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Chesapeake Ordered to Pay $3.2M Fine in West Virginia

In one of the largest fees ever assessed by the federal government for violating the Clean Water Act, both the U.S. Department of Justice and the U.S. Environmental Protection Agency (EPA) said Thursday that Chesapeake Appalachia LLC, a subsidiary of onshore oil and gas giant Chesapeake Energy, would pay a civil penalty of $3.2 million for violations that occurred in West Virginia.

The company will also pay an estimated $6.5 million to restore 27 sites across West Virginia damaged by the unauthorized discharge of fill material into streams and wetlands in Boone, Kanawha, Lewis, Marshall, Mingo, Preston, Upshur and Wetzel counties where horizontal drilling and hydraulic fracturing (fracking) activities were occurring.

"With this agreement, Chesapeake is taking important steps to comply with state and federal laws that are essential to protecting the integrity of the nation's waters, wetlands and streams," said Robert G. Dreher, acting assistant attorney general of the Justice Department.

EPA Regional Administrator Shawn Garvin added that "this case sends a clear message that EPA and other federal and state regulatory agencies will do what is necessary to ensure compliance with the Clean Water Act and to protect these valuable resources and the health of our communities."

The settlement also resolves alleged violations of state law brought by the West Virginia Department of Environmental Protection (WVDEP). The state itself will receive half of the civil penalty.

Several years ago, both state and federal regulators discovered some of the violations after receiving tips from the public and after routine inspections. The company also disclosed potential violations at 19 of the sites following an internal audit (see Shale Daily, March 5, 2012). In 2010 and 2011, the EPA issued administrative compliance orders for violations at 11 sites. Since then, the company has been engaged in restoration efforts at those sites.

According to federal and state regulators, Chesapeake impounded streams and discharged sand, dirt, rocks and other fill material into streams and wetlands without a federal permit in order to construct well pads, water impoundments, road crossings and other drilling-related facilities.

"Chesapeake Appalachia LLC has reached a key milestone in the settlement process to resolve federal and state claims relating to surface construction activities that occurred in West Virginia prior to 2010," said Chesapeake spokesman Gordon Pennoyer in a statement provided toNGI's Shale Daily. "The company is fully committed to regulatory compliance and is working with the EPA, Army Corps of Engineers and [the] WVDEP to restore impacted sites."

When asked, Pennoyer did not elaborate on why the company chose to discharge unauthorized fill material into streams and wetlands.

Last year, the company pleaded guilty to three violations of the Clean Water Act at one of the West Virginia sites related to the current settlement (seeShale Daily, Oct. 9, 2012). The company was ordered to pay a $600,000 penalty in that case after regulators discovered that crushed stone and gravel had been dumped into Blake Fork stream to create a roadway to improve access to a drilling site.

The current order is open to a 30-day public comment period and a court must still approve it.

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