CHAPTER 7 HYDRAULIC FRACTURING LITIGATION--RECENT DEVELOPMENTS AND CURRENT ISSUES IN CASES INVOLVING ALLEGED WATER SUPPLY IMPACTS

• Jurisdiction: United States

Water-Energy Nexus: Acquisition, Use, and Disposal of Water for Energy and Mineral Development
(Sep 2012)
CHAPTER 7
HYDRAULIC FRACTURING LITIGATION--RECENT DEVELOPMENTS AND CURRENT ISSUES IN CASES INVOLVING ALLEGED WATER SUPPLY IMPACTS
Dave Neslin ¹
Davis Graham & Stubbs LLP
Denver, Colorado

TABLE OF CONTENTS

I. Introduction

II. Background

III. Litigation update

A. Basis of Claims

1. Tort Claims

a. Negligence

b. Private Nuisance

c. Trespass

d. Strict Liability

e. Medical Monitoring

2. Contract Claims

3. Fraud Claims

B. Defense Strategies

1. Dismissal

a. Negligence, Nuisance and Trespass Claims

b. Strict Liability Claims

c. Medical Monitoring Claims

2. More Definite Statements

3. Lone Pine Orders

4. Summary Judgment

C. Class Actions

D. NEPA Cases

E. Preemption Cases

1. West Virginia

2. New York

3. Pennsylvania

4. Colorado

IV. Conclusion

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I. INTRODUCTION

Many experts agree that new supplies of natural gas and oil from shale and other unconventional formations have the potential to decrease our energy costs, increase our employment, enhance our national security, and reduce our greenhouse gas emissions. In their words, natural gas is "poised to enter a golden age"² with "enormous potential to provide economic and environmental benefits for the country,"³ while increasing domestic crude oil production has "revers[ed] a decline that began in 1986" and helped decrease petroleum imports from "60 percent in 2005 ... to 49 percent in 2010."⁴ These new natural gas and oil supplies are being unlocked through the application of hydraulic fracturing and horizontal drilling, which are increasing energy production while expanding it into new areas and regions. But widespread use of hydraulic fracturing is also raising public concerns over potential water, air, and seismic impacts. As is often the case, those concerns are finding their way to court.

Plaintiffs have filed at least 35 actions asserting that hydraulic fracturing has adversely impacted or will adversely impact water supplies. This paper provides an up-to-date summary of this litigation with an analysis of the most significant claims alleged, defenses asserted, and procedural issues addressed. Although most of these cases remain in their early stages, plaintiffs have proven unsuccessful in the few that have reached judgment and no court has found that hydraulic fracturing contaminated ground or surface water. To borrow a line from Shakespeare, these cases have been "full of sound and fury" but so far have "signif[ied] nothing."⁵

II. BACKGROUND

The commercial application of hydraulic fracturing to stimulate oil and gas production is more than 60 years old.⁶ It is now routinely used to complete oil and gas wells, particularly those drilled into shale and other unconventional formations. More than one million oil and gas wells have been hydraulically fractured to date, and experts believe that up to 80 percent of all wells drilled in the United States during the next decade will require hydraulic fracturing.⁷

Hydraulic fracturing is not part of the well construction process. Rather, it occurs after the well is drilled, and is intended to stimulate production. The Environmental Protection Agency ("EPA") has described the process as follows:

Hydraulic fracturing involves the pressurized injection of fluids commonly made up of water and chemical additions into a geologic formation. The pressure exceeds the rock strength and the fluid opens or enlarges fractures in the rock. As the formation is fractured, a 'propping agent,' such as sand or ceramic beads, is pumped into the fractures to keep them from closing as the pumping pressure is released. The fracturing fluids (water and chemical additives) are then returned back to the surface. Natural

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gas will flow from pores and fractures in the rock into the well for subsequent extraction.⁸

Water and sand constitute 98 to 99.5 percent of the hydraulic fracturing fluid,⁹ and the volume of water used varies by well type and geologic formation. EPA estimates that 50,000 to 350,000 gallons of water may be required to fracture a vertical well in a coalbed methane formation while two to five million gallons of water may be needed to fracture a horizontal well in a shale formation.¹⁰ Depending upon the site, 15 to 80% of the injected fluids may return to the surface.¹¹ These "flowback fluids" may be recycled, returned deep underground using a permitted underground injection well, treated and discharged to surface water, or applied to land.¹²

Concerns have been raised that hydraulic fracturing could adversely impact both the quality and the quantity of water supplies.¹³ For example, the acquisition of water for hydraulic fracturing could conceivably diminish the volume of water that is available for other purposes.¹⁴ Similarly, improper handling of hydraulic fracturing fluids at the well site could lead to surface spills and leakage into shallow aquifers, as could improper management and disposal of the flowback fluids.¹⁵ Concerns have also been raised over the possibility of fracturing fluid leakage through fractures into drinking water, and a poorly constructed well could potentially leak regardless of whether it was hydraulically fractured.¹⁶

These potential water impacts are the subject of proliferating, and sometimes conflicting, studies and commentary. For example, independent analysis of pre- and post-drilling ground water samples in the San Juan Basin of Colorado indicated no statistically significant changes in ground water chemistry.¹⁷ A study conducted for the Pennsylvania General Assembly surveyed similar data from Pennsylvania and reached the same conclusion.¹⁸ The Energy Institute for the University of Texas reported that "[n]o evidence of chemicals from hydraulic fracturing fluid has been found in aquifers as a result of fracturing operations."¹⁹ The States of Colorado and Texas have reported that hydraulic fracturing accounts for less than one percent of annual water use.²⁰

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On the other hand, a peer reviewed study by Duke University researchers found "systemic evidence for methane contamination of drinking water associated with shale-gas extraction" in Pennsylvania, but "no evidence for contamination of drinking water samples with deep saline brines or fracking fluids."²¹ A subsequent study by some of the same researchers found evidence that deep saline water had migrated into shallower drinking water in Pennsylvania, but determined that such migration was unrelated to oil and gas development.²² Nevertheless, the study suggested that such pre-existing fractures could act as conduits for fugitive gases and place certain aquifers at greater risk of contamination.

III. LITIGATION UPDATE

During the past three years, plaintiffs have filed at least 35 actions in Arkansas,²³ California,²⁴ Colorado,²⁵ Louisiana,²⁶ New York,²⁷ Ohio,²⁸ Pennsylvania,²⁹ Texas,³⁰ and West Virginia³¹ alleging actual or potential impacts to water supplies from hydraulic fracturing.

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Most of these cases were filed by individual landowners who had either leased oil and gas rights to the defendants or resided in the general vicinity of the well site. The plaintiffs typically assert tort and sometimes contract and fraud claims based upon alleged impacts to water quality. Some cases were filed as class actions,³² and a few allege violations of the National Environmental Policy Act ("NEPA") or its state counterparts.³³ The EPA and state agencies have brought several government enforcement actions,³⁴ and a growing number of cases are raising preemption issues.³⁵

Courts have decided few of the water contamination cases to date. Two were dismissed upon motion of the defendants,³⁶ two were voluntarily dismissed by the plaintiffs,³⁷ and one was rejected by a state agency.³⁸ At least four cases have settled,³⁹ and one court has denied class certification.⁴⁰ Courts have also issued decisions in one of the NEPA⁴¹ and four of the preemption⁴² cases. But most cases remain in the discovery and pretrial motion phase, and no court has found a causal connection between a hydraulic tracking treatment and ground water contamination.

A. Basis of Claims

Although litigation over impacts to water supplies from hydraulic fracturing involves a wide variety of fact patterns and legal theories, many of the cases share certain similarities.

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Typically, the plaintiffs are individual property owners who depend upon ground water. Some reside in close proximity to the oil and gas wells at issue, while others live several miles away. The defendants often include both oil and gas operators and drilling and service companies. Although the cases generally arise from the hydraulic fracking treatment itself, the alleged wrongful conduct may encompass the construction of the well and the management of waste fluids. The plaintiffs usually allege that these actions have contaminated the quality of their well water with methane, benzene, ethylene, toluene, or xylene, or with various other chemical substances. They further allege that such contamination has resulted in property damage and personal injury and seek monetary damages and injunctive relief.⁴³

1. Tort Claims

Most of the cases assert traditional tort claims for negligence, nuisance, trespass, and strict liability.⁴⁴ Some of the cases also assert medical monitoring claims⁴⁵ and a variety of other theories have been pled as well.⁴⁶ But all of these claims and theories require proof of causation, that is, that the defendant's conduct harmed the plaintiff. Thus, causation is the fulcrum upon which these claims ultimately rest.

a. Negligence

Negligence generally requires that the defendant owe a legal duty to the plaintiff and that the defendant breach that duty and proximately cause the plaintiff injury. In other words, the defendant has...