September 3 Oklahoma Earthquake May Mean More Class Action Litigation Involving Hydraulic Fracturing

On Saturday, September 3, an earthquake measuring 5.8 on the Richter scale shook Oklahoma and states as far away as Nebraska, Illinois and Texas. The quake caused significant property damage in the area and shook homes and buildings as far away as Dallas. Since September 3, there have been 10 quakes measuring at least 3 on the Richter scale in the same vicinity. There are news reports of U.S. Geologic Survey officials warning persons in Oklahoma and Kansas to “start preparing for earthquakes like Californians.” The Oklahoma Corporation Commission is “implementing a mandatory directive to shut down all Arbuckle disposal wells within a 725 square mile area, based on the location of the earthquake that occurred shortly after 7 a.m. on September 3, 2016, near Pawnee.”

According to the USGS and OCC as well as academic studies, what happened in Pawnee is an “induced” earthquake caused by high volume injection of brine into injection zones. Whether or not this is true and provable in a courtroom has not stopped the plaintiffs’ bar or green groups. Prior seismic activity generated two class action lawsuits against operators that used disposal wells near the epicenter of the last large quake. It also prompted Sierra Club and Public Justice, two green groups, to file a citizen suit under federal environmental statutes in an effort to stop the disposal of fluids from hydraulic fracturing wells. It is logical to assume that this new quake and aftershocks will generate more litigation, and that the plaintiffs will cast a much wider net in naming defendants.

What should you do as an upstream operator? At least the following:

• Operators of disposal wells subject to closure under the OCC emergency order, the users of those wells and transporters of materials to the wells should be on the lookout for claims and demands.
• Alert employees to the possibility that they may be asked to provide information to the OCC or EPA (some of the affected wells are under EPA jurisdiction). You may receive official requests from OCC, Kansas, or EPA, to name a few, to produce records. These require careful responses.
• Records showing what wells were used, how much was disposed in each and when should be carefully preserved.
• A prompt check of liability insurance policies, especially policies covering oil and gas operations or environmental liability, is in order. If those policies are claims made policies, contain reporting requirements, or are near policy expiration or renewal, prompt or immediate reporting may be required to preserve coverage. This is an area where consultation with coverage professionals or coverage counsel likely will be beneficial.

This is not an exhaustive list but it is a start. We hope that there will not be litigation over seismic issues, but prior experience suggests that there will be. Now is the time to prepare.

For further information, or if you have any questions about the information in this alert, please contact Tom Alleman (214-698-7830 or talleman@dykema.com), Gavin Hill (214-462-6467 or ghill@dykema.com), Marty Truss (210-554-5240 or mtruss@dykema.com), or your Dykema relationship attorney.