Oklahoma Supreme Court: Oil Firms Can Be Sued over Quakes

By | July 1, 2015

New Dominion LLC can be sued by an Oklahoma woman injured when her fireplace fell on her during an earthquake that she blames on disposal wells tied to fracking.

The June 30 ruling by the Oklahoma Supreme Court reversed a lower-court decision throwing out the case and saying it was a matter for state energy regulators. The lawsuit is the first of its kind headed toward a jury trial, according to a lawyer for the woman.

Sandra Ladra sued New Dominion and Spess Oil Co. for injuries suffered to her knees and legs in November 2011, when a 5.0 magnitude earthquake struck near her home in central Oklahoma. The tremor caused the rock facing on her two-story fireplace and chimney to fall into the living room, where she was watching television with her family.

Oklahoma, a region not known for seismic activity, has experienced a rash of earthquakes since 2009, the same year area oil companies began using hydraulic fracturing, or fracking, to shatter deep rock layers to extract oil and gas. Fracked wells produce large quantities of wastewater, which drilling companies inject into ultra-deep disposal wells, which are in turn blamed by critics for causing earthquakes.

Richard Andrews, Oklahoma’s state geologist, published a study in April concluding it’s “very likely” the 600 percent increase in earthquake activity experienced in some parts of the state was triggered by the injection of waste water in disposal wells rather than by the fracking activity itself.

Average Rate

Oklahoma’s earthquake rate has increased from 1.5 temblors a year before 2008 to an average rate of 2.5 a day, Andrews said in the April 21 report.

Since 2011, more than 20 lawsuits have been filed against companies including BHP Billiton Ltd., Chesapeake Energy Corp., Royal Dutch Shell Plc and Sunoco Logistics Partners LP that allege underground injection activities caused earthquakes in Arkansas and Texas, according to a tally of cases compiled by Bloomberg Intelligence.

A July 2014 study published in the journal Science found that four high-volume disposal wells owned by New Dominion on the outskirts of Oklahoma City may have accounted for 20 percent of all seismic activity in the central U.S. from 2008 to 2013.

David J. Chernicky, chairman and founder of New Dominion, has said the evidence tying underground wells to earthquakes is unreliable. He was dismissive of Ladra’s lawsuit in an interview this year and expressed confidence New Dominion will prevail.

‘About Emotion?’

“I deal with science,” he said. “That’s what this will come down to. Is it about science? Or is it about emotion?”

New Dominion, based in Tulsa, and Spess Oil didn’t immediately respond to phone messages seeking comment on the suit. Robert Gum, New Dominion’s lawyer, also didn’t immediately return a call seeking comment.

The legal fight over fracking and earthquakes in Oklahoma now includes Harold Hamm, the chief executive officer of Continental Resources Inc. Hamm filed a state court defamation lawsuit on June 26 against a man who accused him in a Facebook posting of trying to “squelch” a study on the state’s earthquakes, according to a complaint.

Mickey Thompson, an oil industry consultant, didn’t immediately return a phone message seeking comment on the lawsuit.

In Ladra’s case, the Oklahoma Supreme Court reversed a trial court’s ruling that the Oklahoma Corporation Commission, which regulates the energy industry, has exclusive jurisdiction over cases concerning oil and gas operations.

Court’s Reasoning

The regulatory body “is without authority to hear and determine disputes between two or more private persons or entities in which the public interest is not involved,” the high court said in its decision.

Stating that a public-rights dispute “must arise between government and others,” the court found the commission “is without the authority to entertain a suit for damages.” It ordered the state district court to proceed to weigh the merits of Ladra’s argument.

Scott Poynter, a spokesman for the injured woman and her attorney, said Ladra’s case will “be stuck for awhile” if the oil companies ask the court for reconsideration.

“People like to say these cases are about fracking but it’s about a byproduct of fracking,” he said in a phone interview.

Poynter said Ladra, 64, has been told she may need replacement knee surgery.

The case is Ladra v. New Dominion LLC, SD-113396, Supreme Court of the State of Oklahoma (Oklahoma City).

With assistance from Mark Chediak, Robert Burnson and Benjamin Elgin in San Francisco

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