A bimodal depth distribution of fluid-injection-induced microearthquakes (MEQs) was observed in the 2012 stimulation phase of the Newberry Volcano Enhanced Geothermal System (EGS) Demonstration project in Oregon. During 7 weeks of hydraulic stimulation of well NWG 55-29, 90% of MEQs occurred in the shallow reservoir while few occurred adjacent to the expected deep stimulation zone. This enigmatic distribution of MEQs may have resulted from two alternative possible causes: (1) A segment of the casing may be damaged, the resulting leak introducing a new fluid source with the pressure triggering microseismicity in the shallow reservoir over the short term; or (2) fluid pressures may have migrated upwards from the deep injection zone to the shallow reservoir to induce local seismic events. Our analysis of the failure potential of the reservoir to fluid- injection indicates that the failure potential increases with reduced depth for a given wellhead pressure. The timing of pore-pressure diffusion suggests that upward-migration of fluid pressures from the injection zone cannot generate critical overpressures in the shallow zone of seismicity sufficiently quickly. This contention, favoring the role of a ruptured casing, is further supported by a coupled Thermal-Hydrological-Mechanical (THM) analysis and the observation (August 2013) that indeed the casing is damaged at shallow depth. Despite this, still unexplained remains the presence of seismicity at great depth, but absent at intermediate depth.