The Pennsylvania Department of Environmental Protection (DEP) on Tuesday fined Chesapeake Energy Corp. nearly $1.09 million for violations related to natural gas drilling operations in the Marcellus Shale.

Under a consent order and agreement (COA), subsidiary Chesapeake Appalachia LLC agreed to pay $900,000 for contaminating private water supplies in Bradford County; $200,000 is to be dedicated to DEP's well plugging fund (see Daily GPI, Sept. 21, 2010).

In the second COA Chesapeake agreed to pay $188,000 for a Feb. 23 tank fire at a drilling site in Avella, PA, in Washington County (see Shale Daily, Feb. 25).

"It is important to me and to this administration that natural gas drillers are stewards of the environment, take very seriously their responsibilities to comply with our regulations, and that their actions do not risk public health and safety or the environment," said DEP Secretary Mike Krancer.

"The water well contamination fine is the largest single penalty DEP has ever assessed against an oil and gas operator, and the Avella tank fire penalty is the highest we could assess under the [state's] Oil and Gas Act. Our message to drillers and to the public is clear."

Throughout 2010 DEP personnel investigated private water well complaints from residents of Bradford County in Tuscarora, Terry, Monroe, Towanda and Wilmot townships, which are near Chesapeake's shale drilling operations.

"DEP determined that because of improper well casing and cementing in shallow zones, natural gas from nonshale shallow gas formations had experienced localized migration into groundwater and contaminated 16 families' drinking water supplies," officials said.

As part of the Bradford County COA, Chesapeake agreed to undertake several measures to prevent future shallow formation gas migration. Among other things the producer agreed to:

The well plugging fund supports DEP's Oil and Gas program operations and is used to mitigate historic and recent gas migration problems in cases where the source of the gas cannot be identified.

The Avella action was taken, said officials, because in February, while testing and collecting fluid from the Joseph Powers well site in Avella, three condensate separator tanks caught fire, injuring three subcontractors working on-site.

"DEP conducted an investigation and determined the cause was improper handling and management of condensate, a wet gas only found in certain geologic areas," officials said. Under the COA, Chesapeake is required to submit for approval to the department a condensate management plan for each well site that may produce condensate.

"Natural gas drilling presents a valuable opportunity for Pennsylvania and the nation," Krancer said. "But with this opportunity comes responsibilities that we in Pennsylvania expect and insist are met; we have an obligation to enforce our regulations and protect our environment."

Chesapeake spokesperson Stacey Brodak said through the course of its investigation the company "identified practices that can improve our operations. With that said, we are grateful the three contract employees who were injured are recovering. Safety is a top priority in every facet of our operations whether it involves our employees, contractors, neighbors or the environment."

Chesapeake's condensate management plan will identify processes to manage condensate vapor emissions and outline how condensate will be safely stored and removed from well sites.

"We have conducted a complete investigation in cooperation with the DEP," Brodak said. "We will apply what we have learned from our review to improve our operational and safety practices at all of our well sites in the Marcellus Shale."