Orange County Branch Newsletter

May 2014

Law and CE News

Law and CE News - Frack Attack: Fallout from $3 Million Judgment in Fracking Trial


Hydraulic fracturing, or “fracking,” is a process of injecting water and chemicals into the ground to expel fossil fuels such as natural gas. Fracking is a popular subject in the news because energy companies and environmental watchdogs have been battling over the potential benefits and risks of the process by which untapped energy resources are accessed and recovered for consumption by energy-hungry consumers. Most activity surrounding fracking has been aimed at legislative moratoriums and outright bans of fracking due to the effects that the activity may have on air and water quality, among other concerns. However, lawsuits by neighboring landowners for the potential deleterious environmental impact of the process have been slow to develop or produce legal guidance from which the industry can learn and adapt, until now.

Recently, a lawsuit for personal injuries alleged to result from fracking activities was brought by residents on adjacent land. The case, entitled Parr et al. v. Aruba Petroleum Inc., et al* came before a jury in Texas and appears to be the first time a jury has found environmental exposure related to fracking caused personal injuries. Now that liability has been established by affected residents, the very real possibility exists that others affected (or that claim to be affected) by fracking activities may sue. While no similar lawsuits have been successfully litigated in California, the significant level of fracking activity in many states means that this type of litigation will likely continue.

Hydraulic Fracturing and the ASCE

While the process of hydraulic fracturing has existed for years, recent advances in technology and horizontal drilling have led to an increase in its use, which has recently garnered national attention. The American Society of Civil Engineers (ASCE) Policy Statement 539 addresses hydraulic fracturing and was adopted by the ASCE Board of Direction on July 20, 2012. This statement advises that “[The ASCE] supports the exploration and production of oil and natural gas energy resources by means of hydraulic fracturing when based upon sound engineering and industry practices that protect public health, safety, and the environment.” Beyond the general support for safe fracking practices, the ASCE strongly recommends continued development and refinement of federal and state regulations to protect persons and property from the potential deleterious effects. Moreover, this policy establishes general recommendations for use by engineers who advise clients on the process which in turn may establish the foundational standard of care that would be applicable to a determination of whether an engineer or other professional assisting in the process was negligent if damages result from fracking.

Verdict for Plaintiffs in Parr et al. v. Aruba Petroleum, et al.

Lisa Parr and her family lived on a forty-acre parcel of farmland in Wise County, Texas. They had lived on the property for years without any health issues, but claim that after fracking started adjacent to their land, they began suffering from various health issues. The Parrs sought damages against Aruba Petroleum, Inc. and Encana Oil & Gas (USA), Inc. for injuries related to fracking near their property. The Parrs asserted in their petition that their problematic health symptoms began to occur after sixty-four natural gas wells began operating after 2008. The Parrs also alleged that the fracking activities included the use of “hydrocarbons, BTEX, and various other chemicals, compounds, and/or metals” that led to severe health issues including abdominal pain, nausea, headaches, body aches, rashes, open sores, chronic nose bleeds, dysrhythmia, fever, asthma, among others. The Parrs also contended that death to their livestock was linked to fracking. The Parrs sought damages through various negligence causes of action, nuisance, and trespass.

After hearing the evidence, the jury awarded the Parrs nearly $3 million in damages for their personal injuries and property damage. In addition, confidential settlements between the Parrs and other energy companies operating wells in the area also occurred for undisclosed monetary amounts prior to the trial.

Be Aware and Be Prepared

Whether you are working as a consultant to an energy company, an in-house engineer managing fracking operations, or for one of the regulatory agencies which oversees fracking activities, knowing the potential risks of fracking is valuable to your practice. A major take-away from the Parr lawsuit is that if you are providing services as an engineer, geologist, hydrologist, geotechnical engineer, or the like, you may be a potential target of a lawsuit if neighboring landowners or environmental watchdog organizations allege that damages have been caused by fracking. It is critical, as with all professional activities, to employ the best practices available to protect yourself against future lawsuits. Though a comparable lawsuit has not yet occurred in California to our knowledge, given the prevalence of fracking here and in many other states, a similar lawsuit with a potential for high exposure is only a matter of time.

Insurance to cover potential calamities is essential. While toxic exposure cases, like the Parr case, are inherently difficult for plaintiffs to prove in a courtroom, they are also expensive and difficult to defend. For both plaintiff and defense, fracking litigation involves the integration of cutting-edge science and medicine to demonstrate whether the fracking caused the claimed injuries. Therefore, pollution policies and other insurance coverage for potential toxic exposure claims are critical to protecting yourself, and working with your insurance broker is necessary to make sure that the potential exposure associated with the risks of fracking can be managed through insurance. What makes this exposure to litigation greater is that environmental exposure cases may take years, if not decades, to manifest. This is similar to asbestos litigation, which took decades to heat up after medicine and science advanced to connect asbestos exposure with its many negative health effects. Under the laws of California and most other states, the delayed discovery of the harmful effects of fracking might toll the statute of limitations for filing a lawsuit for years and create exposure to litigation long after work was completed. If a fracking suit can be successful in a pro-oil & gas state like Texas, such a suit can be successful anywhere.

Because licensed engineers can be held personally liable for their professional services under the Business and Professions Code long after they may have dissolved their engineering firm or retired, “tail” policies can be purchased when needed to make sure there is insurance coverage beyond the immediate future. In addition to insurance, careful negotiating and drafting of your services contracts can be instrumental to minimizing the potential exposure to lawsuits stemming from fracking activities. Indemnity provisions in your favor and limitations of liability can also be enormously important if a lawsuit is filed against you, especially if instead of a single family seeking damages as in Parr, you have an entire neighborhood of plaintiffs.

Please contact us at the Oakland, South Pasadena, Orange, or San Diego offices to discuss further.

 

Christian E. Bredeson, Esq.

[email protected]

Michael L. Wroniak, Esq.

[email protected]

750 The City Drive, Suite 400 | Orange, CA 92868

Phone:  (714) 823-4100   Fax:  (714) 823-41111

 

Nothing contained in this article should be considered legal advice. Anyone who reads this article should consult with an attorney before acting on anything contained in this or any other article on legal matters, as facts and circumstances will vary from case to case.

*No. 11-1650 (Dallas. Co. Ct. at Law, filed Mar. 2011).

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