Fracking-Quakes Liability Fight Rumbles on in N.Y.

MANHATTAN (CN) — Shaken by five lawsuits over fracking-linked earthquakes, an Oklahoma energy company stumbled in its attempt to have its insurance company steady the aftershocks.

New Dominion, an oil and natural gas company based in Tulsa, Okla., has been rocked by lawsuits from the Sierra Club and residents living near its drilling areas blaming it for a sharp spike in seismic activity.

After litigation started early this year, New Dominion demanded that Lloyd's of London underwrite its legal woes, and each of the companies went to court demanding to be cleared of liability. New Dominion filed its case on its home turf of Tulsa County, and Lloyd's responded in kind in Manhattan Federal Court.

On Wednesday, U.S. District Judge Denise Cote ruled that the insurance policy made clear that the dispute belonged in New York.

Their agreement stipulated that the parties "agree that the laws of the state of New York shall apply and that all litigation, arbitration or other form of dispute resolution shall take place in the state of New York."

The judge found that New Dominion had no excuse to wiggle out of these ironclad terms.

"The policy is an insurance contract between two sophisticated businesses and New Dominion has not alleged any power imbalance between it and Lloyd's," Cote wrote.

Attorneys for the parties did not respond to emailed requests for comment Thursday.

The decision fell one day after the Environmental Protection Agency ordered the shutdown of 17 wastewater wells in northeastern Oklahoma's Osage County, in the wake of a 5.6 magnitude earthquake days earlier.

Government regulators have increasingly formed a consensus that fracking, short for hydraulic fracturing, is linked to earthquakes, which have been hitting the Sooner State especially hard.

In a report released in March, the U.S. Geological Survey observed a striking statistic about how much shakier Oklahoma fault-lines have been since the period between 1950 and 2005, when the state averaged 1 1/2 earthquakes per year above a 3.0 magnitude.

"Over the past few years, however, Oklahoma has recorded several hundred M3.0+ earthquakes per year, many of which are thought to be related to wastewater injection," the agency found.

The EPA echoed a similar conclusion months later in August, when the agency — in what was then the first public statement of its kind — told Texas regulators that there was a "significant possibility" that fracking had been causing earthquakes in the Dallas area.

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