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Cabot, Pennsylvania Settle Gas Migration Lawsuit

Residents of Dimock Township in Susquehanna County, PA, whose drinking water supplies were contaminated by natural gas, are to receive a share of $4.1 million that Cabot Oil & Gas Corp. agreed to pay under a settlement negotiated with the state's Department of Environmental Protection (DEP).

The settlement would enable the affected families to "address their individual circumstances as they see fit," said the state. The settlement also binds Cabot to offer and pay to install whole-house gas mitigation devices in each of the 19 affected homes. In addition Cabot agreed to pay $500,000 to offset the state's expense for its two-year investigation of Dimock residents' water supplies.

"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 DEP Secretary John Hanger. He said the amount paid to each family will equal two-times the value of their home, with a minimum payment of $50,000.

"In addition to the significant monetary component of this settlement, there is a requirement that Cabot continue to work with us to ensure that none of their wells allow gas to migrate," Hanger said.

The settlement agreement sets out specific obligations regarding claims related to water quality for the 19 households in the Dimock/Carter Road area. The most notable obligation by Cabot is to establish escrow accounts for the 19 households and to provide for those that agree to participate, the financial resources to rectify this situation. For an established time period, Cabot is to offer a whole house water treatment systems for the households affected.

Once Cabot has complied with the terms of the settlement, the producer would be allowed to resume well completion operations in the Dimock/Carter Road area. The Houston-based independent said it plans to resume operations early next year, with new drilling in the Dimock/Carter Road area beginning in the second quarter.

DEP began investigating reports of stray gas in Dimock water wells in January 2009 (see Daily GPI, Jan. 26, 2009). Later that year, following three spills of a hydraulic fracturing (fracking) fluid in the area, Cabot was ordered to stop fracking wells there (see Daily GPI, Sept. 28).

A consent order and agreement signed in November 2009 required Cabot to install whole-house treatment systems in 14 Dimock homes, but residents found that action to be unsatisfactory and in turn sued Cabot (see Daily GPI, Nov. 6, 2009).

The agreement was modified last April and Cabot was ordered to cap three wells believed to be the source of the migrating gas (see Daily GPI, April 19). DEP also suspended its review of Cabot's pending permit applications for new drilling activities statewide and prohibited the company from drilling any new wells in a nine-square-mile area around Dimock.

In September DEP announced that Pennsylvania American Water Co. would construct a 5.5-mile water main from its Lake Montrose water treatment plant to supply the affected Dimock residents with a reliable source of quality drinking water (see Daily GPI, Oct. 1). Two months later the Pennsylvania Infrastructure Investment Authority approved an $11.8 million grant and loan package for the project, with the commonwealth intending to recover the cost of the project from Cabot.

A federal judge in November denied a motion by Cabot to dismiss the case brought by Dimock residents who claimed that their health and property had been harmed by the producer's drilling activities (see Shale Daily, Dec. 1).

"Given the opposition to the planned water line and the uncertain future the project faces," Hanger said the state would abandon its pursuit of the project.

"Our primary goal at the department has always been to ensure that the wells Cabot drilled in Dimock were safe and that they were not contaminating local private water supplies," said Hanger. "We've made great progress in doing that. Since we initiated our enforcement actions, gas levels in a majority of the contaminated water wells have gone down significantly. This agreement lays the foundation for families to finally put an end to this ordeal."

Cabot CEO Dan Dinges said the agreement "provides a reasonable and pragmatic way forward for all parties. The common ground we found to settle provides the right balance of regulations, financial payments, timely execution and operational safeguards that in the end will protect the resources of Pennsylvania, promote economic development of clean-burning natural gas and continue to create good paying jobs in the natural gas industry.

"We have been committed to responsible operations within Susquehanna County, and we have redoubled our efforts with the Pennsylvania Department of Environmental Resources to resolve past issues," said Dinges. The agreement "signifies a tremendous effort on all sides to move forward with resolution and closure."

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