With the Gas, the Flow of Fracking Litigation Continues



Courtesy: Ecopolitologist/Creative Commons 

Shale gas production in the United States continues to expand, together with public scrutiny and regulatory attention. As with any major industrial development, litigation is not far behind. 

We first reported on the status of fracking lawsuits last year. Since then, falling natural gas prices have caused a dip in the industry’s growth. But natural gas producers are poised to expand operations as prices begin to recover. In addition, petrochemical giants Shell and Dow are betting on an increasing supply of domestic shale gas by investing billions of dollars in planning and building new ethane crackers. Meanwhile, citizen groups and Hollywood activists continue the Armageddon drumbeat, and a number of regulatory efforts are under way. Several states—most visibly New York—are in the process of developing regulations. There will also be an uptick in federal regulation following the presidential election.

Over the past few years, a number of lawsuits have been filed in response to the fracking boom. The litigation wave is not surprising given the broad geographic use of fracking, the ubiquitous and mostly negative media attention, and the large number of “deep pocket” defendants. Most of the cases filed to date are still pending. A few cases have been dismissed without prejudice, a few more have settled, and a few suits have now been decided by pretrial motions in favor of the defendants. While it is perhaps significant that no court has yet found that a plaintiff’s alleged harms were caused by fracking, it is still too early to identify meaningful trends. A big win by a plaintiff, or a major study or government regulatory initiative, could still open the floodgates, leaving the major battles yet to occur.

Uncertain Science

The links between hydraulic fracturing and environmental or health impacts continue to be hotly debated on every major issue: groundwater contamination, earthquakes, and air pollution. Uncertain science plays a major role in fracking litigation, making it difficult or impossible for plaintiffs to show that their injuries were caused by fracking. Yet enough questions remain unanswered and under continued study that claims continue to be made and cases brought.

Groundwater contamination, the most prevalent allegation in fracking suits, is also the most widely debated issue to date. Scientists in the private sector continue to disagree about whether fracking can cause migration of underground methane or fracking fluid chemicals to drinking water. The federal government and others, meanwhile, are currently conducting several studies and reviews that will likely provide the basis for regulatory initiatives. Most significant, the Environmental Protection Agency (EPA) is conducting a broad study of fracking and drinking water impacts scheduled to be released for peer review and public comment in 2014. The agency released a first progress report in December 2012 but did not come to any substantive conclusions. In addition, the U.S. Geological Survey (USGS) recently completed a study of shallow domestic wells in Arkansas’ Fayetteville Shale and concluded that there were no significant effects on groundwater quality

Earthquakes are generally associated not with fracking itself but with the disposal of fracking wastewater in underground injection wells. In response to a request from Congress and the Department of Energy, the National Research Council (NRC) last year completed a study on increased seismic activity in Arkansas, Ohio, and Oklahoma. The NRC study concluded that “fracking does not pose a high risk for inducing felt seismic events.” While disposal of fracking wastewater in underground injection wells “does pose some risk for induced seismicity,” the NRC found that there are very few documented events relative to the large number of disposal wells. Along similar lines, a 2012 USGS study concluded that underground injection may be responsible for some increased seismic activity in the central United States. 

Emissions-related complaints, also common in fracking litigation, can be divided into three categories. 

First, fracking is alleged to cause the release of methane, a potent greenhouse gas. While some researchers have argued that these releases challenge the reputation of natural gas as a climate-friendly fuel, last year the EPA moved to address the problem by requiring drilling companies to install emissions-reducing technology called “green completions” by January 2015. The rules have been challenged, and the EPA has agreed to reconsider certain aspects of them. 

Second, fracking is said to cause the release of volatile organic compounds with the potential to cause health effects. A 2012 study by the Colorado School of Public Health suggested that residents living near natural gas wells are at risk of symptoms such as headaches, eye and throat irritation, and difficulty breathing. This study has been criticized for, among other things, exaggerating health effects and failing to take into account exhaust fumes from nearby Interstate 70. 

Third, a recent “hazard alert” by the National Institute for Occupational Safety and Health (NIOSH) suggests that the transport of silica sand that is blended with fracking fluids may result in worker exposures and silicosis. NIOSH has suggested that these risks can be reduced through air monitoring, implementation of dust control measures, and use of protective equipment at fracking sites.

Although a number of studies have been conducted on each of these topics, significant disagreements persist. As with existing research, new studies are likely to be of varying quality and could have a significant impact on public perceptions of fracking and resulting litigation.

Trouble Proving Causation

The most common type of claim against drilling companies alleges migration of methane from fracked shale into shallow groundwater used as a drinking water source. Since many drinking water wells have some level of naturally occurring methane, a central issue in these cases is whether contamination was preexisting. Even if not, plaintiffs must still prove that the contaminants came from the wells in question. Geological factors such as intervening rock formations or the distance between the contamination and the defendant’s operations may reduce the probability that alleged contamination originated from fracked wells. Defendants can also rely on isotopic “fingerprinting” methods to distinguish contaminated water samples from the alleged gas source. 

Some groundwater cases involve claims that drinking water is affected by fracking fluids. Some of these claims run into trouble when plaintiffs fail to allege specific chemical contaminants that are actually used in the defendant’s operations. Courts have cited the need to hold plaintiffs to the Supreme Court’s pleading standard in Ashcroft v. Iqbal, which requires plaintiffs to state a “plausible” claim by providing more details as to the alleged contamination. For example, a federal trial court in Arkansas held in Tucker v. Southwestern Energy Corp. that “[g]eneral statements about the many dangerous substances used in fracking, and conclusory statements about the migration of these substances, will not suffice.” Plaintiffs in return may be expected to complain that many of the constituents in frack fluids are proprietary and that accordingly much detail may not be possible.

Air pollution cases also involve complicated causation issues, especially when multiple plaintiffs live at different distances from fracked wells but claim the same symptoms. As demonstrated by a defendant-side win in August 2012, plaintiffs cannot avoid proving their own injuries by relying on the scientific literature. In Evenson v. Antero Resources, a prospective class action filed in Colorado state court, the plaintiffs alleged harmful air pollution from fracked wells in the town of Battlement Mesa. Although the plaintiffs claimed symptoms such as headaches and burning eyes, they offered no medical evidence to support them, instead relying on the controversial Colorado School of Public Health study. After the court dismissed the claims, the plaintiffs filed an amended complaint seeking to stop future fracking based on a “reasonable fear of imminent and substantial harm.” The court found that allegations of future health problems were too speculative and dismissed the case.

The future viability of earthquake-related claims will likely depend on the outcome of two consolidated class action suits in Arkansas federal district court. The plaintiffs in Hearn v. BHP Billiton Petroleum are alleging that Arkansas’ “unprecedented increase in seismic activity” is caused by the defendants’ use of underground injection wells. A class certification hearing is set for March 2013 and a jury trial for March 2014. In the meantime, prospective earthquake plaintiffs may be encouraged by a plaintiff-side win in another Arkansas federal case. The plaintiff in Hiser v. XTO Energy alleged that earthquakes caused by nearby drilling operations had damaged her home. After the court refused to dismiss the case, the jury returned a verdict of $100,000 in compensatory damages and $200,000 in punitive damages. XTO Energy sought to overturn the verdict, pointing out that the word “fracking” had not been used during the trial, and therefore jurors who had inquired whether the wells were fracked must have improperly considered outside information. The court rejected this argument and entered judgment on January 18. 

Even though scientific uncertainty presents hurdles for plaintiffs, fracking litigation can impose significant costs on producers who settle cases or are forced to litigate them. In response to one early fracking suit, for example, Cabot Oil and Gas Co. agreed in 2010 to pay $4.1 million to 14 homeowners near the company’s fracking operations in Dimock, Penn., and to provide treatment for private wells. The EPA subsequently conducted two rounds of sampling at the Dimock wells, and in July 2012, the agency reported that, in fact, the water was safe to drink.

Defendants in several recent cases have sought to limit defense costs and avoid costly outcomes through a legal device known as a Lone Pine order. Named after a 1986 toxic tort case, a Lone Pine order requires the plaintiff to make a prima facie showing of exposure and damages at the beginning of the case. Strudley v. Antero Resources Corp., which was dismissed by a Colorado court in May 2012, represents the most successful use of this strategy in a fracking case to date. In response to the court’s order, the plaintiffs submitted maps, photos, medical records, water and soil samples—and a doctor’s affidavit stating only that more information was needed to establish a link between fracking and the alleged health effects. The court found this evidence insufficient to establish causation. 

However, defendants in other cases have had mixed results. In Hagy v. Equitable Production Co.—ultimately a defendant-side win—a West Virginia federal district court originally refused to issue a Lone Pine order, though it later dismissed the case based on insufficient evidence. In two cases pending in a Pennsylvania federal district court, a magistrate judge declined to issue Lone Pine orders but has left the defendants free to try again later. One of these cases, Roth v. Cabot Oil & Gas Corp., survived a motion to dismiss on January 30.

Going forward, plaintiffs’ arguments in fracking cases will continue to track emerging trends in the scientific literature. The results of several major ongoing studies, including the EPA’s drinking water study, may also affect the number of cases filed. On the class action front, courts will continue to measure their tolerance for aggregated claims. On July 11, 2012, an Arkansas federal district court issued the first reported ruling on class certification in a fracking case. The court denied class certification to a group of plaintiffs alleging excessive noise, property damage, air pollution, and groundwater contamination, finding that the case was “driven by individualized issues that required individualized proof.” This case could well set the tone and limit the use of the class action device in fracking cases, reinforced by new U.S. Supreme Court precedent emphasizing the importance of common issues in class actions. There are also other cases pending before the Supreme Court now that could further limit the scope of class actions, which would represent a significant advantage to defendants in litigation.

Enforcement Missteps?

While private plaintiffs have struggled to tie their injuries to fracking, the chief environmental enforcement authority has also taken faltering first steps. In 2012, the EPA came under fire for backpedaling on two high-profile fracking cases. 

Last March, the EPA withdrew its widely publicized Emergency Enforcement Order against Range Resources. The EPA had issued the order in 2010 upon finding the company responsible for contaminating certain drinking water wells in Texas. When Range Resources refused to stop fracking in response to the order, the EPA filed an enforcement suit in federal district court. Range Resources responded by filing its own petition for review in the Fifth Circuit. Meanwhile, the relevant state regulatory authority, the Texas Railroad Commission, conducted its own investigation and concluded that Range Resources could not have been responsible for the contamination. The EPA has not provided a clear explanation of its reversal but has expressed only an intent to focus on “the science and safety of energy extraction” instead of on litigation. 

The EPA has also been criticized for its about-face in an investigation of contamination near a gas field in Pavillion, Wyoming. After the agency released a draft report in December 2011 that purported to link contamination of an aquifer to fracking fluids, it was severely criticized for having inadequate sampling methodology. In response to this criticism, the EPA announced in March 2012 that it would delay peer review and public comment in order to conduct additional sampling. 

The EPA’s withdrawal of the Range Resources order, together with its decision to reopen the Pavillion drinking water study, has led to widespread speculation that the agency is making politically motivated decisions about fracking without waiting for all the facts. Since federal agencies play an important role in shaping public opinion, it is important that EPA tread more carefully going forward. Enforcement actions may serve as a model to private litigants, and ill-considered suits may lead to an increase in wasteful and unnecessary litigation. 

Conclusion

The initial wave of fracking cases rolls onward. As more scientific studies are completed and cases begin to resolve, trends will continue to emerge. Meanwhile, debates about how to address environmental risks will continue in multiple fora. In addition to battling against each other, both industry and citizen groups have pulled regulatory agencies into court. Interestingly, a group of New York landowners recently threatened to file a Fifth Amendment takings claim against the State of New York if it does not lift its moratorium on fracking. Oil and gas companies have sought to invalidate municipal fracking bans and have had mixed success getting them overturned in state courts. Environmental groups have challenged permitting decisions by state and regional authorities, such as California’s approval of drilling permits and the Delaware River Basin Commission’s approval of water withdrawals for fracking fluids. And both sides have objected to federal regulatory efforts, most notably the EPA’s approach to regulating air emissions under the Clean Air Act. 

Whether administrative agencies are directly involved in the cases or focused on developing the science, regulatory decisions will continue to be central to fracking litigation going forward. The conclusion of our last article was that the jury was still out as to fracking litigation, and it was necessary to stay tuned. It still is.

Mark Fitzsimmons is a partner in the toxic tort and environmental litigation section and Rachel Tennis is an associate in the litigation and environmental regulatory sections of Steptoe & Johnson LLP in the firm’s Washington, D.C., office.