Overview of Legal Issues and Litigation Arising from Shale Gas Development and Fracking

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Overview of Legal Issues and Litigation

Arising from Shale Gas

Development and Fracking

Presented by

John K. Broussard &

James E. Rogers

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Outline / Summary

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Importance of development

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Issues unique to fracking

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Legal Claims being made

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Future Legal Concerns

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Importance of Development: Meeting demand

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Source: U.S. Energy Information Administration; AEO2011

Executive Summary

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Importance of Development : Where

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Outline / Summary

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Importance of development

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Issues Presented by Shale Gas / Fracking

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“Real”

and “Perceived”

Issues

Water Use / Disposal

Environmental Issues: Politicians speak out

• New technology

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_{Water Use / Disposal}

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_{NY State Senator Kevin Parker (D)}

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Outline / Summary

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Importance of development

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Issues unique to fracking

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Who is involved?

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Repeat players…

Allen Stewart, P.C. (Dallas, Personal Injury)

Arnold & Itkin, LLP (Houston, Personal Injury and General Litigation)

Claunch Law Firm (Fort Worth, Personal Injury)

North Texas Litigation Group (Dallas, Texas) (consists of Petroff & Associates, Riddle & Williams, P.C., and Mathis & Donheiser,

P.C.)

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Current / Recent Texas cases

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Trio of Barnett Shale contamination cases

• Plaintiffs’ counsel in all three is the Turley Law Firm. 1. Scoma v. Chesapeake Energy Corp.;

• Plaintiffs (husband and wife homeowners) claim orange/yellow coloring of the water, bad taste, and foul odor. Plaintiffs allege increase in the concentration of benzene, toluene, ethylbenzene, xylene, barium, and iron in their water.

2. Mitchell v. Encana Oil & Gas (USA), Inc.

• Plaintiff alleges that her well water began to feel slick to the touch and give off an oily, gasoline-like odor in May 2010.

3. Harris v. Devon Energy Production Company, L.P.

• Plaintiffs allege water from two wells on plaintiff’s property became contaminated in April 2008 with a gray sediment. Plaintiffs claim to have testing results showing water contamination with high levels of metals.

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Current / Recent Texas cases

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Range Resources / EPA litigation

Dec. 7, 2010: the EPA issued to Range Resources an emergency

administrative order pursuant to Safe Water Drinking Act (§1431) finding an imminent and substantial endangerment to public health. January 18, 2011: EPA sued Range in Federal Court to enforce

its order.

March 7, 2011: TRRC issued a proposal for decision (PFD)

finding that Range’s operations have not caused or contributed to the contamination of the domestic water wells.

June 20, 2011: the District Court stayed the case until the Fifth

Circuit made a ruling on the Range’s Petition, which presents similar issues of fact and law.

October 3, 2011: Fifth Circuit held oral argument (Judges

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Current / Recent Texas cases

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Costal Oil & Gas Corp. v. Garza Energy Trust, 268 S.W.3d. 1

(Tex. 2008)

Holding: Rule of capture prevents royalty interest owners from recovering damages against well operator based upon trespass claim under Texas law.

The court, however, did not rule out the possibility of a breach of implied lease or breach of implied covenant to produce claim--only ruling that there was no evidence on the record to support such a finding.

The court did not make clear exactly what evidence would be required to make such a claim.

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Current / Recent Texas cases

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FPL Farming Ltd. v. Environmental Processing Sys., No.

09-1010 (Tex. Aug. 26, 2011)

The Injection Well Act and Texas Administrative Code do not shield permit holders from civil tort liability resulting from actions governed by the permit. Merely having a permit is not a shield from trespass claims.

(Overturned a Court of Appeals opinion on this issue.)

The court avoided the issue of whether subsurface wastewater migration can constitute a trespass and whether it did so in this case.

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Other Legal Claims Across U.S.

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Northeast Natural Energy, LLC v. Morgantown (Monangalia

County, West Virginia)

City of Morgantown’s ban on hydraulic fracturing overturned

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Cabot case –

Federal Court (Middle District of Pennsylvania)

Plaintiffs (63 individuals) reside in Dimock and Montrose, PA.

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Anschutz case --

New York state court, Chemung County

Plaintiffs (9 families in the Elmira, New York area) claim that fracking operations contaminated drinking water

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Outline / Summary

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Importance of development

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Issues unique to fracking

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Legal Claims being made

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Future Legal Concerns

Water Contamination /

Pollution Claims

■ Plaintiffs’ attorneys have made it clear that they intend to

exploit this niche market – particularly given the recent press regarding the

documentary “Gasland.”

Federal State & Citizen Group Action

Water Contamination Claims

Toxic Exposure Injury Claims

Person Injury & Property Damage Claims from

Operations Lease & Mineral Rights

Contract & Fraud Claims Contract & Business Tort Suits

among Producers, Operators, Service Companies, Transporters, Contractors & Purchasers Eminent Domain

Actions

Local Government Lawsuits & Ordinances

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Future Legal Concerns

Lease and Mineral Rights

Contract and Fraud

Claims

■ The Texas and Oklahoma courts have not completely ruled out the possibility that improper actions in fractioning

natural gas wells could lead to claims for breach of a covenant for damages – other courts may follow suit.

■ Most of the existing shale gas lawsuits are traditional oil & gas lease disputes (cancellations, underpayment of

royalties, cancellation / loss of drilling rights)

Federal State & Citizen Group Action Water Contamination

Claims

Toxic Exposure Injury Claims

Operations

Lease & Mineral Rights Contract & Fraud Claims

Contract & Business Tort Suits among Producers, Operators,

Service Companies, Transporters, Contractors & Purchasers

Eminent Domain Actions Local Government

Lawsuits & Ordinances

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Future Legal Concerns

Contract and Business

Tort Suits

Disputes regarding:

A. Oil and gas field service contracts B. Construction contracts

C. Joint venture agreements D. Transportation agreements

E. Oil, gas and liquids purchase and sale agreements

Every manner of contract and business tort dispute should be anticipated.

Federal State & Citizen Group Action Water Contamination

Claims Toxic Exposure Injury

Claims

Operations

Lease & Mineral Rights Contract & Fraud Claims

Contract & Business Tort Suits among Producers, Operators,

Service Companies, Transporters, Contractors & Purchasers

Eminent Domain Actions

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Future Legal Concerns

Local Government Lawsuits and Ordinances

■ Continued Political and Legal Efforts from Environmental Activists (i.e. Nofracking.com) ■ Barnett Shale examples:

A. Titan Operating sues the City of Flower Mound for denial of setback variances.

B. DFW area cities tighten drilling ordinances.

■ Another Range Resources situation

Federal State & Citizen Group Action

Water Contamination Claims

Toxic Exposure Injury Claims Person Injury & Property

Damage Claims from Operations Lease & Mineral Rights

Contract & Fraud Claims Contract & Business Tort Suits

among Producers, Operators, Service Companies, Transporters, Contractors & Purchasers

Eminent Domain Actions

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Outline / Summary

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Importance of development

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Issues unique to fracing

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Legal Claims being made

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Future Legal Concerns

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Federal Legislation

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Congress and EPA recently have suggested that federal

oversight of hydraulic fracturing operations might be warranted.

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i. Proposed FRAC Act

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ii. The Clean Energy Jobs & Oil Accountability Act 2010:

Requires disclosure of chemical constituents similar to the disclosure required by the proposed FRAC Act.

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iii. Continued / Threatened EPA Action

EPA studying relationship between hydraulic fracturing and drinking water contamination; final report in 2014

Overview of Legal Issues and Litigation Arising from Shale Gas Development and Fracking