Cabot, Pa. Regulators Settle Water-Contamination Dispute
December 16 2010 - 1:15PM
Dow Jones News
Cabot Oil & Gas Corp. (COG) has agreed to pay $4.6 million
to Pennsylvania regulators and 19 rural households whose drinking
water state officials claim was contaminated by the company's
nearby natural-gas drilling activities.
The settlement, announced Thursday, will allow Houston-based
Cabot to resume drilling in northeastern Pennsylvania's Susquehanna
County early next year.
It also greatly reduces the amount the company had been expected
to pay to resolve the matter: In early October, the Pennsylvania
Department of Environmental Protection Agency said it wanted Cabot
to pay for an $11.8 million water line to the Dimock Township homes
whose water wells had been contaminated by methane.
Cabot holds about 200,000 acres--nearly all in Susquehanna
County--in the vast oil- and gas-bearing Marcellus shale formation
that underlies much of Pennsylvania, New York, Ohio and West
Virginia. The process of cracking open the deeply buried shale to
unleash fossil fuels is known as hydraulic fracturing, or fracking,
and has been blamed for, but hasn't been conclusively linked to,
contamination of aquifers in several U.S. states.
From the onset, Cabot has maintained that its operations weren't
to blame for the Dimock Township water contamination.
In settling the matter, Cabot doesn't admit that its drilling
operations caused the contamination, an Environmental Protection
Department spokesman said.
"This agreement provides a reasonable and pragmatic way forward
for all parties," Cabot Chief Executive Dan O. Dinges said in a
prepared statement. "The common ground we found to settle provides
the right balance of regulations, financial payments, timely
execution and operational safeguards."
Of the $4.6 million Cabot will pay, $500,000 will go to the
state to offset costs related to two years of investigation into
the matter. The remaining $4.1 million will be paid into an escrow
account for eventual distribution among the 19 affected households.
Each household will receive an amount equal to two times their
property value, but no less than $50,000, the Environmental
Protection Department said.
Cabot will also provide whole-house water-treatment systems for
each of the families who want one.
"The 19 families in Dimock who have been living under very
difficult conditions for far too long will receive a financial
settlement that will allow them to address their own circumstances
in their own way," said John Hanger, who heads the state
agency.
Cabot still faces civil lawsuits filed by Dimock residents in
the U.S. District Court in Scranton, Pa. Some of the plaintiffs are
among the 19 households Pennsylvania regulators have identified for
the settlement, though Thursday's agreement will have no impact on
the litigation, said Cabot spokesman George Stark.
Beyond the drinking water-contamination issue, that federal
civil suit seeks damages for chemical spills in the area. Cabot was
cited by regulators for three spills of chemical-laced
hyrdaulic-fracturing fluid at its drilling sites there last
year.
Analysts with Jefferies & Co. said the settlement, along
with recent air-quality permits Cabot recently received in
Pennsylvania, indicate that the icy relationship between the
company and the state's regulators "may be thawing."
Cabot said it will be able to complete the wells it has underway
in the Dimock area during the first quarter of 2011 and should
begin drilling new wells there in the second quarter.
Shares of Cabot traded up 15 cents, or 0.42%, at $36.29 on
Thursday.
-By Ryan Dezember, Dow Jones Newswires; 713-547-9208;
ryan.dezember@dowjones.com
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