Ladra v. New Dominion: Opening the Door to Tort Liability for Earthquake Damage Caused by Energy Companies

May 8, 2016
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As someone who attended college at the University of Oklahoma, I can attest to the exponential rise in earthquakes in the state first-hand. In fact, I am willing to bet that I felt the same earthquake that injured Sandra Ladra on November 5, 2011, providing the basis for her lawsuit. After facing initial roadblocks, Ladra’s suit is finally ready to proceed. Ladra filed suit against defendant energy companies in the district court. The energy companies filed a motion to dismiss, alleging that the court was not the appropriate venue for damage claims in actions concerning oil and gas activity because the Oklahoma Corporation Commission has exclusive jurisdiction.[1] But the Oklahoma Supreme Court determined that district court had jurisdiction because of the “long-held rule that district courts have exclusive jurisdiction over private tort actions when regulated oil and gas operations are at issue.”[2] Ladra is unlikely to prevail, but her case opens the door for courts to find liability for earthquake damage in the future. The main challenge to Ladra’s case is proving duty of care and causation.

 

The issue of proving duty of care poses a problem for Ladra. She claims that several energy companies were negligent in their disposal of wastewater and that this negligence led to the earthquake that caused her injuries. In order to prove this she must first show that these energy companies owed her a duty of care. There is a well-established relationship between high-pressure disposal wells and seismic activity. In 2013, the 5.7 magnitude quake that caused Ladra’s injuries was likely caused by “[c]ontinuing injection over 18 [years] into subsurface compartments in the Wilzetta field….”[3] However, in 2011 at the time of the earthquake, federal and state regulations concerning injection wells focused predominantly on the protection of groundwater from contamination of wastewater.[4] It will be difficult for Ladra to argue that her damages, which stemmed from an earthquake, were foreseeable to energy companies at the time, such that that they owed her a duty of care. It will be especially difficult given that the best practices in the industry did not account for earthquakes.[5]

 

The issue of causation also presents a problem for Ladra. Although the science behind induced seismic activity has made large strides since 2011, “Pinpointing the a particular well to a series of earthquakes can be problematic….”[6] Even if Ladra can prove that injection well activity caused the earthquake leading to her injuries, it will be extremely difficult to prove that it was caused by activity from a specific well, like the one operated by defendants New Dominion LLC and Spess Oil Co.

 

Because duty and causation are so difficult to prove, Professor Blake Watson of the University of Dayton School of Law argues that there should be strict liability for energy companies who engage in wastewater well injection that leads to earthquakes.[7] Watson proposes that courts should view injection and fracking as abnormally dangerous activities under the Second Restatement of Torts.[8] According to Watson, these activities create a high degree of risk of harm to persons or land.[9] What’s more, the risk cannot be eliminated through the exercise of reasonable care and it is likely that the harm will be great.[10] “Because earthquake damage occurs even when frack fluids are properly injected and subsurface formations are properly fractured,” he states, “oil companies should compensate injured land owners.”[11]

 

Energy companies counter Watson’s contentions by asserting that there is no high degree of risk of harm given the number of injection wells across the country that do not, under any theory of research, cause earthquakes.[12] Professor Meredith Wegener of Oklahoma City University says, “[A]s the science progresses and the data indicates why one well may operate without incident and another may cause harm, reasonable care and what that entails will eliminate the risk.”[13]

 

Whether Ladra is successful in her tort action or not, she has already dealt a blow to the energy industry in Oklahoma by forcing energy companies to defend earthquake damage claims in court. Indeed, “By extension, the Supreme Court ruling also allows a property damage suit…. worth tens of millions of dollars if the requested class-action status is granted.”[14] Now that the door is open for such suits in Oklahoma, it will be interesting to see how the courts rule. If the relationship between earthquakes and well injection continues to be more concretely proven, it will be more difficult for energy companies to claim that the damages caused by earthquakes are unforeseeable, shielding themselves from liability. But this question may be moot if courts opt for a strict liability approach. Regardless, this new subset of litigation develop in Oklahoma is one to watch as the result could impact similar cases in other states.

 

 

[1] Ladra v. New Dominion, LLC, 2015 OK 53, 353 P.3d 529.

[2] Id. at 532.

[3] Katie M. Keranen, Heather M. Savage, Geoffrey A. Abers & Elizabeth S. Cochran, Potentially induced earthquakes in Oklahoma, USA; links between wastewater injection and the 2011 Mw 5.7 earthquake sequence, 41, GEOLOGY, 699, 702 (2013).

[4] Meredith A. Wegener, Shake, Rattle and Palsgraf: Whether an Actionable Negligence Claim Can be Established in Earthquake Damage Litigation, 11, Tex. J. Oil, Gas & Energy L., 115, 130 (2016).

[5] Id.

[6] Julie Shemeta, Did the Earth Move? Induced Seismicity in Oil and Gas Operations, ABA ENERGY LITIGATION (May 27, 2015), http://bit.ly/1JtUH0k.

[7] Blake A. Watson, Fracking and Cracking: Strict Liability for Earthquake Damage Due to Wastewater Injection and Hydraulic Fracturing, 11, Tex. J. Oil, Gas & Energy L., 1, 24.

[8] Id.

[9] Id.

[10] Id.

[11] Id. at 26.

[12] Wegener at 136.

[13] Id. at 137.

[14] Randy Krehbiel, Oklahoma Supreme Court clears way for earthquake lawsuits against energy companies, TULSA WORLD (July 1, 2015), http://www.tulsaworld.com/news/capitol_report/oklahoma-supreme-court-clears-way-for-earthquake-lawsuits-against-energy/article_546e6b34-4bfb-5298-a245-502c632a00dd.html.

About

A 2L at Texas Law, Zach attended college at the University of Oklahoma where he majored in Economics. Being from Houston, he’s always had an interest in the energy industry. After graduation, Zach hopes to practice corporate transactional law.