Cabot Says Co. Not at Fault for Methane Gas Migration

Cabot said it does not agree with Pennsylvania Department of Environmental Protection (PaDEP) Secretary John Hanger's assertion that Cabot is at fault for methane gas migrating into northeast Pennsylvania water supplies.

The company was responding to a statement made at a press conference Thursday in Dimock Township, Penn., during which PaDEP announced it plans to proceed with a new water line from a neighboring community for the benefit of 18 or fewer homes. PaPEP plans to try and recover the cost for the line, estimated at $11.8 million, or $656,000 per home for which it would be built, from Cabot.

"Though methane was pre-existing in the area's water prior to Cabot's drilling, we, just like the PaDEP, want to help solve this problem," said Dan O. Dinges, chairman, president and chief executive officer of Cabot. "Our different with the PaDEP is that the solution to methane in water has been venting water wells and putting them on water treatment devices, which cleans up the water quickly. We do not know why Secretary Hanger has changed his mind from endorsing separators to wanting this new pipeline that could take years and cost million.

"As well, we have just drilled a new water well at one of the households that is making clean water, so we know that this is also a viable solution."

Gas migration problems in Dimock first became evident when a private water well exploded on Jan. 1, 2009. An investigation by PaDEP revealed that methane gas from a shallow formation had been disturbed and migrated through poorly constructed wells Cabot built while drilling for the much deeper Marcellus shale formation, PaDEP said in a statement.

On April 15, 2010, the department ordered Cabot to plug three operating natural gas wells in the township and take remedial action on a fourth well to address gas migration that had contaminated 14 water supplies. In addition, DEP fined Cabot $240,000 and ordered the company to install permanent treatment systems in 14 homes within 30 days. Cabot Oil & Gas also was prohibited from drilling any new wells in a nine-square-mile area around Dimock until April 2011.

Cabot said it attempted to satisfy the PaDEP demands by agreeing to plug certain wells and to offer methane separation systems to the litigants as the solution to the water problems, which Cabot strongly believes it did not cause.

This was the preferred solution that PaDEP insisted upon and to which Cabot agreed, Cabot said in a statement. The order was clear in that the methane separation systems were the final solution; once Cabot made the offer to "affected" residents (which Cabot did), the company was deemed to have met the PaDEP requirement. The systems are now sitting in a Cabot equipment yard.

Dinges said the company was forced to accept this demand as it "was clear at the time that if we did not agree to this solution, an enforcement action was to follow completely shutting down the Company's Pennsylvania operations."

In the following months, the PaDEP told Cabot that it wanted more time in order to convince the litigants that the separation systems were the solution and requested Cabot agree to amend the order to remove the separator language. Cabot complied with this request, trusting the PaDEP's assurance that separators were still the solution.

"After the plaintiffs' lawyer publically stated in July that the plaintiffs' preferred solution was a public water line from Montrose, this culminated in the PaDEP announcement in August that a new pipeline from Montrose is the solution, with no mention of the separators. Additionally, PaDEP disclosed that Cabot was expected to pay for the pipeline," Cabot said.

"The abrupt change in the PaDEP's proposals – going from separators to building a multi-million dollar, multi-year pipeline project is an obvious attempt at placating the litigants and that is why we have taken our position."

On Sept. 14, DEP determined that Cabot's drilling activities had contaminated three additional water supplies serving four residences.

"The problems in Dimock were caused by Cabot’s failure to construct their natural gas wells properly, and we are holding them responsible for the damage caused by these wells," Hanger said. "We intend to proceed with construction of a public water system for the Dimock area and will seek recovery of costs from Cabot Oil & Gas."

Pennsylvania American Water Company will construct a new, 5.5-mile water main from the company’s Lake Montrose water treatment plant south along Route 29 to Dimock and install approximately seven miles of distribution line to provide water service to at least 18 homes. The solution to the drinking water needs in Dimock will also make this basic resource accessible to other residents along Route 29 not currently served by public water. The water company will also install pressure regulating stations and a new treatment facility to serve the community.