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Marcellus Shale and the Ultrahazardous Activity Analysis

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Marcellus Shale and the Ultrahazardous Activity Analysis THE OLDEST LAW JOURNAL IN THE UNITED STATES 1843-2011 PHILADELPHIA, FRIDAY, OCTOBER 14, 2011 VOL 244 • NO. 74 Marcellus Shale and the Ultrahazardous Activity Analysis BY CHRISTOPHER D. BALL Pennsylvania court has ruled on the issue Special to the Legal CHRISTOPHER D. BALL to date. is an attorney at the If the drilling and stimulation of shale- ennsylvania lies over the heart of the environmental and energy gas wells is determined by the courts to be Marcellus Shale formation, a rock unit law firm of Manko Gold ultrahazardous, liability may be assessed P underlying approximately 65-million Katcher & Fox, where irrespective of fault and the potential acres of land from West Virginia to New he focuses his practice on liability and associated costs facing the York. This formation has been estimated to civil and administrative burgeoning Marcellus Shale industry have a resource value of up to 500-trillion environmental litigation could be significantly increased. A review cubic-feet equivalents of natural gas, and and regulatory matters. of the factors typically employed by has spawned a boom of gas-well drilling in He can be reached at courts in determining whether to impose the southwest, northcentral and northeastern 484-430-2358 or [email protected]. strict liability, as well as recent case law portions of the commonwealth. Between touching specifically on the issue of shale January and September, the Pennsylvania drilling, indicates that it is unlikely that Department of Environmental Protection Commission noted the potential for poorly the development of natural gas from the issued 2,514 Marcellus Shale drilling constructed gas wells to allow methane to Marcellus Shale will be considered an permits, and 1,388 wells were reported as migrate along the outside of the well and ultrahazardous activity in Pennsylvania. having been drilled. impact water supplies. Regarding hydraulic In determining whether an activity is Litigation related to Marcellus Shale fracturing, the Advisory Commission ultrahazardous, Pennsylvania courts have development is similarly on the rise. Claims identified related concerns as surface spills of adopted the Restatement (Second) of Torts, brought by private litigants focus on claimed hydraulic fracturing fluids, well control and which requires the following factors to be impacts from well drilling and related lost containment of flowback or produced considered: activities, including hydraulic fracturing, water on the surface. • Existence of a high degree of risk of referred to colloquially as “fracing” The concerns of the Advisory Commission some harm to the person, land or chattels or “fracking.” Hydraulic fracturing, in have been reflected in Marcellus Shale- of others. combination with horizontal drilling related litigation, where litigants’ claims • Likelihood that the harm that results techniques, enables the extraction of natural have raised allegations that their drinking from it will be great. gas trapped in shale rock through the use water supplies were contaminated by • Inability to eliminate the risk by the of large amounts of pressurized fluids, chemicals in the hydraulic fracturing fluids exercise of reasonable care. consisting primarily of water and sand with or by methane gas released by drilling. • Extent to which the activity is not a limited amounts of chemical additives, to These lawsuits have asserted numerous matter of common usage. induce small fractures to form in the rock causes of action, including for claimed • Inappropriateness of the activity to the surrounding the well casing within the violations of Pennsylvania’s environmental place where it is carried on. Marcellus Shale formation. Those fractures, laws such as the Clean Streams Law and the • Extent to which its value to the in turn, allow the natural gas in the shale to Hazardous Sites Cleanup Act, as well as the community is outweighed by its dangerous pass into the well casing and be captured. For typical common law claims for negligence, attributes. wells tapping the Marcellus Shale formation trespass, nuisance and for claims based in Activities that have been found to be in Pennsylvania, the hydraulic fracturing strict liability. ultrahazardous in the past include the process is focused on shale that is typically To be successful, a claim based on a collection of large amounts of water in at a depth of between 5,000 and 8,000 feet common law theory of strict liability must unsuitable or dangerous places, the use below the ground surface. demonstrate that an activity is so abnormally of explosives in the midst of a city, pile In July, the Governor’s Marcellus Shale dangerous, or “ultrahazardous,” that liability driving near surrounding buildings and Advisory Commission issued a report should be imposed on the person engaged in activities such as crop dusting that involve evaluating the development of Marcellus the activity for any damages caused by their the release of poisonous gas into the air. Shale gas reserves in Pennsylvania. The operations whether or not they exercised the People engaged in these activities, or any report assessed many facets of the surge utmost care to prevent the harm. Pennsylvania other deemed to be ultrahazardous, are in natural gas development, including well plaintiffs have alleged that Marcellus Shale held to be strictly liable for the damages drilling and the use of hydraulic fracturing. well drilling and development qualifies as resulting from the activities. With respect to drilling, the Advisory a form of ultrahazardous activity, but no Litigants have attempted to analogize the alleged risks associated with shale-gas drilling of wells through the exercise of economic activity and significant amounts development with those of the activities such reasonable care. of natural gas. Moreover, such natural as blasting that courts have found to qualify as Second, with almost 4,000 Marcellus gas represents a domestic energy supply ultrahazardous. In this regard, litigants have Shale wells developed in Pennsylvania that lessens reliance on foreign sources of pointed to the fact that a single shale well since 2005 — and more anticipated in the energy. In light of the nation’s persistent site can use several million gallons of water future — plaintiffs bringing strict liability energy demands and high unemployment mixed with sand and chemical additives, claims will be increasingly hard-pressed rates, it will be difficult for plaintiffs to the management of which has prompted a argue that the value to Pennsylvania from high level of public concern. Also, while shale-gas development is outweighed by the surface land above the Marcellus Shale any dangerous attributes of the practice. formation is largely rural, communities and It will be difficult for While no Pennsylvania court has applied individual residences can be located near the above-factors to date, over the last year shale drilling operations — operations that plaintiffs to argue that two orders issued by the U.S. District Court involve the use of explosive charges deep for the Middle District of Pennsylvania on underground to initially perforate the well the value to Pennsylvania motions to dismiss in shale-related litigation casing within the shale before initiating the highlight the challenges facing claims that hydraulic fracturing process. from shale-gas drilling and stimulating natural gas wells is Risks alleged by litigants are, however, ultrahazardous. In both Fiorentino v. Cabot insufficient to characterize an activity as development is outweighed Oil & Gas Corp. and Berish v. Southwestern ultrahazardous where the Restatement factors Energy Production Co., the court allowed the on balance do not support that conclusion. by any dangerous plaintiffs’ strict liability claims to proceed For instance, despite the acknowledged risks past the pleadings stage, but stressed that of operating a petroleum pipeline next to a attributes of the practice. the likelihood of success for those claims Bucks County housing development, the as the cases proceeded was limited. In Pennsylvania Superior Court in Melso v. to argue that shale gas development has Fiorentino, the court pointed to precedent Sun Pipe Line Co. determined that such not become a matter of common usage, rejecting ultrahazardous allegations against an activity did not warrant the imposition particularly because the common usage activities such as pipeline operation, and of strict liability because it was a common prong of the analytical framework under in Berish, the court noted that “meeting activity required in our highly industrialized the Restatement can take into account the ‘common usage,’ ‘inappropriateness of society. Other Pennsylvania cases where usage within a given community and shale the activity,’ and ‘value to the community’ activities with inherent risks have been gas development is widespread within prongs of [the Restatement factors] will found not to be ultrahazardous include the certain communities in Pennsylvania. likely create difficulty for plaintiffs at the storage of a toxic insecticide in a barn in Third, to access natural gas in the Summary Judgment Stage.” Diffenderfer v. Staner and the storage of Marcellus Shale formation, well operators The recent orders issued by the Middle gasoline in underground storage tanks in first must obtain the rights to the natural District, the high threshold imposed by the Smith v. Weaver. gas reserves, typically through leases with Restatement factors and the Marcellus Shale Consideration of the Restatement factors
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