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Witnesses Called in XTO Marcellus Spill Case

State prosecutors called six witnesses to the stand on Wednesday in a preliminary hearing at the trial court-level on the unprecedented criminal charges brought against XTO Energy Inc. in September by Pennsylvania Attorney General Kathleen Kane, who maintains that the company should be held liable for a 2010 wastewater spill at one of its drilling sites in the state.

The case represents the first time criminal charges have been filed against an operator in Pennsylvania, and given the fact that XTO -- the onshore subsidiary of the world's largest publicly traded oil and gas company, ExxonMobil Corp. -- is involved, both sides have reportedly brought out the legal big guns.

XTO is represented by three law firms, while the state has brought to bear its leading lawyers, including the attorney general's top environmental attorney, Glenn A. Parno.

Environmental groups have applauded Kane for her bold move to prosecute the company, while pro-business groups, such as the Pennsylvania Chamber of Commerce, have chided her decision as one that could have a chilling effect on the state's oil and gas boom, especially as it relates to recycling fracking wastewater.

The only comparable instance in Appalachia occurred a state away in Ohio, in which the former owner of a small oil and gas company was indicted by a federal grand jury this year for ordering an employee to dump tens of thousands of gallons of wastewater down a storm drain in Youngstown (see Shale Daily, Feb. 19). 

That incident eventually led to a large-scale clean-up effort after the waste leaked into a major river there.

But the oil and gas industry has fully supported XTO, unlike its move to disown the bad actors in the Ohio dumping case.

A spokesman for the Marcellus Shale Coalition -- an industry trade group with hundreds of members, including XTO -- told NGI's Shale Daily that each case was like comparing "apples and oranges" because the Youngstown perpetrators knowingly dumped their waste.

"These charges set a bad precedent, with ramifications that may be far-reaching," the spokesman said of the XTO case. "The incident has been fully addressed at the state and federal levels, and such charges are a clear overreach."

The charges stem from a random inspection that occurred on Nov. 16, 2010 at a north-central Pennsylvania drilling site where XTO was working on two wells. An inspector with the Pennsylvania Department of Environmental Protection (DEP) found an open valve on a wastewater storage tank that had discharged fluid containing toxic chlorides, barium, strontium and aluminum (see Shale Daily, Sept. 12).

At issue in the case is who opened the valve, if anyone at all, and who should be held responsible. XTO claims the incident was completely accidental, while the state maintains that even if it was an accident, the spill warrants prosecution because ultimately XTO was responsible for operations at the site.

"Criminal charges are unwarranted and legally baseless because neither XTO nor any of its employees intentionally, recklessly or negligently discharged produced water on the site," the company said in September when the charges were filed, adding that "the criminal charges filed by the attorney general are unprecedented and an abuse of prosecutorial discretion."

ExxonMobil agreed in July to pay a $100,000 penalty and spend up to $20 million in a settlement with the U.S. Justice Department, which conducted a year-long investigation into the matter and found there were no grounds for criminal charges, as did the U.S. Environmental Protection Agency.

On Wednesday in Lycoming County Court, Jeremy Daniel, the DEP inspector who discovered the discharge, told prosecutors that he found wastewater, sand and an area of dead vegetation near several steel storage tanks that are widely considered to be the safest method to hold wastewater. He added that he couldn't be sure why the valve or valves were left open or why they had malfunctioned.

A few local news media outlets reported that District Judge James G. Carn, who typically hears misdemeanor cases, was in largely uncharted territory with the heavyweights standing before him.

In many ways, the case appears to be shaping up as a sensitive one for the industry. One Pittsburgh-based lawyer, who wished not to be identified because his firm represents XTO in a separate capacity, said the case will likely attract a certain level of interest from the public and industry stakeholders as it continues to progress given the "gravity of how serious" the charges are.

Still, Lisa Kasianowitz, a spokeswoman for the DEP, said the incident did not prompt regulators to increase their inspections at well sites across the state or specifically force the agency to take a second look at its regulations, which she said is a constant effort anyway.

Pennsylvania currently employs 83 people to inspect well sites, among them inspectors, water quality specialists, solid waste specialists and environmental protection professionals. Kasianowitz added that the DEP's inspections went from a low of 1,264 in 2008 to a staggering 12,201 last year, conducted on a scheduled and random basis at the state's thousands of Marcellus wells.

Carn must now decide whether the XTO case will move to a full trial.

The company faces five counts of unlawful conduct under Pennsylvania's Clean Streams law and three counts of unlawful conduct under the Solid Waste Management Act.

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