The Pennsylvania Department of Environmental Protection on Tuesday levied the largest fine in state history against an oil or gas company, sending what it called a "clear message" to Chesapeake Energy after several recent violations.
The energy behemoth, already facing a lawsuit from Maryland over an unrelated spill, is to cough up more than $1 million as part of the "consent order and agreement" it reached with the department.
The Oklahoma City-based company, a major player in Marcellus Shale natural gas drilling with operations in more than a dozen states, will pay $188,000 for a Feb. 23 tank fire at a site in Avella, Washington County, which injured three subcontractors working there. Chesapeake also owes $900,000 over state claims that, in separate incidents over the course of 2010, the company contaminated 16 private water supplies in Bradford County in northern Pennsylvania.
Pennsylvania's Environmental Protection Department determined that "improper well casing" and other missteps allowed gas to enter drinking water last year.
In a statement released Tuesday, Chesapeake promised to do better.
"We have conducted a complete investigation in cooperation with" the Environmental Protection Department, Chesapeake spokeswoman Stacey Brodak said. "We will apply what we have learned from our review to improve our operational safety practices at all of our well sites in the Marcellus Shale."
But the troubles may not be over for Chesapeake.
Maryland Attorney General Douglas F. Gansler announced plans this month to sue the country's second-largest natural gas producer, citing an April 19 "well control incident" in Bradford County. Mr. Gansler said the spill resulted in contaminants flowing into Towanda Creek, which feeds into Susquehanna River and, ultimately, into the Chesapeake Bay.
"Companies cannot expose citizens to dangerous chemicals that pose serious health risks to the environment and to public health," Mr. Gansler said in a statement announcing his intentions to sue.
Chesapeake disputes the attorney general's characterization.
"To date, our testing results indicate minimal and localized impact to the environment immediately surrounding our location, and no impact to Towanda Creek or the Susquehanna River," the company said in a written statement. "The most significant impact occurred at a small farm pond near the [location of the spill], which was drained."
The statement also said, "Area landowners' private wells continue to be tested."
The company said the type of failure that led to the incident, a malfunctioning valve, "is extremely rare in the industry" and that it was the "first failure of this magnitude in more than 15,000 wells Chesapeake has completed since its founding in 1989."
After the April 19 incident, Chesapeake voluntarily shut down operations in Bradford County. It resumed operations on Friday.
Mr. Gansler cited the release of "fracking fluids" in justifying the lawsuit, which is expected to be filed after the 90-day notice period has expired. The intent to sue was issued May 2.
The fracking process allows access to huge deposits of natural gas trapped thousands of feet below the surface in shale rock formations. The Marcellus Shale, which spans much of Pennsylvania, West Virginia and other states, contains one of the world's largest known natural gas deposits. Proponents say it could satisfy the nation's gas demands for 50 years or more and help break U.S. dependence on foreign oil.
To extract the gas, companies pump a mixture of water, sand and chemicals into the ground at tremendous pressure, fracturing the rock and allowing gas to flow freely. Companies install layers of protective piping and concrete to ensure the fracking fluid and gas come nowhere near water supplies.
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