In November 2009, a group of 44 plaintiffs, including the Ely family, filed suit against Cabot Oil & Gas Corp. for personal injuries and property damages that allegedly resulted from Cabot’s hydraulic fracturing operations in Dimock Township, Susquehanna County, Pennsylvania. The case is pending in the Middle District of Pennslyvania, captioned as Ely et al. v. Cabot Oil & Gas Corp., et al., Dkt. No. 3:09-cv-2284 (M.D. Pa.) (J. Carlson). After a number of parties settled out of the lawsuit, Cabot filed a motion for summary judgment on the Elys’ claims for breach of contract and lost royalties on an oil and gas lease, fraudulent inducement, negligence and negligence per se, medical monitoring, and violations of the Pennsylvania Hazardous Sites Cleanup Act (“HSCA”).   On Monday, nearly all of the Elys’ claims were dismissed.

The Ely family claimed that their drinking water well was contaminated with excess methane as a result of Cabot’s drilling activities in the surrounding area, despite the fact  Cabot never actually drilled any wells on the Elys’ property.  However, in 2009, the Pennsylvania Department of Environmental Protection shut down the Elys’ water well, which was replaced by a potable water supply container periodically filled by either Cabot or the Ely family.  The Elys claimed that their property value was severely impacted as a result of the contamination of their water supply and due to the general stigma attached to their property and the surrounding neighborhood. The Elys also claimed that Cabot breached its contractual obligations under their oil and gas lease to test and restore water supply to their property.    

On Monday, Judge John E. Jones entered an order, Ely et al. v. Cabot Oil & Gas Corp., et al., Dkt. No. 3:09-cv-2284 (M.D. Pa. Jan. 12, 2014) (J. Carlson), approving Magistrate Judge Carlson’s Report and Recommendation, which dismissed nearly all of the Elys’ claims. 

The court granted Cabot’s motion for summary judgment on the contract claims, in part because the plain language of the oil and gas lease agreement only required pre-drilling testing of the Elys’ water well and restoration of the Elys’ water supply if and when drilling operations occurred on the Elys’ property – not if the well was contaminated as a result of Cabot’s drilling activities on surrounding property.  The court also ruled that the Elys failed to meet all of the required elements for their fraudulent inducement claim, because the lease agreement contained an integration clause confirming that the parties did not rely on any promises or statements outside of that agreement, and because the Elys failed to present evidence to show that Cabot had made any false or misleading statements to the Elys. 

The Elys’ HSCA claim also failed because there was no evidence that there was an actual or threatened release of a hazardous substance on the property, and because the Elys had not incurred any response costs to clean up any hazardous substances – required elements of a claim under HSCA.  The court noted that the Elys’ own experts did not identify any releases of hazardous substances on the property, and that to the extent the Elys were attempting to assert that the release of methane or petroleum products into their water supply constituted a release under HSCA, those substances were expressly excluded from HSCA’s statutory scheme. 

The Elys’ negligence per se claim was also dismissed, because plaintiffs failed to present evidence that Cabot violated federal and state environmental statutes (including HSCA), other than including conclusory allegations that the company had violated such statutes.  The court also dismissed plaintiffs’ claims for medical monitoring on the basis that the Elys failed to produce any evidence indicating that they were at an increased risk of disease as a result of their alleged exposure to a toxic substance.  

Despite significantly narrowing the scope of the case, the court did allow the Elys’ general negligence and private nuisance claims to move forward to trial. Cabot had been subject to multiple consent orders and settlement agreements with the PADEP for activities in Dimock Township, which the Elys’ pointed to as evidence that the various natural gas exploration wells Cabot drilled in the surrounding area were negligently constructed.  The court held, however, that the Elys could not use Cabot’s consent decrees to establish support for their negligence claim, because Federal Rule of Evidence 408 precludes the introduction of evidence of settlement agreements and compromises if offered to prove a defendant’s ultimate liability.  However, the court also found that the plaintiffs had submitted sufficient additional evidence to support their negligence claims through the expert testimony of a hydrologist and engineer, which presented a disputed issue of fact regarding whether Cabot had breached the applicable standard of care when conducting their fracking operations, and whether the Elys suffered damages as a result. 

The court also denied summary judgment on the Elys’ private nuisance claim, because plaintiffs had presented sufficient evidence to support their allegations that Cabot’s fracking activities caused contamination of their water supply, which could be considered a significant interference with the use and enjoyment of their property.

One additional issue that the court has not yet decided is whether hydraulic fracturing is an abnormally dangerous or ultra-hazardous activity under Pennsylvania law – an issue that both fracking proponents and opponents will be carefully watching. 

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