Pittsburgh-based EQT Corp. continues to fight a proposed $4.5 million penalty by the Pennsylvania Department of Environmental Protection (DEP) for a 2012 impoundment leak in Tioga County, arguing in state Supreme Court earlier this month that a lower court ruling against it should be overturned.
The company has been battling the DEP about the civil penalty since May 2014, when it was first proposed for $1.27 million, which included $900,000 for what the agency alleged were ongoing discharges from the impoundment that violated the state's Clean Streams Law.
While the DEP recommends fines, it is the state’s Environmental Hearing Board (EHB) that makes a determination of the appropriate amount and imposes them. EQT had circumvented the EHB and filed a complaint directly with the state Commonwealth Court, challenging the DEP's interpretation of the Clean Streams Laws and asking the court, rather than the administrative EHB, to decide whether DEP's fines could include fees for ongoing discharges. In response, the DEP filed a lawsuit seeking $4.53 million for ongoing discharges, adding that settlement negotiations had broken down and that the company was failing to cooperate with its investigation (see Shale Daily, Oct. 7, 2014).
The DEP asked the lower court to dismiss EQT's complaint, which it did, saying there was no controversy because EHB is the entity that determines and imposes fines. EQT has called DEP's increased proposal "excessive," saying it acknowledges responsibility for the leak but will not agree to the fine.
During oral arguments before the state Supreme Court earlier this month, EQT argued that it should not be subjected to a lengthy administrative process, maintaining that its challenge to the DEP's interpretation of the Clean Streams Law is a legal issue that the Commonwealth Court could decide in a more timely manner. EQT also fears that the fine could grow during EHB's hearing process if DEP elects to tack on more ongoing discharge fees.
The dispute stems from an incident that began in April 2012 in north-central Pennsylvania's Tioga County. Monitoring at a centralized impoundment serving EQT's Phoenix pad revealed elevated levels of chloride. A month later, DEP said it discovered a release of flowback water from a transfer line serving the impoundment and, in a separate incident, EQT reported that the impoundment was leaking, which affected a cold water fishery, a stream, an unnamed tributary, vegetation and groundwater, according to DEP.
Eventually, the impoundment was emptied, revealing what DEP said were 75-100 holes in the liner. EQT said the holes in its impoundment were caused by a subcontractor and added that it promptly removed all fluids and solids from the impoundment after it was discovered to be leaking in 2012.
In a blog post on its website, BakerHostetler LLP, which represents clients in the energy industry, but not EQT in this case, said it was unclear how the state Supreme Court would rule in the matter. The firm said if EQT prevails, however, it "could represent a win for the industry as a whole."
The ability to have legal issues resolved in court, BakerHostetler said, "might remove some of the leverage power regulators have, by allowing the penalized party to bypass the arduous and costly administrative process..."
If EQT is forced to pay the fine, it would be the largest against an unconventional operator in the state's history. While the agency has an $8.9 million fine pending against Range Resources Corp., that company agreed to pay $4.15 million last year for a series of violations at six of its water impoundments in the southwest part of the state (see Shale Daily, June 16; Sept. 19, 2014).