Liability in

Hydraulic Fracturing Charles R. Bailey

Pre-Development

Activities include: • Title Abstracts – performed by non-lawyer who

reviews records in record room • Land Deeds • Leases • Surveying • Professional Design and Testing (architects,

engineers, geologists, etc.) • Permitting

Pre-Development

Risks • Relatively low; few potential claims • Changes in statutes and resolutions are creating

additional risks • Mostly involve injury to property owners – both surface and subsurface • Sometimes involve claims against attorneys, as they

review and sign the title examinations to permit drilling

Pre-Development

Damages • Could be significant if mistake is made • Damages theories could include:

o Trespass oNuisance o Restoration of property oDamage to other mineral rights holders

Pre-Development

Insurance Market • Number of insurers providing this type of

professional liability is limited

Pre-Development

Questions regarding drilling rights: • Have you legally entered into lease? • Have you acquired appropriate state permits? (Note: Some

jurisdictions require a permit from local authorities) • Have interested parties been notified?

o Other mineral rights owners o Surface owners o Governmental agencies o Individuals/entities with riparian rights o Citizens of surrounding area who may have interests

Development

Activities • Drilling

oVertical drilling oHorizontal drilling

Development

Activities • Cementing and casing

o Process by which cement slurry is circulated through the inside of the casing and out into the annulus through the casing shoe at the end of the casing string. The cement flows back up the hole towards the drill site and encases the pipe.

Development

Cementing and Casing: Purpose

• To prevent contamination of water well zones

• Prevents migration of fracking fluid to surface

• Protects well integrity • Prevent unstable upper formations

from and caving in • Foundation for high-density drilling

Development

Cementing and Casing: Purpose

• Zonal isolation (isolates zones with different pressures or fluids)

• Seals of high pressure zones to prevent blowouts

• Prevents fluid loss • Provides smooth internal bore for

installation of production

Development

Fracking Process • Perforating casing and igniting charges

Development

Fracking Process • Injection of fracking fluid

o Preparation of fracking fluid: 1. Fresh water 2. Biocide/Disinfectant 3. Ethylene glycol (antifreeze) 4. Diesel fuel 5. Citricanhydrocloric acid 6. Anti-corrosives 7. Gelling agent (cosmetic industries)

Development

Fracking Process • Fracking fluid is shot through

casing to area where casing has been perforated

• Shale in drilling area is fractured by pressure of fracking fluid being pumped into area

• Gas is released from shale, enters casing, and is extracted at surface

• 20-40% of fluid comes back into casing

Development

Heavy equipment • Includes excavation equipment, rigging machinery, water

trucks, pumps, and seismic machines • Generally present during all phases of development

Development

Risks During Development Process • Personal Injury to workers (workers’ compensation and

deliberate intent claims) 1. Fires and explosions (two recent ones in West Virginia)

Development

Risks During Development Process • Personal Injury to workers (workers’ compensation and

deliberate intent claims) 2. Slips, trips and falls 3. Strains and sprains 4. Pinch point/ crushing injuries 2. Rigging injuries 3. Being hit by objects

Development

Risks During Development Process • Personal Injury to workers (workers’ compensation and

deliberate intent claims) 7. Exposure to hazardous compounds and chemicals

Development

Risks During Development Process • Personal Injury to workers (workers’ compensation and

deliberate intent claims) 8. Vehicle accidents

Development

Risks During Development Process • Environmental/property damage

o Generally not that significant during actually process o When they occur, usually arise during the casing, cementing and

injection process

Development

Risks During Development Process • Environmental/property damage

o Contamination 1. Failure in cement casing 2. Failure in sediment pond lining 3. Failure of injection wells 4. Migration of fracking fluid from injection and waste sites 5. Improper dumping of waste materials 6. Contaminants includes fracking fluid chemicals and heavy

metals pulled to surface during drilling 7. Contaminated areas may include water wells, streams and

rivers

Development

Risks During Development Process • Environmental/property damage

o Sinkholes/quakes

Development

Risks During Development Process • Environmental/property damage

o Damage caused by transportation Transportation includes trucks, drilling rigs, and other heavy

equipment Road destruction, erosion, dust, and other damage to

adjacent property

Development

Risks During Development Process • Environmental/property damage

o Damage caused by transportation Tanker leaks/spills Damage to expensive equipment

Development

Risks During Development Process • Environmental/property damage

o Sinkholes/quakes o Damage caused by transportation

Dust

Development

Risks During Development Process • Environmental/property damage

o Damage to insured’s property/operations o Drill bits o Failure in process

Usually during horizontal turn Bits and pipe cannot be removed Equipment is very expensive

Post-Development

1. Removal of heavy equipment 2. Ongoing storage of fracking fluid, mud, and other

contaminants • Contains chemicals and heavy metals, such as arsenic and

mercury • Difficult to treat

Post-Development

1. Removal of heavy equipment 2. Ongoing storage of fracking fluid, mud, and other

contaminants • Put into slurry ponds and abandoned wells/mines

Post-Development

1. Removal of heavy equipment 2. Ongoing storage of fracking fluid, mud, and other

contaminants • Common complaint is that leaks have occurred or that

contaminants have migrated to water reservoirs.

3. Monitoring of well sites

Controversies

1. Linked to earthquakes in Kentucky, Ohio, and West Virginia 2. Pollution of wells, streams and rivers; even when ‘treated’ in

sewage and wastewater facilities contaminants can be found 3. Contamination of surface areas around well site 4. Brine is sometimes spread on public road and private

property; 90% is placed in injection wells 5. Hazardous landfills have been created

Controversies

6. Incineration may cause concerns with environmental air quality 7. Fracking fluid is regulated by industry; only recently have

companies been required to disclose the ‘propriety’ components of fracking fluid

8. Causes of toxic medical conditions in humans (though drinking water, dermal contact, and inhalation)

9. Regulatory scrutiny 10. Many communities and public service districts accepted method

until recently NOTE: Test laws suits have been filed in Texas, West Virginia, and

Arkansas

Business Entities Involved in Fracking

Business Entities Involved in Fracking

Attorneys Casing Operations Cementing Coatings/Cathodic Protection Communications/Control Construction Equipment Directional Services Downhole tools Drilling Electronics Engineering Services/Consultants Equipment Manufacturers Excavating Fabrication Freight Transportation/Logistics Fuel Manufacturers/Producers Geotechnical Services/Consultants Heavy Equipment HR Training/Professional Development Inspection Services

Landowners Meters/Measurement Mud Services/Logging Perforating Operations Pipes/Valves/Fittings Pollution Control Public Relations Pumping Services Regulatory Consultants Rental Tools Risk Management Safety/Health Programming Stimulation Surveying Transportation Waste Disposal Welding and Construction Well Control Well Logging Operations Wireline Operators

Questions?

Charles R. Bailey cbailey@baileywyant.com