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Earthquake Case Could Doom Fracking In Oklahoma by James Stafford, March 31, 2015, Oilprice.com
The rise in earthquakes as a result of fracking poses a massive problem for the oil and gas industry.
… The oil and gas industry in Oklahoma has downplayed the induced seismicity from disposal wells, but the frequency of earthquakes – rising to several earthquakes each day – has become too hard to ignore. That is leading to the prospect of a flurry of lawsuits against fracking companies. Continental Resources, one of the most active companies in Oklahoma, even included legal action and state regulation related to seismic activity on its list of risks in its financial statements.
Legal action in neighboring states offer an indication that costs will rise for Oklahoma drillers as the backlash ensues. Chesapeake Energy and BHP Billiton paid an undisclosed sum to settle a 2013 case in Arkansas over earthquake activity.
Energy companies can deal with paying off plaintiffs one by one, although it will raise the cost of doing business. But the big threat to drillers is a court case going against them, saddling the industry with the costs of earthquake-related damage and raising the liability for all future drilling. In essence, the subsequent cost of insurance needed by drilling companies could make oil and gas production unviable.
One case in particular could determine how bad costs could get for the industry. A woman named Sandra Ladra has brought a case against two oil companies – New Dominion and Spess Oil Co. – after her chimney collapsed amid a 5.7 magnitude earthquake, and the falling bricks severely injured her. The 2011 earthquake was the strongest in Oklahoma history and destroyed 13 homes. A 2013 peer-reviewed study pointed to injection wells nearby that were used to dispose of fracking wastewater as the cause of the earthquake.
The Ladra case has now moved to the state supreme court. A court ruling in her favor will amount to a huge blow to the industry statewide, raising costs of operating and possibly contributing to a significant reduction in drilling over the long-term. [Emphasis added]
Big Oil Money Tried to Slow Earthquake-Fracking Research, Bloomberg report says Oklahoma government officials were swayed by oil billionaires to impede research on the connection between fracking and quakes by John Wenz, March 30, 2015, Popular Mechanics
There’s been whispers and reports for years now about a connection between hydraulic fracturing (fracking) and earthquakes, especially after the 2011 quake on the east coast. Now a Bloomberg report says the fossil fuel industry paid big money to slow research that was looking into connections between fracking in Oklahoma and a series of earthquakes in that state.
Bloomberg and other publications requested information on meetings between government officials and oil industry executives. While both sides deny wrongdoing, Bloomberg alleges that the industry influence slowed an investigation into the connection between earthquakes and underwater wastewater disposal by the Oklahoma Geological Survey, despite evidence by the U.S. Geological Survey that such a connection exists. This included the investigation into seismic activity that happened just days after a well went up in Love County, OK, in September 2013. As Bloomberg reported, “Injection at the well was curtailed, then stopped altogether. The seismic activity dipped almost immediately.”
OGS officials commented, “We cannot rule out that this observation could be simply a coincidence,” and were later congratulated by ExxonMobil officials for their response. [Emphasis added]
Big Oil Pressured Scientists Over Fracking Wastewater’s Link to Quakes, Energy firms tried to slow science inquiries blaming them for earthquakes in Oklahoma by Benjamin Elgin and Matthew Philips, March 30, 2015, Bloomberg
In November 2013, Austin Holland, Oklahoma’s state seismologist, got a request that made him nervous. It was from David Boren, president of the University of Oklahoma, which houses the Oklahoma Geological Survey where Holland works. Boren, a former U.S. senator, asked Holland to his office for coffee with Harold Hamm, the billionaire founder of Continental Resources, one of Oklahoma’s largest oil and gas operators. Boren sits on the board of Continental, and Hamm is a big donor to the university, giving $20 million in 2011 for a new diabetes center. Says Holland: “It was just a little bit intimidating.”
Holland had been studying possible links between a rise in seismic activity in Oklahoma and the rapid increase in oil and gas production, the state’s largest industry. During the meeting, Hamm requested that Holland be careful when publicly discussing the possible connection between oil and gas operations and a big jump in the number of earthquakes, which geological researchers were increasingly tying to the underground disposal of oil and gas wastewater, a byproduct of the fracking boom that Continental has helped pioneer. “It was an expression of concern,” Holland recalls.
Details surrounding that meeting and others have emerged in recent weeks as e-mails from the Oklahoma Geological Survey have been released through public records requests filed by Bloomberg and other media outlets, including EnergyWire, which first reported the Hamm meeting.
The e-mails suggest a steady stream of industry pressure on scientists at the state office. But oil companies say there’s nothing wrong with contact between executives and scientists. “The insinuation that there was something untoward that occurred in those meetings is both offensive and inaccurate,” says Continental Resources spokeswoman Kristin Thomas. “Upon its founding, the Oklahoma Geological Survey had a solid reputation of an agency that was accessible and of service to the community and industry in Oklahoma. We hope that the agency can continue the legacy to provide this service.”
Likewise, Boren says such conversations are harmless. “The meeting with Harold Hamm was purely informational,” the university president said in a statement on March 27. “Mr. Hamm is a very reputable producer and wanted to know if Mr. Holland had found any information which might be helpful to producers in adopting best practices that would help prevent any possible connection between drilling and seismic events. In addition, he wanted to make sure that the Survey (OGS) had the benefit of research by Continental geologists.” [To tilt the investigation in industry’s favour?] Boren is on the board of The Bloomberg Family Foundation, founded by Michael Bloomberg, the owner of Bloomberg LP.
Before Holland became the state seismologist in 2010, there wasn’t much for Big Oil and state researchers to argue about. Over the previous 30 years, Oklahoma had averaged fewer than two earthquakes a year of at least 3.0 in magnitude. In 2015 the state is on pace for 875, according to Holland. Oklahoma passed California last year as the most seismically active state in the continental U.S.
… Horizontal wells can produce as much as nine or 10 barrels of salty, toxin-laced water for every barrel of oil. Much of that fluid is injected back underground into wastewater disposal wells. It’s this water, injected near faults, that many seismologists—including those at the U.S. Geological Survey—say has caused the spike in earthquakes.
The Hamm and Boren meeting wasn’t the only such informational session. In an e-mail from October 2013, Holland updated his superiors on a meeting he had in the office of Patrice Douglas, then one of the three elected members of the Oklahoma Corporation Commission, which regulates that state’s oil and gas companies. Also at the meeting was Jack Stark, then-senior vice president for exploration at Continental and now its president. “The basic jist [sic] of the meeting is that Continental does not feel induced seismicity is an issue and they are nervous about any dialog about the subject,” wrote Holland. He also wrote that Continental and Douglas were concerned about his participation in a joint statement he’d recently signed with the U.S. Geological Survey suggesting a link between quakes and the oil industry.
As Oklahoma has become the capital of American seismic activity, scientists, citizens, and some state lawmakers have been critical of state officials for their perceived slowness in drawing a connection between earthquakes and oil and gas activities, which account for 1 in 5 jobs in the state. Over the past couple years, as research began to get published and many seismologists became convinced that earthquakes were being induced by wastewater disposal, the OGS remained on the fence. In early 2013 the academic journal Geology accepted a paper attributing a 5.6 magnitude quake that hit Oklahoma in 2011 to underground changes resulting from wastewater disposal wells. In March 2013, OGS put out its own statement, attributing the quake to “natural causes.” [Like Alberta’s regulators and companies blaming nature for water “naturally” becoming too dangerous to flush toilets with after nearby fracing?] And in February 2014, three months after Holland’s meeting with Hamm, the agency released a statement playing down the role of industry, saying the “majority, but not all, of the recent earthquakes appear to be the result of natural stresses.”
“This is a conflict of interest that we never before could’ve imagined,” says Jason Murphey, a Republican state representative from Logan County, which has been one of the most seismically active areas in the state over the past year. “When Boren facilitates that meeting, it sends a message to Austin Holland.”
Even when earthquakes appeared strongly correlated to wastewater injection, OGS has been reluctant to discuss a connection. In September 2013 a new disposal well was turned on in Love County in southern Oklahoma. Soon, quakes began to jolt the area, sometimes several a day. The well reached its peak daily injection of more than 9,000 barrels of wastewater on Sept. 20, 2013. Three days later the area experienced a magnitude 3.4 quake, moving furniture inside homes and knocking down a chimney. Injection at the well was curtailed, then stopped altogether. The seismic activity dipped almost immediately.
Still, the OGS hesitated to link the two. “We cannot rule out that this observation could be simply a coincidence,” Holland wrote in a report a week later. In early October, Holland spoke at a town hall meeting in Love County, where he again said no conclusions could be drawn about the cause of the quakes.
Many residents were frustrated by the lack of answers. But ExxonMobil geologist Michael Sweatt wrote in an e-mail to Holland: “I would like to congratulate you on a job well done at the Town Hall meeting in Love County. I believe you delivered an unbiased report on the recent earthquake activity and answered the residents’ questions the best you could.”
Today, as the number of earthquakes continues to soar, Holland has evolved in his position. He recently told Bloomberg that the vast majority of the increase in earthquakes is due to the injection of oil and gas wastewater. Yet he bristles at any suggestion that industry pressure slowed him from reaching that conclusion. Oklahoma has naturally occurring earthquakes, he says, and there have been large spikes of natural earthquakes in the past where no oil and gas development was occurring. It was proper, Holland says, to start with the hypothesis that the quakes were not man-made. “Science doesn’t operate in beliefs,” he says. “It operates in demonstrable facts.” [Emphasis added]
Bloomberg cross referenced their above article with “Read this next:”
- Alberta Fracking Quake Fears Prompt Tougher Rules for Shale Area [what good will rules do when the frac quakes don’t stop?]
Energy’s New Legal Threat: Earthquake Suits by Miguel Bustillo and Daniel Gilbert, March 30, 2015, Wall Street Journal
PRAGUE, Okla.—After an earthquake toppled her chimney, sending rocks crashing through the roof and onto her legs, Sandra Ladra didn’t blame an act of God. She sued two energy companies, alleging they triggered the 2011 quake by injecting wastewater from drilling deep into the ground.
Ms. Ladra’s lawsuit, now before the Oklahoma Supreme Court, highlights an emerging liability question for energy companies: Can they be forced to pay for damages from earthquakes if the tremors can be linked to oil-and-gas activity?
Oklahoma, with a history of mild-to-moderate seismic activity, experienced 585 earthquakes of 3.0 or greater magnitude last year—big enough to be felt indoors—according to the Oklahoma Geological Survey. That’s more than the state had in the previous 30 years combined and the most of any state in the contiguous U.S.
So far, most of the tremors under investigation in Oklahoma and other oil-producing states, including Arkansas, Kansas, Ohio and Texas, have been too small to cause major damage. But the prospect of facing juries over quake-related claims is reverberating throughout the energy industry, which fears lawsuits and tighter regulations could increase costs and stall drilling.
“It’s definitely something that has risen to a level of fairly high concern,” Steve Everley, a spokesman for industry advocate Energy In Depth, said of earthquake-related risks. “Companies recognize that there’s a problem here,” he said, adding that they are contributing data to help regulators determine what’s causing the quakes. [Or deny that it’s the oil and gas industry causing them?]
… Some state regulators are already trying to address deep-injection-wells worries. Oklahoma said last week it would require energy companies to prove they aren’t injecting wastewater at a depth deemed at risk of triggering quakes—or halve their injection rate. The previous week, Kansas lowered maximum injection rates in areas experiencing increased seismic activity.
Arkansas and Ohio have marked certain areas off-limits for wastewater injection. Texas last year hired a seismologist to help study the connection between disposal wells and earthquakes.
In financial statements, big oil companies like Continental Resources Inc. have flagged potential financial risks if earthquakes lead to stricter regulations. Continental declined to comment.
In Arkansas, BHP Billiton Ltd. and Chesapeake Energy Corp. settled a case by five homeowners in 2013 for an undisclosed sum. In Texas, a lawsuit against EOG Resources Inc. for quake-related damage is pending. The companies declined to comment or didn’t respond to inquiries.
Industry executives said a verdict against an energy company would be devastating. “If a lawsuit was successfully prosecuted that would have a huge impact,” said Kim Hatfield, president of closely held Crawley Petroleum Corp. in Oklahoma City and an official of the Oklahoma Independent Petroleum Association.
He is skeptical disposal wells alone are to blame for quakes. “We’ve been injecting into the subsurface for over 60 years,” he said. “If this is a problem, why just now?”
Ms. Ladra said she was sitting in a recliner when the ground began shaking in 2011. The chandeliers swung wildly. The stone chimney began to crumble. Blocks fell through her roof, some landing on her legs.
“I was screaming. I was trying to keep the blocks from hitting me,” said Ms. Ladra, 64 years old. Her home suffered more than $100,000 in damages, and a doctor says she needs surgery, she said.
The 5.6-magnitude quake was the strongest recorded in Oklahoma history, buckling roads and destroying 14 homes. Oklahoma Geological Survey officials in 2012 said the quake was possibly related to disposal wells nearby but in March 2013 said it was most likely “the result of natural causes.”
Days later, the journal Geology published research concluding a sequence of quakes including the 5.6-magnitude shock was related to two disposal wells nearby. Last March, a Journal of Geophysical Research study found injecting wastewater triggered a 5.0-magnitude temblor that set off the larger quake.
Ms. Ladra filed suit last August in Oklahoma district court against the companies owning the disposal wells near the epicenter, New Dominion LLC and Spess Oil Co. The companies moved to dismiss the lawsuit, arguing they lawfully operate under permits from the state’s oil-and-gas regulator.
Bob Gum, a lawyer representing New Dominion, said at an October hearing that disposal wells—and the oil-and-gas industry broadly—would be jeopardized if the court allowed the lawsuits to proceed, saying: “The legal risk associated with operating them will become uninsurable.”
Mr. Gum declined to comment. A lawyer for Spess declined to comment.
The district judge ruled in October the court didn’t have jurisdiction, dismissing the case. Ms. Ladra appealed. The Oklahoma Supreme Court will rule on whether the lawsuit can proceed in court or whether her complaint must be heard by state regulators before she could sue for damages.
Another Prague resident, Jennifer Cooper, sued New Dominion and Spess in February, alleging they were responsible for property damage from the 2011 quakes and seeking class-action status.
Among those closely following the litigation’s outcome is Oklahoma’s insurance commissioner, John Doak. Between 15% and 23% of Oklahomans have earthquake insurance, up from about 2% in 2011, Oklahoma Insurance Department surveys show.
This month, he issued a bulletin saying his office may investigate what he called an “extraordinary denial rate” by insurers of earthquake claims, which he said might be “based on the unsupported belief that these earthquakes were the result of fracking or injection well activity.”
The outcome of the litigation, he said in an interview, “could have significant ramifications for the insurance and energy sectors.” [Emphasis added]