The Pennsylvania Department of Environmental Protection (DEP) has granted Cabot Oil & Gas Corp. permission to discontinue potable water deliveries to several Dimock Township residents by Nov. 30.

In a letter dated Tuesday to Cabot Vice President Phillip Stalnaker, Scott Perry, the acting deputy secretary for the DEP's Office of Oil and Gas Management, said the Houston-based company had satisfied the terms and conditions of a settlement the agency forged with Cabot last December (see Shale Daily, Dec. 17, 2010). Cabot will begin notifying the affected residents on or before Nov. 1.

The DEP has not acted on a renewed request by Cabot to resume Marcellus Shale natural gas drilling and well completion activities in a 9-square mile area of Dimock Township -- also known as the Carter Road Area -- where methane migration problems have persisted since Jan. 1, 2009, when a private water well exploded (see Daily GPI, Jan. 26, 2009). Stalnaker sent a 14-page letter to the DEP on Monday asking for permission to return to the affected area.

"Cabot has aggressively investigated the origin of [the] methane, including extensive sampling of water supplies in areas where no drilling has yet occurred, to determine comparable background levels of methane in the vicinity," Stalnaker said. He added that the company has worked with third-party consultants and industry experts to conduct further studies and to review its drilling practices.

"It is our hope [that] by collaboratively working with the DEP we will be able to resume operations inside that area soon," Cabot spokesman George Stark told NGI's Shale Daily on Tuesday. "We've had an ongoing dialogue and exchange of data and information with them."

On the water supply issue, Stalnaker said Cabot has been providing fresh water to many residents in the affected area for months and, in some cases, years. But he said 80% of approximately 2,000 groundwater samples from undrilled areas throughout Susquehanna County found detectable levels of methane.

Under the terms of the settlement, Cabot agreed to pay Dimock Township residents with contaminated water supplies $4.1 million and agreed to pay for and install whole-house gas mitigation systems for each of the 19 homes affected. Cabot also agreed to pay the state $500,000 for its two-year investigation into the incident.

"Cabot and [the DEP] had the same interest in mind -- to put temporary measures in place to ensure the safety of homeowners and residents while scientific studies could be implemented and, based upon those studies if or where necessary, permanent remedies could be implemented," Stalnaker said. "The primary reason to discontinue these temporary water supplies is, simply, that they are no longer needed, and have not been necessary for quite some time or never needed."

Both Stark and DEP spokeswoman Katherine Gresh confirmed Tuesday that the DEP was not under any deadline to decide whether or not to allow Cabot to resume activities in the affected area.

"We would like to get back in there soon," Stark said. Stalnaker concurred, adding "other producers with comparable practices have been allowed to proceed with drilling and hydraulic fracturing activities in and around the [affected] area. This shows that drilling and fracking can be conducted [there] without impacting water supplies."

Eleven families -- 20 plaintiffs in total -- appealed the DEP's settlement with Cabot to the Pennsylvania Environmental Hearing Board on Jan. 11. According to the complaint in the case -- Ronald Carter Sr., et al., v. Commonwealth of Pennsylvania, Department of Environmental Protection and Cabot Oil & Gas Corp., No. 2011-003-L -- the appellants allege the DEP negotiated in secret and in bad faith, incorrectly calculated property damages and restored Cabot's ability to resume full permitting.

The appellants also claim that the settlement undermined a parallel lawsuit in U.S. District Court for the Middle District of Pennsylvania -- Norma J. Fiorentino, et al., v. Cabot Oil & Gas Corp. and Gas Search Drilling Services Corp., No. 09-cv-2284 -- and scuttled a proposal for a 12-mile water pipeline system that would have connected their homes to municipal water (see Daily GPI, Oct. 1, 2010). A judge ultimately denied Cabot's motion to have the Fiorentino case dismissed, but the water pipeline project was abandoned after the settlement was reached (see Shale Daily, Dec. 1, 2010).

Meanwhile, on Sept. 13 Judge Bernard Labuskes Jr. -- who is overseeing the Carter case -- denied the appellants' motion to compel Cabot's general counsel, Kevin Cunningham, to testify in that legal proceeding.

The DEP gave Cabot permission to resume drilling at a well pad in Lenox Township -- also in Susquehanna County -- after an investigation there found no elevated levels of methane in private drinking water wells (see Shale Daily, Sept. 6). The investigation began Aug. 16 after three private drinking water wells appeared to be impacted by methane and a combustible gas was observed bubbling from a local pond (see Shale Daily, Aug. 29).