Big data, the oil industry, and legal frontiers

I remember the days when our family fax machine would churn all night to deliver well logs line-by-line for my father (geologist) to interpret. Back then (only ~20 years ago), great oil discoveries began by drawing on maps and geologic printouts with colored pencils.

By the time I was in college, his Blackberry (with its infamous scroll wheel) delivered near real-time updates on the drilling progress of horizontal wells in the Haynesville Shale.¬†As a summer intern at a service company around the same time, I worked on a project to install eye-tracking devices in the dashboard of frac trucks to ensure drivers wouldn’t fall asleep at the wheel. My team also troubleshot how to link up various well site tools to real-time monitoring from Houston.

Things have changed rapidly, but the oil industry has always been at the cutting edge of technology, despite some perceptions to the contrary.

The new trend appears to be “big data” – the compiling and analysis of mountains of digital information. The hope is that somewhere in the numbers, a company can find competitive advantage in making new discoveries, improving efficiency, preventing waste, reducing emissions, trading commodities, preventing accidents, etc. A quick glance at open jobs at Houston oil companies reveals the trend of hiring for statistics, “big data,” and “data science”:

Friends in the industry with these skills have written software programs that detect illegal siphoning from pipelines, optimize oil hauling from tank batteries, and use machine learning to improve production tools. These kinds of projects just scratch the surface of what is afoot.

These changes in industry lead to new frontiers in litigation. Based on comments from practitioners (especially in-house folks) at recent CLE conferences, the following seem like practice areas set to grow in importance as a result of this increased focus on information technology, data, and statistical analysis:

Leaving employees. Though employment lawsuits to prevent trade secret misappropriation, violation of non-competes, etc. have always been common in the oil business, it seems likely there will be even more. With high paying statistics-driven and software-driven positions becoming more common, competitive information is no longer just held by geoscientists or managers. The secret sauce of lucrative predictive software, statistical conclusions, and other results of the data science revolution expands the number of employees who can hurt a company by leaving. Indeed, the information they take with them could be even more valuable, given that it may aggregate information from across the company.

Data breaches. Plenty of litigation has already arisen from data breaches in the consumer/retail industry. Data breaches in the oil business will look different. That is, they aren’t storing millions of people’s credit card information, but some (especially service companies) may be storing mountains of much more valuable proprietary customer data. Moreover, the potential perpetrators of hacking may include unsavory state-affiliated companies conducting industrial espionage. Violation of NDAs, confidentiality agreements, and even international arbitration may result.

Public policy torts. We’re in an era of climate change, methane emission, and coastal erosion litigation. Proving causation and damages are difficult, but data science projects looking for efficiency gains may inadvertently create damaging evidence for similar cases in the future. In other words, large scale data projects may match the scope of what these megalawsuits allege.



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