Act of God or Man Made?

The Wilzetta Fault east of Oklahoma City has slumbered through much of the past 320 million years, according to geologists.

But it reawakened in a big way in November 2011—with a magnitude 5.6 earthquake near the town of Prague.

The quake was the largest measured seismic event in Oklahoma’s history. It was felt as far away as Milwaukee and St. Louis.

The damage was minor compared to California-size quakes, destroying 14 homes, damaging dozens of others, buckling sections of a highway, and injuring two people.

But the quake—one of several thousand in Oklahoma in recent years—sent significant temblors through the insurance industry, regulatory agencies, and oil and gas companies.

Between 1978 and 2008, Oklahoma averaged two quakes of magnitude 3.0 or greater a year. But since late 2009, the rate of quakes that size has been nearly 300 times higher than previous decades, according to the U.S. Geological Survey.

Last year, the state experienced 567 quakes measuring 3.0 or greater—three times as many as the notoriously shaky California.

Oklahomans are taking notice. According to a survey of the state’s top 10 providers of earthquake coverage by the Oklahama Insurance Department, an estimated 15%-23% of state residents now have earthquake endorsements or separate quake coverage for their homes or businesses—up from 2% in 2011.

That’s a higher take-up rate than California, where only 10% of residents and slightly more than 9% of businesses have insurance coverage for earthquakes.

“We’ve talked to people who’ve been agents for years,” Oklahoma Insurance Commissioner John Doak says, “and it’s only in the past two or three that they’ve been dealing with earthquake insurance.”

It’s not what scientists would characterize as natural business growth.

“Large areas of the United States that used to experience few or no earthquakes have, in recent years, experienced a remarkable increase in earthquake activity that has caused considerable public concern as well as damage to structures,” a team of geophysicists wrote in a paper published in February in Science magazine.

“This rise in seismic activity, especially in the central United States, is not the result of natural processes.”

The scientists—from the USGS, the Oklahoma Geological Survey, the University of Colorado and the Lawrence Berkeley National Laboratory—say the increase in quakes is directly related to the high-pressure injection of wastewater into deep wells during oil and natural gas extraction.

The wells are a byproduct of hydraulic fracturing, or fracking, a process that’s enabled the petroleum industry to extract oil and gas from deposits that were previously considered too expensive to tap. Oklahoma has about 3,000 active disposal wells, into which more than 2 million barrels of wastewater is pumped annually.

“Deep injection of wastewater is the primary cause of the dramatic rise in detected earthquakes and the corresponding increase in seismic hazard in the central U.S.,” the study published in Science concluded.

Other researchers are in agreement that human activity is the cause of the surge in quakes in Oklahoma, as well as in Arkansas, Colorado, Ohio and Texas. “The earth science community accepts it quite widely,” says USGS geophysicist Arthur S. McGarr, the lead author of the study in Science.
In a study published earlier this year in The Bulletin of the Seismological Society of America, research also tied a rash of 77 earthquakes near Youngstown, Ohio, in March 2014 to wells involved in the fracking process. The earthquakes, ranging from magnitude 1.0 to 3.0, occurred when a previously unknown fault was activated by fracking activity, according to researchers.

Oil and gas producers dispute the connection between fracking and earthquakes, however, pointing out that deep wells have been used for decades in Oklahoma and elsewhere. McGarr and other geophysicists counter that the volume of water and the pressure of injections have increased in recent years.

Doak, Oklahoma’s insurance commissioner, says the scientific understanding of the recent spike in quakes is advancing. But in a bulletin issued to the state’s property and casualty insurers in March, he wrote “there is no agreement at a scientific or governmental level concerning any connection between injection wells or fracking and ‘earthquakes.’ ”

In the bulletin, Doak said only eight of about 100 earthquake claims filed in Oklahoma in 2014 had been paid. “In light of the unsettled science,” he wrote. “I am concerned that insurers could be denying claims based on the unsupported belief that these earthquakes were the result of fracking or injection well activity. If that were the case, companies could expect the Department to take appropriate action to enforce the law.”

In an interview, Doak said the bulletin has been helpful in starting a dialogue with insurance companies and raising awareness among Oklahomans about the need to read their policies carefully regarding earthquake coverage. Insurance adjusters are also undergoing specific training on earthquake damage and coverage, he says.

The Oklahoma Corporation Commission, which oversees oil and gas production, also has set up a “traffic light” system that sets restrictions on fracking activities in areas where a swarm of quakes is reported.

Doak says about a half-dozen companies have filed endorsements specifically excluding hydraulic fracturing. That’s allowed, but insurers need to be clear and consumers need to understand whether their policies include language excluding human-induced quakes, he says.

Typically, an Oklahoma homeowner pays $100 to $150 per year for earthquake coverage, according to the insurance department’s 2014 annual report.

“There have been very, very few claims in the state of Oklahoma, but we don’t want to wait until we have a major event” before addressing these topics, Doak says.

Others in the insurance industry point out the need for clarity on what types of quakes are covered and how they’ll be covered.

“From an insurance perspective, it is important to note that if there is suspicion that the earthquake was induced, it will be argued to fall under the liability insurance of the deep well operator and not the ‘Act of God’ earthquake coverage of a property insurer,” Deborah Kane, senior modeler at Risk Management Solutions, recently wrote on a company’s blog. “Earthquake models should distinguish between events that are ‘natural’ and those that are ‘induced’ since these two events may be paid out of different insurance policies.”

Some clarity may be forthcoming—from the courtroom and from USGS offices.

The Oklahoma Supreme Court has agreed to hear a lawsuit filed by Prague resident Sandra Ladra against oil companies over injuries she sustained in the 2011 earthquake while sitting with her family in her living room.

“It was like a jet plane hit it or something,” Ladra told the Tulsa News. “We had a 28-foot double fireplace that was right by where I was sitting. Big rocks just started coming down from 28 feet up.”

One rock struck a glass table next to Ladra, and another fell in her lap, injuring her right knee, she told the Tulsa News. “I am so thankful that it landed in my lap because if it had hit my head, I wouldn’t be here,” she said.

In her suit, Ladra alleges the “oil and gas industry has issued public statements to hide the seismic problems they are creating, and in fact continue a mantra that their operations do not cause earthquakes.”

Another Prague resident recently filed a lawsuit against more than two dozen companies seeking about $100,000 to cover earthquake damages to her home. A class-action suit is anticipated.

These cases don’t directly involve insurance, but they could set a legal precedent important to settling claims.

In the meantime, the USGS is preparing the first-ever maps showing the potential for human-induced quakes. “The existing earthquake hazard map that’s updated every six years intentionally excludes areas that have known induced seismic activities,” McGarr says.

The maps will be of particular interest for the central United States, where most of the surge in seismic activity has occurred. (Although fracking takes place in California, it’s not as great a concern regarding earthquakes because of differences in geology and the distance from faults of the greatest concern to seismologists.)

The first maps with human-induced activity are expected to be ready later this year. Asked if the oil and gas industry is cooperating with the work, McGarr says, “The short answer is ‘not much’ … But we’re hoping things will get to be a little more transparent in future.”

The study published in Science clearly signals a hope for more industry involvement. “The science of induced earthquakes is ready for application, and a main goal of our study was to motivate more cooperation among the stakeholders—including the energy resources industry, government agencies, the earth science community, and the public at large—for the common purpose of reducing the consequences of earthquakes induced by fluid injection,” USGS geophysicist William Ellsworth, a co-author, said when the study was published.

According to McGarr, greater access to fluid injection data will allow scientists to detect induced earthquake problems at an early stage, before they become larger and potentially damaging earthquakes.

USGS scientists want the data to be publicly accessible as it becomes available. “Open sharing data can benefit all stakeholders, including [the petroleum] industry, by enabling the research needed to develop more effective techniques for reducing the seismic hazard,” the paper published in Science states.

The agency is also seeking to increase seismic monitoring to better detect human-induced quakes. The current detection threshold in much of the U.S. is for quakes of magnitude 3.0 or higher. In their paper, McGarr and Ellsworth say a national network is needed to detect magnitudes as low as 2, or even less, “to take corrective actions while the problems are still manageable.”

McGarr and others warn maintaining the status quo means there’s a greater likelihood of larger earthquakes in the magnitude 5.0 and 6.0 range in the central U.S. Last year, researchers from Cornell University published a study in Science noting the potential for a 7.0 quake in the Oklahoma City metropolitan area.

“I think if we wait long enough, we’re going to see larger earthquake in Oklahoma,” McGarr says. “I can’t tell you when. But I can tell you we will. How much larger I don’t know.”