Oil & Gas and Toxic Tort Alert
August 2008
Authors:
www.klgates.com
Ignore NORM at Your Peril
Charles Rysavy
Partner
+1.973.848.4053
charles.rysavy@klgates.com
Roger Shaw
Technical Specialist
+1.973.848.4065
roger.shaw@klgates.com
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Significant Potential Liability for Mishandling Naturally Occurring
Radioactive Materials
The U.S. Supreme Court recently provided the oil and gas industry with another not-toogentle reminder that issues surrounding “naturally occurring radioactive material” (NORM)
must be taken seriously to avoid liability for claims of contamination resulting from even
the most basic oil and gas operations. On April 21, 2008, the Court denied a petition
for writ of certiorari by ExxonMobil (“Exxon”), ending the company’s final attempt to
overturn a $168 million judgment in favor of landowners claiming that their property was
contaminated by NORM from pipe de-scaling operations. ExxonMobil Corp. v. Joseph
Grefer, et al.1 Although the original verdict received widespread coverage in the industry
and popular press, the lessons learned from the Grefer case are sufficiently important to
take a few moments to revisit the basics of NORM in oil and gas operations, the facts of
the case and the implications of the Court’s rulings for the industry.
NORM, TENORM and the Oil and Gas Industry
Naturally occurring radioactive material, or NORM, is everywhere. We are exposed to
it every day of our lives through radioactive materials that naturally exist in the ground
we walk on, materials used to construct our homes, offices and factories, the food we eat,
the air we breathe, and even within our own bodies. Essentially everything that exists in
nature contains some small amount of natural radioactivity. Not to mention that we are
also constantly bathed in a sea of natural cosmic radiation coming from the sun and deep
space. Life on earth has evolved in this environment of “background radiation,” and no
reputable scientific study has ever linked background levels of NORM and cosmic radiation
to harmful health effects.
“Technologically enhanced naturally occurring radioactive material,” or TENORM,2 is
produced when radionuclides that occur naturally in ores, soils, water, or other natural
materials are concentrated or exposed to the environment by human activities.
Charles Rysavy is a partner with the law firm of K&L Gates LLP, where he counsels and
defends clients on issues related to nuclear power and radiation generally. Roger
Shaw is a Technical Specialist with the firm of K&L Gates, where he provides technical
support to the firm’s nuclear industry and radiation injury practices. This publication
is for informational purposes only and does not contain or convey legal advice. The
information herein should not be used or relied upon in regard to any particular facts or
circumstances without first consulting with a lawyer.
*
1 128 S.Ct. 2054 (U.S. La. Apr. 21, 2008).
2 The term NORM is often used to
refer to both NORM in its natural state and NORM
that has been concentrated or made more available to the environment by human activity.
TENORM is the currently favored and more precise description of the latter material,
which is likely to be encountered in the oil and gas industry. For that reason, the term
TENORM will be used throughout this article, even when the cited reference used the
term NORM.
Oil & Gas and Toxic Tort Alert
TENORM wastes are the radioactive residues from
the extraction, treatment and purification of minerals,
petroleum products, or other substances obtained
from parent materials that may contain elevated
concentrations of NORM. TENORM also includes any
radioactive material in its natural concentration but made
more accessible by human activities. According to the
EPA, hundreds of millions of metric tons of TENORM
wastes are generated each year from a wide variety
of processes, ranging from uranium and phosphate
mining to municipal drinking water treatment.3 NORM
present in parent materials can become concentrated
in the wastes during mining and beneficiation, mineral
processing, oil and gas extraction, or various other
processes, resulting in radionuclide concentrations in
TENORM wastes that are often orders of magnitude
higher than in the parent materials.4 Thus, radiation
levels from TENORM can be increased sufficiently
above background levels that they present a potential
hazard to health and environment, and trigger state or
federal regulatory requirements for human exposure
and/or remediation.
TENORM accumulates in elevated concentrations in
oil and gas exploration and production waste streams
primarily when radium isotopes naturally present in
subsurface formations are dissolved and carried to
the surface in the produced water. Oil and gas waste
streams most likely to be contaminated by TENORM
include produced water, scale and sludge. Production
and processing equipment may also contain residual
NORM. Minor amounts of radionuclides can also be
transported as dissolved radium or radon in produced
hydrocarbons, or nuclides in drill cuttings and drilling
fluid. The amount of TENORM that accumulates in
any oil and gas waste stream is dependent upon the
amount of radionuclides present in the subsurface
formation, formation fluid chemistry, extraction
processes, treatment processes and age of production.
Because most TENORM in oil and gas exploration
and extraction is brought to the surface by produced
water, the higher water production rate characteristic
of older fields can result in higher concentrations of
TENORM.5
3
United States Environmental Protection Agency,
“About TENORM,” www.epa.gov/rpdweb00/
tenorm/about.html, July 17, 2008.
4 Id.
5 “An Overview of Naturally Occurring Radioactive
Materials (NORM) in the Petroleum Industry,”
The highest concentrations of oil and gas related
TENORM is typically found in scale deposits, most
frequently in equipment where produced water is
handled or stored, such as water lines, flow lines,
injection wellheads, vapor recovery units, water storage
tanks, heaters/treaters and separators. In general,
TENORM concentrations are highest in wellhead
piping and in production piping near the wellhead.
TENORM concentrations in sludge are generally much
lower than in pipe scale.6
Natural gas production and processing equipment can
also contain TENORM in the form of a radioactive
isotope of lead, Pb-210, a long-lived daughter product
of radium-222, which is sometimes produced along
with natural gas. The gas plant equipment with the
highest concentrations of Pb-210 includes reflux
pumps, propane pumps and tanks, other pumps, and
production lines.7
Equipment cleaned of scale, sludge or other forms
of TENORM can be reused, but the cleaning process
generates radioactive waste that requires proper
disposal. Most scale is recovered from piping and other
equipment by commercial facilities where the pipe and
equipment is sent for cleaning, although some scale is
removed at the well site during workover operations.
Removal of scale has the potential to increase worker
radiation exposure if not properly controlled. In
addition, since recovered scale in the past was most
often disposed of by spreading on land or burial, the
soil at equipment cleaning yards and around some well
sites may be heavily contaminated by TENORM.8
Grefer v. ExxonMobil
The Facts
The Grefer case involved a claim for property damage
due to the presence of TENORM contamination on
private property owned by the Grefer family and
leased to Intracoastal Tubular Services, Inc. (“ITCO”),
which conducted oil pipe de-scaling operations there
under contract with Exxon. 9 ITCO began de-scaling
United States Department of Energy, Environmental
Assessment and Information Sciences Division,
Argonne National Laboratory, p. 12 (1992).
6 Id. at 13-14.
7 Id. at 17.
8 Id. at 19.
9 Grefer v. Alpha Technical, 901 So. 2d 1117 (La.App.
4 Cir. 2005).
August 2008 | 2
Oil & Gas and Toxic Tort Alert
operations on the Grefer property in 1968. The
evidence at trial indicated that Exxon first became
aware of radioactive scale in drilling equipment in
the North Sea when Occidental Petroleum made that
discovery in 1981 and informed the other companies
operating in the area. In April 1986, Chevron identified
radium-226 in oilfield equipment in Mississippi, and
shortly thereafter, Exxon undertook surveys of its
own sites in Mississippi and made similar findings. In
March 1987, Exxon representatives met with ITCO
management and employees to discuss the NORM
problem. Following the meeting, ITCO advised Exxon
that it would no longer clean piping containing NORM,
and some time thereafter, ITCO ceased all operations
at the site. In 1996, testing on the property revealed
radium contamination. In 1997, the Grefers filed suit
against Exxon, ITCO and others for property damage,
including loss of use and remediation of the property,
as well as punitive damages.10
The Verdict
After a five week trial, the jury returned a verdict in
favor of the Grefers in the amount of $145,000 in
general damages, $56 million in restoration costs, and
$1 billion in punitive damages. The jury assessed 85%
of the fault to Exxon, 5% of the fault to ITCO and the
remaining 10% to two other defendants dismissed
before trial.11
The Louisiana Court of Appeal’s Ruling
Exxon raised several arguments on appeal, among
them that the jury charge included no requirement
of “reasonableness” for calculating compensatory
damages, and that the $1 billion in punitive damages
was unsupported by the evidence and unconstitutionally
excessive.12
On the issue of compensatory damages, Exxon argued
that the $56 million verdict was patently unreasonable
because the Grefer property was valued at only $1.5
million.13 The Court of Appeal disagreed. Under the
circumstances of this case, the Grefers were entitled to
the cost of restoration, even if that cost far exceeded the
value of the land and even though the damaged party
could not be forced to use the award to remediate the
10Id.
11Id.
12Id.
13Id.
at 1125-29.
at 1129, 1135-36.
at 1136.
contaminated property.14 Although the court concluded
that “a jury’s award of $56 million for restoration
damages for a tract of land whose highest market value
is $1.5 million certainly appears to be unreasonable,”15
it concluded that the jury did not abuse its discretion
or manifestly err in the award because the plaintiffs
“clearly . . . had both personal and economic reasons
for wanting to restore their property to its original
condition.”16
On the issue of whether the evidence supported the
imposition of punitive damages, the court reasoned that
the jury was entitled to conclude that Exxon’s conduct
was “wanton and reckless” because it was on notice of
the TENORM problem in 1981, even though there was
no indication that Exxon was aware that the problem
existed outside of the North Sea oil field until April
1986.17 The court further concluded that the jury could
reasonably find Exxon’s conduct “wanton and reckless”
because it waited ten months between the discovery of
TENORM in domestic oil fields and notifying ITCO.18
This delay, the court reasoned, was “inexcusable”
because, “[a]fter all, the ITCO employees were the
persons handling the NORM contaminated piping/
tubulars on a daily basis and were most at risk, not
Exxon’s executives.”19 Although this was purely a
property damage case and it was undisputed that the
plaintiffs had suffered only economic damages, in the
Court of Appeals’ view “Exxon’s conduct . . . certainly
evidenced an indifference or reckless disregard of the
health and safety of others.”20
The court ultimately concluded, however, that the
punitive damage award of $1 billion was neither
reasonable nor proportionate to the wrong committed,
such that it constituted an irrational and arbitrary
deprivation of Exxon’s property.21 The court reduced
the punitive damages to $112 million, or twice the
general damage award.22
14Id.
15Id.
16Id.
17Id.
18Id.
19Id.
20Id.
21Id.
22Id.
at 1137-39.
at 1141 (emphasis added).
at 1142.
at 1145.
at 1146-47.
at 1148.
at 1152.
August 2008 | 3
Oil & Gas and Toxic Tort Alert
The U.S. Supreme Court’s denial of certiorari in April
closed the door on Exxon’s final avenue to appeal the
verdict.
Conclusion
The prospect of substantial oil and gas exploration
in plays not previously developed carries with it
the prospects of new TENORM challenges. This
seems particularly true where the Marcellus Shale
play intersects with geologic deposits high in natural
radioactivity, such as the Reading Prong, a geological
formation in Eastern Pennsylvania, New York, New
Jersey and Connecticut characterized by elevated
levels of uranium and thorium. There and elsewhere,
oil and gas industry participants would be well advised
to undertake preventative efforts at the front end of
their operations to detect and contain TENORM,
and to establish action plans to address TENORM
contamination when it occurs. As Grefer clearly
counsels, anyone that fails to take such steps does so
at its own - very substantial - peril.
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August 2008 | 4