On Monday, the Wall Street Journal added to the debate over induced seismicity with an online opinion piece entitled, “Should Oil Firms Be Held Liable in Earthquake Lawsuits?” Law professor Blake Watson at the University of Dayton took the position that oil and gas companies should be held strictly liable if underground fluid injection causes earthquakes, even if companies did nothing negligent. By contrast, Catrina Rorke, director of energy policy at the R Street Institute think tank noted that the executive and legislative branches are better poised than courts to address induced seismicity risks. As these issues emerge, these divergent approaches may influence the liability regimes and regulatory responses pursued by individual states.
A chief criticism of a strict liability regime is that it does nothing to encourage operators to take steps to mitigate the risk of induced seismicity because companies that take careful precautions and companies that do nothing will suffer the same punishment in the event of an unavoidable quake: liability for all damage caused. In addition, strict liability is premised on the idea that the industrial activity is inherently dangerous, and the facts simply do not bear that out in the context of underground fluid injection. Instead, research demonstrates that oil and gas fluids have been injected safely in Class II wells for over three decades under the Underground Injection Control Program. In fact, environmentalists and operators alike agree that underground injection of produced water and hydraulic fracturing wastewater is not only the safest disposal method for large volumes, but also the most environmentally-friendly, especially when compared to alternatives like land application and treatment in conventional wastewater facilities. Furthermore, a strict liability model is unworkable in several oil and gas producing states where strict liability is just not a feature of the law. For a variety of reasons, strict liability represents an inadequate liability framework for the hypothetical case in which a plaintiff demonstrates a party caused an earthquake—a result which at least one court will consider, but no lawsuits have yet reached.
By contrast, an increasing number of states are recognizing that liability altogether is a less appropriate vehicle than executive and legislative action to address risks associated with induced seismicity. For instance, underground fluid injection risks are regulated in all oil and gas producing states through policies implemented through administrative agencies: the state regulatory bodies responsible for either oil and gas activity, the environment, or health, and in a few instances, by the Environmental Protection Agency. These entities have greater institutional competence to balance the risks of induced seismicity with the costs of attempting to mitigate them due to the specialized expertise of their officials. For example, earlier this year, Texas Railroad Commission staff conducted detailed geophysical analysis of possible induced seismicity as a result of hearings regarding permits for two wells of concern. The Texas Railroad Commission, which assigns both a technical examiner and a hearings examiner to each hearing, has the capacity not only to do its own independent geophysical analysis of whether a well has caused induced seismicity, yet also to hear expert testimony and the presentation of scientific evidence in roughly the same format as a court. By contrast, the state and federal judiciary lacks this dual capacity. Furthermore, legislators—responsible for policy decisions to balance public demands for economic benefits and environmental risks—closely oversee and guide administrative agencies, a function which courts often see as beyond their domain. As more states continue to address induced seismicity risks through administrative and legislative measures, the role for courts may become more apparent.
At present, however, energy companies continue navigating a new legal and regulatory framework surrounding induced seismicity risk. Will administrative agencies or the judiciary be better equipped to ascertain causation, and what will be the ramifications for industrial operations and liability? If courts ever reach the issue of liability, will negligence, strict liability, trespass, or nuisance provide a framework for their analysis? We will continue to monitor these developments here at The Hydraulic Fracking Blog.