Fracking verdict may spur more lawsuits

Fracking verdict may spur more lawsuits

Source: http://www.lexology.com, April 25, 2014
By: Angelo J. Kappas and Todd Nelson, Gordon & Rees LLP

“Rise early, work hard, strike oil.” The late oil baron J. Paul Getty’s formula for success may be a new rally cry for the plaintiffs’ bar. On Tuesday, April 24, a Texas jury awarded $2.95 million to a family in one of the first trials alleging that hydraulic fracturing (commonly known as “fracking”) caused severe health problems.

Plaintiffs testified that an environmental doctor told them they had neurotoxins in their blood that matched chemicals used in natural gas activities. The family experienced chronic migraines, rashes, dizziness, nausea and chronic nosebleeds — including an incident when their daughter awoke in the middle of the night covered in blood, according to plaintiffs’ attorneys in Parr v. Aruba Petroleum, Inc. The size of the verdict (and that it results from air pollution, as opposed to the more common assertion of groundwater pollution) may spur similar cases and exert upward pressure on settlement demands throughout the country.

Fracking, a process performed by drilling thousands of feet and releasing a fracking fluid into the rock layer, allows natural gas to escape and be transported up into a well storage. Fracking sites are huge operations with construction and drilling equipment, retention ponds and storage tanks for chemicals, water and hydrocarbons. The drilling sites operate 24 hours a day because they support well bores that must be continually fracked to promote the flow of oil and gas from tight formations. Fracking has made natural gas extraordinarily cheap in America. In Asia, it sells for more than triple the price; in Europe, double.

Despite fracking’s perspicuous opportunity for arbitrage, environmentalists only recognize fracking’s potential impact on local air and water pollution due to leaks of benzene, methane and other hydrocarbons. Further, much to the chagrin of fracking’s opponents, many state regulations allow fracking operations to be located in proximity to homes and schools. In several jurisdictions, environmentalists have pressured lawmakers to tighten fracking regulations, noting in Illinois, a large loophole where energy companies may bypass regulations by instituting modified technologies, such as nonwater-based fracking.

The Parr lawsuit, pitting Barnett Shale landowners against natural gas producer Aruba Petroleum, Inc., is one of the first cases in the nation to reach a jury on claims that air emissions from nearby drilling operations caused health problems. The plaintiffs sought $9 million in damages and alleged that 22 wells operated within two miles of their land. The case, a deviation from the common order because it made it to trial and because of the fact-specific nature of nuisance claims (including serious causation questions), has some anticipating a reversal on appeal.

Yet the jury’s verdict — finding Aruba intentionally created a private nuisance and is liable for the plaintiffs’ physical and mental pain and suffering as well as a diminution of their property value — may hearten plaintiffs’ attorneys with similar litigation and add fuel to settlement negotiations in other fracking and air emissions cases. The plaintiffs’ bar will intently watch the appeal process in Parr, and so too should energy companies.  While many thought the anti-fracking movement would be “the next big thing” and generate a multitude of litigation across the country, few cases have reached the courts. The redolence of fracking money from this verdict may change that, with a gas explosion from the plaintiff’s bar in the near future.

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