Should oil firms be held liable in earthquake lawsuits?
Holding companies liable for damages caused by fracking-induced earthquakes is an unreliable way to manage this new risk. The courts simply aren’t equipped to handle this issue in a way that is fair to the companies and to the people who have been harmed, while also taking into account the best interests of the broader population.
The science is straightforward. Increases in drilling activity, including hydraulic fracturing and deep-well injections, have caused dramatic changes in seismic activity. Last year, 5,415 earthquakes were documented in Oklahoma, making it the most seismically active state in the continental United States. The frequency and severity of these earthquakes are both on the rise.
While the relationship between fracking and earthquakes may appear sufficient to hold companies liable, how to apportion liability is a much more difficult question. The devil is in the details. Scientists are only now beginning to connect seismic activity to certain types of drilling-related activities, and are still exploring whether a causal relationship between those particular activities and quakes can be determined. Drilling sites are extremely active and clustered, making it extraordinarily difficult to differentiate how each well or event contributes to the geologic stresses that cause earthquakes.
Research is beginning to connect discrete seismic events to discrete drilling phases in a few isolated incidents, but not with the confidence necessary to pinpoint how—and how much—oil and gas developments contribute to the timing and severity of those events. Earthquakes are a wickedly complex subject, even without any human activity involved. Indeed, the natural system is so complex that we rely on probability analysis, not true forecasts, to plan and prepare for earthquakes.
Meeting the conditions for liability in these circumstances is hugely complicated. But even if it was conceivable to meet such a threshold, it would still be inappropriate for the courts to make this decision.
Common-law liability is simply too blunt an instrument. It asks the court not only to sort through complicated and inconclusive scientific data, but also to judge, in effect, whether limited instances of earthquake damages should put an end to oil-and-gas operations that promote economic growth and enhanced energy security.
There is no doubt that oil-and-gas development in Oklahoma has enormous upside benefits. Oil production has nearly doubled in the state over five years, creating jobs and raising average wages, increasing revenue to the state treasury and holding state unemployment well below the national average. Other benefits accrue to the rest of the country, creating supply-chain jobs, lowering manufacturing costs and increasing the supply of stable, domestic energy resources.
These benefits must be balanced against the risks of increased seismic activity—not sacrificed to a tenuous connection between any one oil and gas operation and a particular seismic event.
Thankfully, the legislative and executive branches are designed to handle exactly such inherently political calculations. Limited state action, in cooperation with the oil and gas industry, to identify and codify the best technical practices to mitigate earthquake risk is a much more effective and efficient approach than litigation.
That doesn’t mean people shouldn’t be compensated for earthquake damages. Ideally that’s the role of the insurance market. In the absence of coverage, it may be necessary to create an alternative compensation pool funded by industry contributions or any other number of sources.
There is no doubt that aggressive development of shale deposits has increased the frequency and magnitude of earthquakes in the central United States. Managing and mitigating practices that contribute to damaging earthquakes can be part of successful, continuing investment in oil and gas development, but not if the judgment is left to the courts.
