Drillers did not report half of spills that led to fines

Half the spills at Marcellus Shale well sites that resulted in fines weren’t spotted by gas companies, which are required by state law to look for and report spills of drilling-related fluids.

That is one of the main conclusions of a Pittsburgh Post-Gazette review of hundreds of thousands of state and company documents for every incident at a Marcellus well site that led to a fine against a driller through the end of 2012.

The documentation showing that companies often failed to detect spills on their own sites offers a look at self-regulation in the shale gas industry.

State regulation of the industry was the subject of a withering state auditor general review of the Department of Environmental Protection’s oversight issued July 22. The audit detailed the agency’s shortcomings, including failing to consistently issue enforcement orders to drilling companies after regulators determined that gas operations had damaged water supplies, even though the state’s oil and gas law requires it.

The Post-Gazette investigation using well permit file documents and other DEP data focused on 425 incidents involving 48 companies that resulted in nearly $4.4 million in fines.

Of those 425 fines, 137 were due to spills at or near a well site. They ranged from relatively small incidents involving a couple of gallons of diesel fuel on a well pad to larger accidents involving thousands of gallons of hydraulic fracturing flowback fluid that killed vegetation or fish.

Since the first fine of the Marcellus era in 2005, the DEP has made it clear that incidents that potentially impact the environment would be the ones most likely to result in a fine, so it is no surprise that spills make up a significant portion of the fines.

But what is surprising — to politicians, environmental groups, the industry itself and state officials — was the number of spills that were not first spotted by the drillers themselves. About a third were first identified by state inspectors while others, about one-sixth, were discovered by residents, according to the Post-Gazette’s analysis.

State law requires that reportable spills and even muddy runoff events be called in to the state within two hours of discovery. At least 60 percent of the 137 spills occurred while drilling crews were on site; it was not always possible to discern from reports whether crews were working.

PG graphic: Companies with most spills
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Few of the 20 drillers contacted for this story would address the question of why spills were missed. Some of those that did cited confusion over what constituted a spill in the early years of the Marcellus era. Companies that responded said they never failed to report a spill that they were aware had occurred. Several current and former DEP inspectors — all of whom asked for anonymity — said they believed some spills they didn’t find went unreported.

The Marcellus Shale Coalition, an industry trade group that represents all of the main drillers in the state, dismissed the Post-Gazette’s analysis of spills and fines because the number of incidents represented just a small percentage of active well sites in the state (more than 6,000 wells drilled through 2012).

“Moreover, judging environmental compliance exclusively based on fines is misleading, intellectually dishonest and suggests a purposeful manipulation of data to advance a flawed narrative,” the coalition’s spokesman, Patrick Creighton, said in an email response to questions. “Thanks to the leadership of both Govs. [Ed] Rendell and [Tom] Corbett, Pennsylvania has some of the most robust oil and natural gas regulations in the world.”

In some cases, the spills were first noticed by landowners who then reported them to the driller, who in turn notified the state. State officials sometimes took companies to task for not spotting the spill first.

“You’d hope that the companies would report 100 percent of them,” said Davitt Woodwell, president and CEO of the Pittsburgh-based Pennsylvania Environmental Council, which has worked with the industry to find ways to make drilling more environmentally friendly. “Spills have been one of our biggest concerns. Because the biggest number of problems aren’t necessarily the hydraulic fracturing itself, but the handling of the chemicals at the surface that poses the greatest threat.”

The concern over spills is illustrated by two other facts shown in the state files. About one-third of the spills that resulted in a fine impacted a stream, pond or wetland, and about one-quarter of them occurred in a specialty or high-quality watershed — areas in which the state asks drillers to take special precautions to prevent spills.

Somerset County big spill

One of the state’s largest fines for a spill stemmed from an incident that began on June 10, 2010, at a Marcellus well site owned by Chief Oil & Gas on a family dairy farm in Somerset County in the Laurel Hill Creek special protection watershed. April Weiland, a state inspector making a routine inspection, found what appeared to be a small spill of an oily substance on a corner of the well pad.

It didn’t seem to be that big of a deal at first to Ms. Weiland or the landowners.

“I saw the spill earlier” than the inspector, said Robert Miller, 67, a second-generation farmer who runs the farm with his wife, Janet, 62. “It was just a darkened area on the side there, but I didn’t think much of it.”

They and their son, Andy, 34, who also works the farm, said the well has been good for them and not impacted their farm life dramatically, and they support the natural gas industry.

“They provide jobs. They provide money for landowners. And they provide energy,” Andy Miller said of drillers like Chief. “But if they did something they weren’t supposed to do, well, yeah, come down on them.” That’s what the state did in this case.

PG graphic: What Spilled
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Over the five months after she first found the spill, Ms. Weiland returned to the Millers’ farm as Chief dug up enough of the well pad to dispose of the contaminated soil she found only for Ms. Weiland to return and spot additional oily spots on the pad that had to be dug up.

It took Ms. Weiland a dozen return inspections, a dozen phone calls, four soil samples and several emails in the four months after she first spotted the spill to get it properly cleaned up, which involved removing 2,200 tons of contaminated soil. Despite her repeated requests to identify exactly what was spilled, it took Chief five months to tell her that it was hydraulic oil.

At a settlement conference with the state in April 2011, Chief officials “admitted they didn’t adequately handle the incident initially,” according to a state document.

Ultimately, Ms. Weiland determined that it appeared that Chief had “intentionally buried” the spill with soil and rock something Chief denies and it was fined $180,000, one of the largest single-incident fines in the Marcellus era.

Runoff incidents

State documents show that the state has assessed fines for everything from the most basic administrative errors to the most damaging well site accidents.

In 28 incidents, the main reason for a fine was because a state inspector found “sediment-laden water” runoff at a well site. Such incidents are associated with inadequate erosion and sedimentation controls. The state considers these muddy runoff incidents to be potential pollution because they can damage surface and water environments by choking out vegetation or streams.

Not one of the 28 runoff events that led to a fine was first reported by a driller, records show, and more than half of the runoff cases impacted a stream, pond or wetland; seven occurred in a specialty or high-quality watershed.

In one of those cases, the state’s largest driller, Chesapeake, paid $215,000 (the second-largest fine in state history for a single incident tied to a well permit) after repeated warnings from state inspectors about erosion problems at a well site in the Pine Creek high-quality watershed in Potter County.

During a rain and snow melt in March 2011, so much muddy runoff left the well site that the borough of Galeton had to close one of its two public water supply intakes on a stream for three months after the runoff choked its filters.

Why aren’t spills reported?

Some of the spills that were missed by the drillers were relatively small, maybe a couple dozen gallons of spilled brine, drilling mud, hydraulic fracturing flowback fluid or some other contaminant. But others were large, comprising thousands of gallons that killed large swaths of vegetation, state documents show.

There is no way of determining whether spills not spotted by inspectors or others went unreported.

Scott Perry, a DEP deputy secretary who oversees the Office of Oil and Gas Management for the state, said: “I don’t personally presume any criminal intent” on the part of drillers.

He cites confusion over the state’s laws and policies about what constituted a reportable spill as a possible reason so few of the spills were first spotted or reported by the drillers.

“The [former] spill policy had a fair degree of ambiguity to it,” said Mr. Perry. “We felt that small spills weren’t getting reported to the DEP. With the new [spill] policy, we’re intending to define a reported release. Anything more than 5 gallons dumped over 24 hours into a noncontained area. Drips are hard to ascertain, so we recommend spills of any size be reported.”

PG graphic: Reasons for Spills
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The new spill policy, adopted last fall, is DEP’s attempt to provide a thorough definition of a part of the rewrite of oil and gas laws that were adopted under Act 13 in 2012, he said.

Mr. Perry said he expects that rewrite, plus additional changes in the industry, to reduce spills generally and improve the reporting of spills.

Some drillers spot more

Though nearly every major driller has had multiple spills that resulted in fines, some firms did better than others.

Chief Oil & Gas, which was responsible for the spill on the Miller farm, had one of the worst records with spills that resulted in fines. Of 10 spills on the list, Chief spotted two of them first. Inspectors found seven spills and a farmer spotted one.

A spokeswoman for Chief, which sold many of its wells to Chevron, did not respond to the question of why the company failed to spot the spills. But she did say in an email response to questions, in part: “Chief complies with the regulatory process outlined by the PA Department of Environmental Protection. We are inspected at our locations several times per month by the DEP. Chief’s goal is zero violations.”

East Resources, which has sold all of its Marcellus wells to Shell, was the first to spot three out of 14 spills that resulted in fines, while inspectors noticed seven of them first and residents spotted four spills.

In one notable case in May 2010, a spill of hydraulic fracturing fluid was suspected to have been drunk by some cattle on a farm in Tioga County. The fluid had leaked from a surface impoundment on a well pad, the seventh such occurrence at an East drilling site. All were discovered either by a landowner or a state inspector. East had inspected the cattle farm in Tioga County site twice in the four weeks prior to the spill there but reported it did not detect a leak.

Eventually, all seven incidents, plus one more that occurred a month after the Tioga County spill, would result in $159,165 in fines by the state.

East’s record in spotting spills “surprises me,” Scott Blauvelt, East’s regulatory manager, said in an interview. “With our inspections, we were incredibly proactive. We were never shut down because DEP believed we were being proactive. Even though there were releases, very few of them left the well pad and none affected the ground water. There was no long-term damage.”

Mr. Blauvelt said East used a two-prong incentive system to try to prevent or find any spills at well sites.

Employees involved in drilling activities were given “substantial bonuses if there were no releases on that well pad,” he said, in an attempt to make them be more careful.

Asked if that could have had the opposite reaction of encouraging employees or subcontractors to not report spills, Mr. Blauvelt said: “No. I don’t think so. We spent a lot of time talking with contractors. We made it a contractual obligation of them to report spills and clean them up. And we tried to tell people there was nothing to be gained by fighting with DEP.”

Private inspectors hired by East were given bonuses if they found spills at a well site, he said, “so that they knew they could report them.”

Two other large drillers were among the five companies with the most spills that resulted in fines: Chesapeake, which spotted seven of 12 spills that led to fines against it, and Atlas Resources, which had the most spills that led to fines with 15, and spotted nine of them itself. Neither company would comment for this story.

The other large Marcellus driller in the top five is Range Resources, which had a markedly different record from the other companies.

Range, the second-largest Marcellus driller in the state behind Chesapeake, had 14 spills that resulted in fines.

One of those spills was one of the state’s most egregious: A hydraulic fracturing flowback fluid spill that killed fish and other aquatic life along nearly half a mile of a stream in Washington County in October 2009. That spill resulted in one of the largest fines in state history, $141,175.

But Range reported that spill first, as it did all but three of its 14 spills on the list. One spill was first spotted by an inspector and two others by residents.

“Our goal is to have zero” spills, Range spokesman Matt Pitzarella said. But if there is a spill, “our policy is to report everything spilled over 1 gallon to DEP, even if it is contained” to the well pad, he said. “We make a big push for that internally. We discuss that at safety meetings all the time. And we measure and track all of that stuff internally.”

Sean D. Hamill: shamill@-post-gazette.com or 412-263-2579.

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