Marcellus heavyweight EQT Corp., one of Pennsylvania’s leading producers, is in a showdown with the state Department of Environmental Protection (DEP) over a 2012 impoundment leak that finds it facing a $4.53 million fine and six separate criminal charges in Commonwealth Court.

On Tuesday, DEP said it is seeking a $4.5 million civil penalty from EQT. Its complaint, filed with the Pennsylvania Environmental Hearing Board, says settlement negotiations have broken down and the company has failed to cooperate with its investigation.

But EQT offered a different version of events and fired back with its own press release Tuesday, calling the proposed fines “excessive” and alluding to some of the agency’s recently publicized problems by saying the timing of the regulatory actions against it are “suspect” (see Shale Daily, Oct. 3; July 22a; July 22b).

The dispute stems from an incident that began in April 2012 in north-central Pennsylvania’s Tioga County. Monitoring wells at a centralized impoundment serving EQT’s Phoenix Pad S 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.

Eventually, the impoundment was emptied, according to DEP, revealing between 75 and 100 holes in the liner. It remains unclear exactly how much waste leaked from the impoundment, but DEP said it was likely “significant.”

“EQT fails to recognize the ongoing environmental harm from the significant amount of waste released by its leaking six million gallon impoundment,” Acting DEP Secretary Dana Aunkst said of the agency’s proposed fines. “This action was necessary because the company has not been cooperative during our investigation. The department does not tolerate this unacceptable attitude toward compliance and proper protection of Pennsylvania’s environment.”

Even after discovering two seeps near the impoundment during its investigation of the leaking transfer line and elevated chloride levels, DEP maintains that the company’s lack of cooperation was evident in its alleged decision to continue dumping flowback water in the pit.

EQT expressed outrage at the DEP’s move to file a complaint with the Environmental Hearing Board and inflate what it said was an original penalty assessment of $1.27 million.

“EQT has a great deal of respect for the DEP and its professionals,” said General Counsel Lewis Gardner. “We have cooperated with the agency on this and many other projects and we will continue to do so. At present, we disagree on this basic legal issue, and while EQT acknowledges responsibility for its contractor’s action, EQT will not agree to an excessive fine based on a faulty legal theory.”

Asked to comment further and explain how the original assessment had grown, DEP spokesman Dan Spadoni toldNGI’s Shale Daily that the agency couldn’t comment because the matter is in litigation, saying only that the DEP would pursue the $4.5 million fine.

EQT said the holes in its impoundments were caused by a subcontractor. It added that it “promptly removed all fluids and solids” from the impoundment after it was discovered to be leaking in May 2012.

Last month, the company filed a complaint in the state Commonwealth Court against DEP challenging its interpretation of the Clean Streams Law, which the agency has assessed the penalties under.

“The DEP’s insistence on a $1.27 million penalty during settlement negotiations, with no room for discussion or negotiation, followed by a $4.53 million demand in a lawsuit filed in response to EQT’s attempt to clarify the law in Commonwealth Court, illustrates the problem with the agency’s interpretation of the Clean Streams Law,” Lewis said of the DEP’s complaint with the Environmental Hearing Board. “It creates uncertainty and leads to the absurd result of never-ending and unquantifiable liability.

“The timing is suspect, and the exorbitant proposed penalty is inconsistent with both past and recent agency practice,” he added. “The DEP’s proposed penalty seems designed more for headlines than for the lawful enforcement of the Commonwealth’s environmental statutes. In addition, based on a preliminary review of the complaint, the DEP is wholly ignoring EQT’s remediation efforts and cooperation with the agency, as well as misstating many facts of the case.”

While DEP said Tuesday that EQT’s consultant has found contamination at high enough levels that water at the site is still being collected and transported off-site, EQT said the same consultant has confirmed that the site meets statewide soil cleanup standards.

In addition to its lawsuit challenging DEP’s interpretation of the Clean Streams Law, the company is now fighting on another front in court. The Pennsylvania Attorney General’s (AG) Office late last month filed three criminal counts of pollution of waters and three counts of disturbance of waterways against the company for the Tioga County incident. Each of those charges carries a $5,000 fine.

They are the subject of a separate investigation by the AG’s office stemming from a misdemeanor complaint by the Pennsylvania Fish and Boat Commission for the leaking impoundment’s impact on the cold water fishery. EQT said it was currently discussing a settlement with the commission and the AG’s office.

Based in Pittsburgh, EQT has been in business for more than a century. Through the first half of this year, it was Pennsylvania’s fifth leading producer, according to state records (see Shale Daily, Aug. 19). Last year, the company produced 378.2 Bcfe, of which the Marcellus Shale accounted for 73% (see Shale Daily, Feb. 13).

If EQT is forced to pay the $4.5 million fine, it would be the largest against an unconventional operator in the state’s history. The record was recently set by a DEP fine against Range Resources Corp. in September, which required a $4.15 million payment for a series of violations at six of that company’s water impoundments in the southwest part of the state (see Shale Daily, Sept. 19).