Man-made earthquakes likely to impact local businesses

For the first time ever, the U.S. Geological Survey released data on man-made earthquakes, or quakes caused by wastewater injection associated with oil and gas drilling. And the effects are likely to ripple through the insurance industry, real estate sector and a variety of small businesses.

Activist Erin Brockovich uses a computer model to display the growing environmental hot spots as she speaks during an Oklahoma Earthquake Town Hall Meeting at the University of Central Oklahoma February 23, 2016.
J Pat Carter | Getty Images
Activist Erin Brockovich uses a computer model to display the growing environmental hot spots as she speaks during an Oklahoma Earthquake Town Hall Meeting at the University of Central Oklahoma February 23, 2016.

The USGS said Monday that Oklahoma, Texas, Kansas, Colorado, New Mexico and Arkansas face the highest risk from this relatively new type of seismic activity, which is sometimes referred to as "induced." From 2011 to 2015, for example, Oklahoma went from two 3.0 quakes per year to two such quakes per day.

"Earthquake insurance prices will continue to climb in the areas affected by induced seismicity, reflecting the increased likelihood that property in these areas could be damaged by an earthquake," said Jack Baker, associate professor of civil and environmental engineering at Stanford University.

To determine whether earthquakes were natural or induced, scientists examined earthquakes' proximity to wastewater disposal wells and looked at whether those wells were active at the time of the quake. If so, USGS classified it as an induced event. Multiple studies have created a scientific consensus that links gas and oil operations to increased seismic activity in the United States.

"This data will impact whether or not people will choose to start a business in these areas of higher risk. When people make decisions on where they will locate a business or a new building, some people may have second thoughts." -John Ebel, professor, Boston College

"The USGS' latest report is relevant to businesses," said Michael Barry, spokesman for the Insurance Information Institute, an industry research group. "It should prompt commercial property owners to consider purchasing earthquake insurance."

The new data are likely to affect many types of new or small businesses as well as larger firms.

"This data will impact whether or not people will choose to start a business in these areas of higher risk," said Boston College's John Ebel, a professor of earth and environmental sciences who focuses on seismology. "When people make decisions on where they will locate a business or a new building, some people may have second thoughts."

Seven million people are at risk from human-induced seismic activity, according to the report.

The USGS report is based on only one year's worth of data, but regulators and seismologists told CNBC that the data form a sufficient baseline from which to draw conclusions. The Oklahoma Corporation Commission, a state regulatory body, said the information is helpful in its task of overseeing the oil and gas industry.

"For us as regulators who have to justify and defend what we do under Oklahoma law, it's just another element we can point to, to say this is why we've taken the action, and this is why we have to continue working on this public safety issue," said Oklahoma Corporation Commission spokesman Matt Skinner.

Energy in Depth, a research program sponsored by the Independent Petroleum Association of America, told CNBC that the oil and gas industry is cooperating with scientists on the earthquake matter.

"This is a complex issue, but most earthquakes are not induced. This is an issue that scientists say — with near uniformity — can be effectively managed," said Seth Whitehead, a researcher at Energy In Depth.

According to the commission, most of the oil and gas industry in Oklahoma has been compliant in adhering to regulation.

"When it comes to rubber meets the road, the reaction of industry has been by the vast majority cooperative," he said. "Some of the best data has actually come from the oil and gas industry."