Liability in Hydraulic Fracturing

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This presentation explores the liabilities in hydraulic fracturing "fracking" that can occur which includes the risks in the pre-development process, risks in the post-development process, …

This presentation explores the liabilities in hydraulic fracturing "fracking" that can occur which includes the risks in the pre-development process, risks in the post-development process, controversies and the different business entities that are involved in fracking.

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  • 1. Liability in Hydraulic Fracturing Charles R. Bailey
  • 2. 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
  • 3. 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
  • 4. Pre-Development Damages • Could be significant if mistake is made • Damages theories could include: o Trespass o Nuisance o Restoration of property o Damage to other mineral rights holders
  • 5. Pre-Development Insurance Market • Number of insurers providing this type of professional liability is limited
  • 6. 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
  • 7. Development Activities • Drilling o Vertical drilling o Horizontal drilling
  • 8. 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.
  • 9. 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
  • 10. 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
  • 11. Development Fracking Process • Perforating casing and igniting charges
  • 12. 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)
  • 13. 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
  • 14. Development Heavy equipment • Includes excavation equipment, rigging machinery, water trucks, pumps, and seismic machines • Generally present during all phases of development
  • 15. 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)
  • 16. 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
  • 17. Development Risks During Development Process • Personal Injury to workers (workers’ compensation and deliberate intent claims) 7. Exposure to hazardous compounds and chemicals
  • 18. Development Risks During Development Process • Personal Injury to workers (workers’ compensation and deliberate intent claims) 8. Vehicle accidents
  • 19. 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
  • 20. 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
  • 21. Development Risks During Development Process • Environmental/property damage o Sinkholes/quakes
  • 22. 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
  • 23. Development Risks During Development Process • Environmental/property damage o Damage caused by transportation  Tanker leaks/spills  Damage to expensive equipment
  • 24. Development Risks During Development Process • Environmental/property damage o Sinkholes/quakes o Damage caused by transportation  Dust
  • 25. 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
  • 26. 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
  • 27. 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
  • 28. 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
  • 29. 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
  • 30. 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
  • 31. Business Entities Involved in Fracking
  • 32. 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
  • 33. Questions? Charles R. Bailey cbailey@baileywyant.com