This is the first of two articles addressing recent enforcement activities by the federal government and the states targeting Marcellus Shale well development activities. 

The U.S. Department of Justice (“DOJ”), Pennsylvania Department of Environmental of Protection (“PADEP”), and environmental groups have quickly answered the U.S. Environmental Protection Agency (“EPA”) summons to ensure new energy extraction complies with environmental laws.  The Marcellus Shale extraction (and “energy extraction” in general) is one of EPA’s six national “environmental and public health problems” that warrant a special enforcement initiative for Fiscal Years 2011-2012 to “assur[e] energy extraction sector compliance with environmental laws.”  See, http://www.epa.gov/oecaerth/data/planning/initiatives/initiatives.html. In the first half of 2011, companies paid record fines in Pennsylvania, individuals and corporations were criminally prosecuted, and EPA Region III leaned heavily on PADEP and the largest natural gas operators in Pennsylvania for treatment and/or disposal of flowback water.  As a result of the various enforcement tools at EPA’s disposal, this topic will be address in two articles – this month focusing on Clean Water Act actions. Next months article will address actions pursuant to the Clean Air Act and Safe Drinking Water Act.

Possibly influenced by EPA’s enforcement initiative, DOJ, through the Assistant Attorney General for the Environment and Natural Resources Division, and the U.S. Attorneys for three districts in Pennsylvania held a two-day Marcellus Shale Law Enforcement Conference on May 25, 2011 in Pennsylvania.  Reportedly over 200 federal, state and local officers, environmental officials and prosecutors from West Virginia, Pennsylvania, New York, and Ohio attended. The purpose of the conference was to “focus on environmental crimes, financial crimes, commercial vehicle violations, drug trafficking, officer safety issues, eco-terrorism and other relevant local/state/federal crimes specific to Marcellus Shale.” Inclusion of non-environmental potential causes of action may stem from the fact that the Safe Drinking Water Act’s exemption of subsurface injections of fracking fluids from the definition of “underground injection”. Other than short presentations by the Marcellus Shale Coalition and Sierra Club, the conference was otherwise restricted to law enforcement and prosecutors only.

Even prior to the Marcellus Enforcement Conference, PADEP was pursuing alleged civil and criminal environmental violations related to Marcellus drilling. On March 17, 2011, Pennsylvania’s Attorney General’s Environmental Crimes Section filed criminal charges against Robert Allan Shipman and his business, “Allan’s Waste Water Service, Inc.”  Mr. Shipman was charged with 98 criminal counts, his business with 77. The indictment alleges, Mr. Shipman  instructed drivers to mix various waste waters together and then dump the “cocktail” at various locations in Southwest Pennsylvania. Other counts include allegations of falsified and forged manifests and instructing drivers to leave water valves open at gas wells while supposedly “filling” the tanks – typically after dark or during heavy rains. On March 21, 2011, PADEP ordered the two operations owned by Mr. Shipman (Allan’s Waster Water Service Inc. and Tri-County Waste Water Service) to be closed and revoked their permits. For civil enforcement, on May 17, 2011, PADEP issued to Chesapeake Energy (“Chesapeake”) the largest single penalty ever assessed to an oil and gas operator related to water well contamination. Under a Consent Order and Agreement, Chesapeake will pay $900,000 for alleged contamination of private water supplies in Bradford County, PA. Chesapeake will also pay $200,000 into DEP’s well-plugging fund. A second consent order related to a February 23, 2011 tank fire at Chesapeake’s drilling site in Avella, Washington County was entered on the same day. The company agreed to pay a fine of $188,000 associated with the fire.

In addition to civil and criminal enforcement, EPA Region III also sent a “request” to PADEP and six § 308 requests to Atlas Resources, Cabot Gas & Oil Corporation, Chesapeake Energy, Range Resources, SWEPI, and Talisman Energy USA regarding disposal and recycling activities associated with wastewater generated by Marcellus Shale extraction and production. The § 308 requests and letter to PADEP stem from PADEP’s April 19, 2011 announcement that it requested all Marcellus Shale natural gas drillers by May 19, 2011, to voluntarily cease delivering wastewater to the 15 wastewater treatment plants “grandfathered” from PADEP’s 2010 total dissolved solids regulations. The information requests focused on how drillers were going to dispose of their wastewater after May 19 and their responses were due by May 25, 2011. In its letter, EPA Region III “requested” that PADEP:
 

EPA Region III has also been active utilizing Section 404 of the Clean Water Act alleging discharge of dredged and/or fill material in waters of the United States without a permit at oil and gas construction sites in West Virginia. Seven administrative Orders of Compliance have been issued since January 1, 2011. The orders generally require the respondent company to (1) cease and desist all discharges without a permit into waters of the United States, (2) submit a pre-construction wetland and stream delineation for EPA’s approval that identifies all areas at the particular site that were streams or wetlands prior to construction, and (3) submit for EPA’s approval a detailed restoration plan that will describe actions to be taken to remove the material from the regulated waters, to stabilize the site and to return the watercourse and wetlands to pre-disturbance grade and conditions, and then implement the same within 90 days of EPA’s approval of the plan.   

As drilling activity in West Virginia increases, aggressive enforcement and enhanced oversight of WVDEP’s regulation of drilling activities by EPA Region III should be expected and companies should plan accordingly.