Damage Award in Texas Fracking Case Raises Stakes in Air Quality Debate

Photographer: Matt Nager/Bloomberg

A natural gas rig in the North Texas Barnett Shale bed rock deposit near Kennendale, Texas. Close

A natural gas rig in the North Texas Barnett Shale bed rock deposit near Kennendale, Texas.

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Photographer: Matt Nager/Bloomberg

A natural gas rig in the North Texas Barnett Shale bed rock deposit near Kennendale, Texas.

InsideClimateNews.org — Between February 2010 and July 2011, Lisa and Bob Parr filed 13 complaints about air pollution from gas and oil operations near their ranch in Wise County, Texas. Sometimes they had trouble breathing, they told the Texas Commission on Environmental Quality (TCEQ). They also experienced nausea, nosebleeds, ringing ears and rashes.

Other families were also alarmed. Between 2008 and 2011, the TCEQ received 77 complaints from Wise County, in the Barnett Shale drilling area in North Texas. One said the odor was so powerful that the complainant "couldn't go outside," according to the TCEQ report.

Frustrated and angry, the Parrs decided to sue. Their attorney warned them that lawsuits against the oil and gas industry rarely, if ever, succeed. But the Parrs persisted and last month won what appears to be the first successful U.S. lawsuit alleging that toxic air emissions from oil and gas production sickened people living nearby. A Dallas County jury found that Aruba Petroleum, a privately owned company based in Plano, Texas, "intentionally created a private nuisance" that affected the family's health and awarded the Parrs almost $3 million in damages.

"When you don't have a strong regulatory system, a system to prevent what happened to this family, the only place left to turn for help is the courts," said Robert Percival, director of the University of Maryland's Environmental Law Program.

There are no assurances the verdict against Aruba will survive an appeal or lead to regulatory changes in Texas or any of the other states where people complain their health is jeopardized by gas and oil drilling. The issues are so complex that the industry, the public and policymakers may be sorting through them for years.

Aruba has asked Judge Mark Greenberg, who presided over the Parrs' case, to reverse the jury's verdict. Greenberg is expected to hear arguments over the verdict in June.

"This case will be looked at very, very closely because it has set the stage in a way that has never been set before," said attorney Tomas Ramirez. He represents two families in similar lawsuits in the booming Eagle Ford Shale of South Texas, where emissions are raising the same alarms that have been sounding in the heavily developed Barnett Shale region the Parrs call home.

Aruba used two long-standing industry arguments in its defense: That the emissions could have come from one of its competitors' wells, and that it was in compliance with Texas environmental rules.

The fact that those arguments failed in this case "exposes every company to more possible litigation," said Thomas McGarity, a University of Texas law school professor who specializes in environmental and administrative law.

"Losing this case was not good for the industry," McGarity said. "My guess is the industry will coalesce around this case. The industry will want to stop the dam from breaking wide open...This is where they will take a stand."

Aruba officials declined requests for interviews but released a statement though a public relations firm that said: "We contended the plaintiffs were neither harmed by the presence of our drilling operations nor was the value of their property diminished because of our natural gas development."

In a motion to overturn the verdict, company lawyers argued "there is no evidence that Aruba engaged in any conduct intended to cause harm...Aruba's operations complied with best industry practices and met the standard for a reasonable and prudent oil and gas operator."

More than 100 wells have been drilled within two miles of the Parrs' ranch, Aruba pointed out, and only 22 of them are owned by Aruba. On its website, Aruba says it is the fifth-largest of the 117 companies operating in Wise County.

The Parrs' attorney, Brad Gilde, said TCEQ documents show Aruba repeatedly violated state regulations and in some cases was fined for its offenses.

There was sufficient evidence to support a jury finding that "Aruba either (1) knew an [emissions] invasion was resulting from its conduct, or (2) knew an invasion was substantially certain to result from its conduct," Gilde said in his response to Aruba's motion to overturn the verdict.

William Anaya, a Chicago attorney who often represents the oil and gas industry, said the Parrs' victory is an anomaly and won't set a precedent that the industry can be held responsible for dangerous emissions.

Oil and gas development is safe and heavily regulated, he said, which is why cases against the industry rarely even make it to court, much less succeed.

"I'm incredulous of the whole thing," Anaya said.

The Parrs, meanwhile, are trying to sell their 40-acre ranch, which the jury concluded had lost $275,000 in value because of the Aruba facilities. It has been on the market for two years, but so far they've had no offers. Their neighbors, Christine and Tim Ruggiero, also sued Aruba, but agreed to an out-of-court settlement. The Ruggieros' settlement prohibited them from talking publicly about their case, and they declined to be interviewed for this article.

Lisa Parr said she's constantly stopped at the supermarket, the gas station and her daughter's school by people who offer their congratulations and thanks. She said she even gets calls from strangers who start out by saying "You don’t know me but..."

"They want to tell me how happy they are for us," she said. "And they thank us for fighting...It's like they are feeling it too, like our win is their win."

That the case was won in Texas makes the Parrs' victory especially unusual. A recent investigation by InsideClimate News, the Center for Public Integrity and The Weather Channel found that Texas politicians often work hand-in-hand with the industry, regulations are lax and little is known about the risks from the toxic soup of emissions the industry releases.

Thousands of oil and gas facilities, including at least one Aruba facility near the Parrs' house, self-audit their emissions without reporting them to the state. The TCEQ, which regulates most air emissions, doesn't even know some of these facilities exist.

TCEQ chairman Bryan Shaw said the agency doesn't plan to take any concrete action as a result of the lawsuit. Instead, it will continue to enforce existing regulations, he said during a brief interview earlier this month at the TCEQ Environmental Trade Fair and Conference in Austin.

The agency's business-as-usual attitude doesn't surprise former TCEQ Commissioner Larry Soward, whose contentious, four-year term ended in 2009.

"TCEQ is so strongly set in their belief that emissions from oil and gas have little or no effect on air quality or human health that they will simply ignore this case," Soward said. "They are very pro-industry and they will not change their position because of some jury award."

It Smelled Like 'Burning Plastic'

The Parrs' story began in 2008, after Bob Parr married Lisa and brought her and her daughter Emma to live on his ranch near Decatur, 60 miles northwest of Dallas. Parr bought the land in 2001 and built a 2,500-square-foot house in a gentle valley that he hoped would protect it from the tornadoes that often rip across the plains. There were a couple of old oil wells nearby but little else except rolling prairie and clear skies stretching from horizon to horizon.

Like many people in Texas and other parts of the United States, Parr doesn’t own the mineral rights to his land. When he bought the ranch that didn’t seem to be a problem. The drilling boom in the Barnett Shale hadn't begun yet. He had no idea his new house was sitting atop one of the nation’s largest gas and oil reserves.

By the time Lisa and Emma moved to the ranch, gas wells had begun encircling the property. A little less than a year later, Lisa Parr said she started coughing and wheezing and noticing a chemical odor "like burning plastic." She began noting the dates and details of her ailments in a journal.

She filed her first complaint with the TCEQ on Feb. 20, 2010.

The agency assigned the complaint case number 138794. It succinctly summed up Lisa Parr's grievance:

"The complainant alleged that odors from a natural gas facility were creating a nuisance," according to a synopsis of the complaint on the TCEQ's website.

The matter was investigated the same day and closed with an equally succinct note: "No violations were found."

Inspector Saw 'Heavy Plumes' of Emissions

The Parrs didn't know it at the time, but their neighbors on Star Shell Road, the Ruggieros, also had complained about Aruba.

On two occasions the TCEQ dispatched inspectors to two Aruba facilities near the Ruggieros and the Parrs because of odor complaints it received over an 11-day span in January and February 2010. The TCEQ concluded that Aruba had failed to prevent the discharge of volatile organic compounds (VOCs) onto neighboring properties. Many VOCs—including benzene, toluene, ethylbenzene and xylene—are known to cause the ailments the Parrs had complained about.

The TCEQ fined Aruba $32,500.

In July, the Parrs complained about a third Aruba facility. They said foul odors coming from a wellhead caused "dizziness and caused their nose to burn,"according to the complaint. The Parrs were also worried because three of their chickens had mysteriously died.

A TCEQ investigator arrived about two and a half hours later and began collecting air samples, according to an agency report. Using an infrared camera, he identified "heavy plumes" of emissions wafting from the Aruba facility and toward the Parr house, 280 feet away.

The investigator walked into the plume to obtain a canister sample. Thirty seconds later he "felt the physical effects of dizziness and a sore throat," the report said. He left immediately.

The TCEQ uses a three-point rating system—major, moderate and minor—to classify the harm caused by a release. The agency classified the Aruba release as "moderate" but decided the incident warranted a vigorous response.

"Due to the seriousness of the alleged violations and the deterrent effect of a district court order" the case was referred to the Texas attorney general's office, according to a letter the TCEQ sent to Christine Ruggiero.

Aruba paid $108,000 to settle the court case, the third-highest penalty collected in 99 cases that the attorney general's office prosecuted on behalf of the TCEQ that year.

Evidence key to the attorney general's case included an analysis of the air samples the TCEQ investigator had taken. It showed concentrations of five VOCs high enough to cause short-term health effects and 20 compounds in amounts high enough to cause long-term health effects, according to the attorney general's complaint.

The TCEQ's report on the incident revealed something else: Aruba had been operating the facility without obtaining a TCEQ air emissions permit.

'Our Life Turned into a Nightmare'

In April 2011, the TCEQ discovered that a separate Aruba facility less than a mile from the Parrs' ranch had spewed 5,383 pounds of VOCs into the air over a five-and-a-half-hour period, according to TCEQ records. The emissions accounted for more than 10 percent of the total amount of VOCs the facility was authorized to emit in an entire year.

The accident was caused by a broken valve. The TCEQ fined Aruba nearly $3,000 for failing to operate its equipment properly and for failing to report the incident within 24 hours, as regulations required. At the time, the TCEQ considered Aruba an "average performer" for compliance.

Meanwhile, Lisa Parr's symptoms were worsening. She saw six doctors, who were baffled by her illnesses. She had oozing welts on her scalp and lumps the size of walnuts on her neck. Bob Parr and Emma suffered from nosebleeds and irritated throats.

"Our life turned into a nightmare," Lisa Parr said in an interview. "We were deathly sick, scared and didn’t know what to do."

The Ruggieros continued to complain. But their situation was different. They had reluctantly allowed Aruba on their land after learning that the property's original owner had retained the surface and mineral rights. But they were shocked when the company erected a drilling rig the length of a football field away from their front window.

"Based upon their actions, Aruba Petroleum appears not to be concerned with our environment or health at all," Christine Ruggiero wrote to the TCEQ in August 2010. "They chose to place their operations 300 feet from our children, but they refuse to take proactive measures to protect them."

As the dispute deepened between the Ruggieros and Aruba, Christine began keeping a log of emissions and spills on and near their property. She shared the log with Lisa Parr, who was stunned when she compared the dates of her health crises with the events Christine had documented. Many of the dates matched.

In October 2010, the Ruggerios sued Aruba, complaining that toxic fumes were drifting from a natural gas well the company had drilled near their home. Aruba denied the allegations, saying it had paid the Ruggieros $30,000 to drill two wells on their land and had been a "reasonable and prudent" operator.

Lisa Parr, meanwhile, told one of her doctors what she had learned from Christine Ruggiero's logbook. He sent her to a specialist who focuses on illnesses triggered by environmental factors, such as polluted air and water. Tests revealed that chemicals in her blood matched chemicals found in the air samples the TCEQ investigator had taken when he responded to her July complaint.

In March 2011, the Parrs filed a lawsuit against Aruba and 10 other companies, claiming the family was "under constant, perpetual, and inescapable assault of Defendants' releases, spills, emissions, and discharges of hazardous gases, chemicals, and industrial/hazardous wastes." They sought up to $66 million in damages.

In November, the Ruggieros settled their case with Aruba. They sold their 10-acre property, which they said had been devalued from $257,330 to $75,240, and moved with their 10-year-old daughter to Pilot Point, Texas, about 45 miles away.

"Leaving Gasland is not winning, it's merely an end to losing," Tim Ruggiero wrote in a blog post for Earthworks, an environmental organization that opposes hydraulic fracturing, the process that has made it profitable to tap deeply buried shale deposits, like the Barnett and Eagle Ford.

A Narrow Win

The trial of the Parrs' lawsuit began on April 7 and lasted two weeks. Both sides called expert witnesses, who offered contradictory opinions on the effects of gas and oil emissions. According to scientists interviewed by InsideClimate News and the Center for Public Integrity, air monitoring in Texas, and across the nation, is so flawed that scientists don't fully understand how the industry's emissions affect public health.

One of the experts the Parrs relied on was Paul Rosenfeld, a California-based environmental chemist. He testified that Aruba's wells contained VOCs capable of causing headaches, nosebleeds, rashes, dizziness—the very symptoms the Parrs had complained about.

An expert witness for Aruba countered by saying that the amounts of VOCs on the Parrs' property were so small that they couldn't have affected the family’s health, according to the company’s motion to reverse the verdict.

The deliberations lasted two days. At one point the jurors were deadlocked and told the judge a verdict might not be possible, said David Davis, the jury foreman. The judge ordered them to keep trying.

In an interview with InsideClimate News, Davis said a couple of factors tipped the balance in the Parrs' favor.

The medical evidence, including Lisa Parr's blood tests, bolstered the family's case, said Davis, who was speaking as an individual juror. While that evidence alone wouldn’t have won the case for the Parrs, it gave the jury "something to evaluate that was documented evidence of what the plaintiffs were claiming," he said.

Testimony by Aruba officials that they had few formal written plans or policies in place to address emissions weighed against the company, Davis said.

"There was a perception if you are engaged in this activity you would have written guidelines that would provide consistency and insure you were following the rules and operating within the confines of state regulations," he said.

In the end, Davis said, jurors applied the letter of the law as laid out in the judge's instructions. The equation would have been the same if someone were claiming that smoke from a barbecue restaurant was causing a nuisance, he said.

"It was a matter of did A, B and C meet the definition of a nuisance," Davis said. "I don't think anybody realized this was a case of significance outside of what it meant to the plaintiffs and defendant...Nobody was defending the industry or backing an environmental cause. It was simply, did the defendant cause the harm alleged by the plaintiff?"

After the evidence and testimony was added up—a process Davis likened to placing grains of sand on a scale until the balance tipped—the Parrs had proven their case.

On April 22, the jury delivered a 5-1 verdict in the Parrs' favor. Instead of getting the $66 million they had asked for, they got $3 million. Still, it was a victory.

Gilde, their attorney, hopes the verdict will ripple throughout Texas and across the country. He has already been contacted by other families who want to fight the industry's air pollution.

"The issues in this case are important," Gilde said. "It means the consequences of toxic emissions cannot be summarily dismissed. The industry will now be made to be more responsible."

A Wake-Up Call for Regulatory Change?

In addition to beating Aruba, the Parrs also highlighted weaknesses in Texas' regulatory system.

That may not sit well in a state smitten by an industry that pumped $7 billion in taxes into the state's coffers in the last two years.

"Texas has a long reputation of being extremely pro-business," said Percival, with the University of Maryland's Environmental Law Program. "The message from all parts of the state, including the regulatory agencies, is one of full speed ahead without being sensitive to the concerns of the public."

Ilan Levin, an Austin-based lawyer with the Environmental Integrity Project, a research and advocacy organization, worries that instead of being a wake-up call for regulatory change, the Parrs' case could lead state officials and lawmakers to find ways to block citizens from winning similar lawsuits.

Since 2000, the industry has poured nearly $58 million into the campaign coffers of state candidates in Texas, according to an analysis of data from the National Institute on Money in State Politics.

"What we have is a system that is heavily tilted in favor of those who can play the money game," said Meredith McGehee, policy director for the Campaign Legal Center, a Washington D.C.-based nonprofit that tracks money in politics and monitors government ethics.

"The oil companies see the contributions as a good business investment," she said. "They are making an investment with an expectation of access when they need it."

Texas legislators have listened to the industry in the past.

In January 2011, with air quality worsening and the federal government beginning to take notice, the TCEQ adopted rules to reduce emissions in the Barnett Shale.

A few months later, however, the legislature overwhelmingly approved a bill that effectively prevented those regulations from being applied statewide. It later weakened the rule again, by narrowing the law to include only 15 of the 24 counties in the Barnett region.

Ramirez, the attorney who represents two families in the Eagle Ford Shale, is studying the Parrs' case for strategies that could give his clients an extra edge. He's sure industry lawyers are doing the same thing, to find ways to defeat future lawsuits.

"Each case has its own set of facts that are subject to intense examination during a trial," Ramirez said. "While one case may look like another, there are so many subtle and distinguishing differences that you can never be sure how it will play out."

Jim Morris, a managing editor with the Center for Public Integrity, and Lisa Song, a reporter with InsideClimate News contributed to this report, which is part of an ongoing project by the two organizations.

Republished with the permission of InsideClimate News, a non-profit news organization that covers energy and climate change issues in law, policy and public opinion.

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