwater is a common pre-drilling condition in Pennsylvania. Nevertheless, the plaintiffs continue their federal suit, and are challenging the results of the state DEP's test before the Pennsylvania Environmental Hearing Board. Unfortunately, some of the plaintiffs' lawyers may be emboldened because the Aruba case is telling them that neither causation nor culpable behavior is a requisite to the success of a nuisance cause of action. The case is currently scheduled for trial in January 2015.
These cases are but a small representation of cases that involve factual and legal issues similar to those in Aruba. Other cases are pending in Pennsylvania and elsewhere, and copycat cases will almost certainly be brought by emboldened plaintiffs in the wake of theAruba verdict, although, as mentioned, the likelihood of the success of those claims is far from guaranteed. A non-exhaustive list of other similar cases currently pending includes: Kamuck v. Shell Energy HoldingsGP, No. 4:11-cv-01425-MCC (M.D. Pa. Aug. 3, 2011); Butts v. Southwestern Energy Production, No. 3:12-cv-01330 (M.D. Pa. July 10, 2012); Fiorentino v. Cabot Oil and Gas, No. 3:09-cv-02284 (M.D. Pa. Nov. 19, 2009); Baker v. Anschutz Exploration, 6:11-cv-06119 (W.D.N.Y. March 9, 2011); and Strong v. ConocoPhillips, No. 2011-487 (Dist. Ct. Panola County Tex., Dec. 2, 2011).
The potential uptick in upstream-related litigation may likewise be affected by an increasing focus on hydraulic fracturing and natural gas development by citizens, environmental groups and the U.S. Environmental Protection Agency (EPA). The EPA just released its proposal to regulate disclosure of chemicals used in fracturing—even though the states already do that. The EPA's "fracturing study" continues—even though the states are already regulating and studying fracturing every day.
The debate, whether informed or not, regarding the safety of, and the need for, hydraulic fracturing and natural gas development continues to play out in editorial pages, town hall meetings where moratoria are considered, and commercial venues such as the movie "Gasland." Some Americans have short memories. Not so long ago, we were waiting in gas lines at the mercy of foreign cartels. Now, we stand at the verge of not only being energy-secure in our own right, but also in being able to influence positive international outcomes through wise deployment of our natural resources rather than our military resources.
Industry has known all along that the minds of the people must be won by hard work in the neighborhoods and the court of public opinion before it will be won in court. It should therefore continue to do a good job in the field and work hard to convince all citizens, who make up our juries, that responsible development of our natural resources can be done safely and at a great economic and geopolitical benefit to both them and our country.
Reprinted with permission from the May 16, 2014 edition of The Legal Intelligencer © 2014 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382, email@example.com or visit http://www.almreprints.com/.