Chesapeake Energy Corp. has agreed to settle a lawsuit with a group of landowners in Bradford County, PA, who allege the company’s Marcellus Shale drilling operations contaminated their groundwater supplies.

Company spokesman Rory Sweeney told NGI’s Shale Daily that under the terms of the settlement subsidiary Chesapeake Appalachia LLC will pay the plaintiffs — three families who live on Paradise Road in the town of Wyalusing — a total payment $1.6 million, which the company believes is fair market value for the property plus additional compensation. He added that Chesapeake believes there is no permanent damage that would prevent a future sale, enabling the subsidiary to recoup a significant portion of the settlement.

“While Chesapeake remains confident that the water supply is consistent with area water quality standards, it has entered into the settlement so the families and the company could bring closure to the matter,” Sweeney said Monday.

Attorneys for the plaintiffs said Chesapeake began drilling in 2009, but signs of groundwater contamination didn’t arise until the summer of 2010, when wells drilled near the plaintiffs’ property “were leaking gas because the wells had been poorly cemented.” The attorneys added that a subsequent investigation by the Pennsylvania Department of Environmental Protection (DEP) determined that Chesapeake was responsible for methane contamination in the plaintiff’s water wells.

“These landowners signed oil and gas leases under assurances that gas drilling would never be close enough to affect their properties,” said the plaintiffs’ lead counsel, Allen Stewart of the Dallas-based law firm Allen Stewart PC. “These assurances proved false and Chesapeake’s inadequate design and maintenance of the gas wells allowed methane to pollute the plaintiffs’ underground water supply.”

But Sweeney said the investigation into what happened in Wyalusing was hampered by a lack of pre-drill water testing on some of the water sources in question. He said that although the DEP currently recommends testing within a 2,500-foot radius of any oil or natural gas well — a recommendation that Chesapeake meets or exceeds with its own testing — the contaminated wells are beyond that testing radius, and so the company had not collected samples there before drilling started.

“The pre-drill testing that we do have in the area shows that a significant percentage of the residential wells had measurable methane levels prior to any Chesapeake drilling activity in the area,” Sweeney said. “Furthermore, many wells exceeded at least one of the drinking water standards set by the U.S. Environmental Protection Agency with arsenic, iron and manganese being common findings.

“While efforts over the past two years have been made to restore the residents’ confidence in their water wells, it increasingly became clear — through the actions of the residents and their legal counsel — that reasonable solutions, including treatment systems, would not satisfy their concerns.”