Ohio’s shale drilling boom continues. Natural gas companies are rapidly staking claims all across what could prove to be the next great U.S. energy field: Ohio’s Utica shale formation located primarily in eastern Ohio. To date, Ohio has issued more than 130 drilling permits to explore this previously untapped source of natural gas and natural gas liquids. Energy industry experts suggest that shale drilling could add approximately $12.3 billion to Ohio’s gross state product over the next five years.
This boom largely is the result of technological advances in natural gas exploration, including horizontal drilling, microseismic imaging, and hydraulic fracturing, also known as “hydrofracking” or simply “fracking.” Fracking involves sending a high-pressure combination of proppants (often sand), water, and chemicals deep into the Earth to create cracks and fissures in shale rock. Those fissures are held open by the proppants, allowing natural gas to flow through a horizontal well bore and up to the surface.
Opposition. Fracking enables natural gas developers to target and exploit the Utica shale formation, but it also raises alarm among conservation and environmental groups. The potential adverse effects trouble many people concerned about contamination of public and private drinking water resources and the consumption of huge quantities of water. For example, a controversial 2010 U.S. EPA study of drilling operations in Pavillion, Wyoming found that fracking chemicals present in groundwater posed a drinking water hazard to residents. Other concerns include air emissions during well completion and production, methane migration and seismic impacts from deep well injection of the flowback and production waters from the wells.
Although most of the adverse effects of fracking are preventable, the public debate has become a firestorm. Fracking opponents seek enhanced state and federal regulatory controls to ensure safety, while industry advocates seek greater latitude to expand their operations. In recent congressional testimony on U.S. EPA’s proposed budget, EPA Administrator Lisa Jackson defended inclusion of more than $45 million in the overall fiscal 2013 federal budget for new interagency collaboration to review fracking.
On the Horizon. Hydraulic fracturing’s increasing notoriety could lead to the next major surge in toxic tort litigation. To date, dozens of private tort suits pertaining to fracking – including half a dozen putative class actions – already have been filed in the state and federal courts of Arkansas, Colorado, Pennsylvania, Texas, and West Virginia. Based on theories of negligence, trespass, and nuisance, these lawsuits generally allege that the defendants’ fracking operations contaminated the plaintiffs’ drinking water. The plaintiffs seek various remedies, including injunctive relief banning fracking, compensatory damages, and medical monitoring.
On March 12, 2012, the first two Ohio cases involving alleged contamination via fracking fluids were filed in the U.S. District Court for the Northern District of Ohio. In Managan v. Landmark 4, LLC, and Boggs v. Landmark 4, LLC, two sets of landowner plaintiffs claim that the defendant gas exploration company discharged fracking fluids onto their property, causing the plaintiffs to incur health injuries, emotional distress, and other damages. In additional to compensatory damages, the plaintiffs seek medical monitoring, and their causes of action include negligence, strict liability, private nuisance, unjust enrichment, negligence per se, battery, intentional fraudulent concealment, and negligent misrepresentation.
Municipal bans on natural gas drilling are stirring up litigation as well. On February 21, 2012, a New York trial court upheld a challenged Dryden, New York zoning ordinance – the result of a grassroots community effort – prohibiting all natural gas exploration, production, and storage within the town’s limits. Other municipalities in New York, Ohio, Pennsylvania, and West Virginia also have or are contemplating similar bans.
Given the current litigation climate, additional lawsuits are sure to crop up throughout Ohio and in other states in the coming months. It is therefore critical that companies with any stake in the growing natural gas market be mindful of potential litigation, regulatory developments, and industry best practices.