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XTO Wants DOJ Documents to Prove Pennsylvania Criminal Charges Unwarranted

ExxonMobil Corp.'s XTO Energy Inc. on Thursday sued the U.S. Department of Justice (DOJ) to force federal officials to release documents that could clear the producer of eight criminal environmental charges filed in 2013 in Pennsylvania.

In 2010, more than 50,000 gallons of wastewater were discharged at XTO's Marquardt development in Lycoming County, where two natural gas wells were being drilled. The incident was found to be caused by an open valve on a wastewater storage tank, which ExxonMobil said was an accident. Following an investigation by the U.S. Environmental Protection Agency (EPA) and Justice Department, ExxonMobil entered into a consent decree, agreeing to pay a $100,000 penalty and spend up to $20 million in a settlement (see Shale DailyJuly 22, 2013). No criminal charges were filed and the producer admitted no wrongdoing.

Two months after the federal settlement and following a Commonwealth grand jury investigation, the Pennsylvania attorney general charged XTO with unlawful conduct, including five criminal counts under the state's Clean Streams Act and three under the Solid Waste Management Act (see Shale DailySept. 12, 2013). A pretrial conference before Judge Christopher Conner tentatively is scheduled Feb. 2 (see Shale DailyOct. 26, 2015).

XTO in November 2014 subpoenaed documents from DOJ used in the federal investigation to help it in the Commonwealth case, but federal officials have refused to comply with the request, according to the lawsuit filed in U.S. District Court for the Middle District of Pennsylvania (XTO Energy Inc. v. U.S. Department of Justice et al, No. 1:16-cv-00077). The lawsuit also names Peter J. Smith, U.S. attorney for the Middle District of Pennsylvania.

"The narrow set of documents at issue is highly relevant to the pending criminal action," XTO's lawsuit noted. "Indeed, the documents sought relate to the federal government's investigation of the exact same incident for which XTO is now being prosecuted in the Pennsylvania action -- a release of produced water at a gas well site on Nov. 16, 2010. Unlike the Commonwealth's investigation, however, the DOJ’s investigation of the incident led the agency to conclude that XTO should not be criminally prosecuted...

"Despite that conclusion, [DOJ] has categorically refused XTO's narrow subpoena and request for production of exculpatory and impeachment evidence that may assist the state court in likewise rejecting the criminal charges currently facing XTO" in Lycoming County (Commonwealth v. XTO Energy Inc., No. CR-2-2014). The "diverging outcomes of the federal and state investigations of the Marquardt incident provide XTO with substantial reason to believe that DOJ's files may contain both information that is exculpatory or favorable to XTO and information constituting impeachment material."

Before the DOJ declined to pursue a federal prosecution, XTO stated that DOJ, the Federal Bureau of Investigation, and EPA's Office of Criminal Enforcement, Forensics and Training "conducted a criminal investigation of the exact same environmental incident giving rise to the Commonwealth's criminal charges. During this investigation, the government issued federal grand jury subpoenas to XTO for documents relevant to the release, interviewed relevant XTO employees, and, on information and belief, issued grand jury subpoenas to relevant third parties" that were involved in transporting water/wastewater to the Marquardt site.

Specifically, the producer has requested documents containing information "tending to show that XTO did not participate in or cause the acts or events giving rise to the alleged discharge, or that...some other party did participate in or cause such acts or events." It also has requested "specific categories of impeachment material for 17 specific potential witnesses in the Commonwealth's case."

Last February, DOJ denied XTO's request, citing three reasons for its categorical denial. "First, because the government is not prosecuting XTO, it has (or so it contends) no legal obligation to search for and produce...material," said XTO's lawsuit. Second, the government asserted that XTO's request was based on "pure speculation," and was "overly burdensome, oppressive, unreasonable and would impose undue burden and expense on [the United States Attorney's] office's resources." The government also noted that the materials in its files would be "privileged on a number of grounds," including a secrecy requirement for grand jury materials.

XTO said DOJ's findings "must be set aside because they were arbitrary, capricious, an abuse of discretion, otherwise not in accordance with law, contrary to constitutional right, power, privilege, and immunity, without observance of procedure required by law, unwarranted by the facts, in excess of the DOJ's statutory and regulatory jurisdiction, authority, and limitations, and were short of the DOJ’s statutory and regulatory right."

Philadelphia's Buchanan Ingersoll & Rooney PC is representing XTO.

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