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.

1. Liability in
Hydraulic Fracturing
Charles R. Bailey

3. 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

4. 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

5. 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

6. Pre-Development
Insurance Market
• Number of insurers providing this type of
professional liability is limited

7. 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

8. Development
Activities
• Drilling
o Vertical drilling
o Horizontal drilling

9. 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.

10. 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

11. 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

12. Development
Fracking Process
• Perforating casing and
igniting charges

13. 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)

14. 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

15. Development
Heavy equipment
• Includes excavation equipment, rigging machinery, water
trucks, pumps, and seismic machines
• Generally present during all phases of development

16. 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)

17. 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

18. Development
Risks During Development Process
• Personal Injury to workers (workers’ compensation and
deliberate intent claims)
7. Exposure to hazardous compounds and chemicals

19. Development
Risks During Development Process
• Personal Injury to workers (workers’ compensation and
deliberate intent claims)
8. Vehicle accidents

20. 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

21. 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

22. Development
Risks During Development Process
• Environmental/property damage
o Sinkholes/quakes

23. 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

24. Development
Risks During Development Process
• Environmental/property damage
o Damage caused by transportation
 Tanker leaks/spills
 Damage to expensive equipment

25. Development
Risks During Development Process
• Environmental/property damage
o Sinkholes/quakes
o Damage caused by transportation
 Dust

26. 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

27. 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

28. 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

29. 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

30. 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

31. 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

32. Business Entities Involved in Fracking

33. 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

34. Questions?
Charles R. Bailey
cbailey@baileywyant.com