DEP fined oil and gas companies $2.5 million last year
Oil and gas companies were fined $2.5 million by Pennsylvania environmental regulators last year for violations at well sites and pipeline routes.
The 2013 total was the third highest in the three decades of oil and gas penalties the Department of Environmental Protection tracks in its public compliance report. Oil and gas companies were fined higher amounts only in 2010 ($2.7 million) and 2011 ($2.6 million), according to the database. (Tallying the fines in a different way through its fiscal report, DEP said the 2013 total was actually tied with 2011.)
Unlike recent years when high-profile spills, fires or methane migration cases attracted attention and hefty penalties, 2013 saw smaller but significant fines issued without fanfare to companies for violations that accumulated over years. Six of the 20 largest fines ever levied by DEP’s oil and gas program were handed out last year, but only one was among the ten largest.
Many violations are years old and have been resolved by the time regulators decide on a penalty, which can encompass dozens of problems at separate sites. Most fines receive little or no public attention when they are settled. DEP issued press releases announcing three of 135 fines in the oil and gas compliance report last year, according to its archive, and one press release described two of the fines.
DEP spokesman Eric Shirk said the agency can combine multiple violations by a company into one penalty assessment rather than issuing separate fines. The department calculates penalties based on several factors, including which laws or permit limits were broken, how severe the violations were and whether the acts were intentional. He said the agency issues press releases “as deemed necessary,” for example, when an incident has received media attention or when a violation is caused by reckless behavior or has a significant environmental impact.
“If a particular incident garnered media interest, we will do a press release on the enforcement action of that incident,” he said. “If members of the media have followed a particular matter and the department has provided all the relevant information based on these inquiries so that the matter is already conveyed to the public, it may not be necessary to issue a press release.”
Storms and streams
Williams Companies, through three pipeline subsidiaries, paid the most in fines in 2013 for excess erosion and drilling mud spills into creeks during pipeline construction and underground boring operations. The subsidiaries, Laser Northeast Gathering, Williams Field Services and Laurel Mountain Midstream, paid a combined $388,694 in fines for 105 violations between March 2011 and September 2012. Williams Field Services and Laser paid one fine each for a host of problems at their sites in Susquehanna, Wyoming and Luzerne counties; they were the second and third largest fines of the year, at $169,648 and $164,622. Laurel Mountain Midstream paid three fines totaling $54,424 for operations in southwestern Pennsylvania.
Williams was not responsible for the Laser violations, which happened before Williams bought the company in 2012, but Williams assumed Laser’s liabilities and paid the fine.
Williams spokeswoman Helen Humphreys said many of the problems in the northeast stemmed from wet weather brought by Hurricane Irene and Tropical Storm Lee in 2011, while other violations happened during horizontal directional drilling, which is used to bore pipeline paths under waterways. The company has since hired an engineering expert in the directional boring process to implement better design, evaluation and management practices. It has also created a compliance team of engineers and biologists to train its environmental inspectors and construction crews and communicate with regulators.
The program has earned praise from regulators, she said. “Once Pennsylvania DEP closes out its 2013 record of violations, we’ll measure the impact that the compliance team has had,” she said. “But we think we’re going to have a very good result.”
Regulators fined Seneca Resources Corp. the second largest total amount in 2013: $377,000 in seven fines that encompassed 59 violations from February 2010 to March 2013. The company operates both conventional and unconventional wells in the state and the fines settled violations in northwestern and north-central Pennsylvania. More than half of the violations were associated with sites on public lands.
Seneca spokesman Rob Boulware said the fines were principally focused on three incidents: “a road collapse during extreme weather conditions in 2011, a fuel spill which led to a fairly involved clean-up but caused no pollution of any water resource,” and “a spill that resulted from vandalism.”
The company’s infractions also included fluids seeping through a well pad in a Tioga County state forest and a spill during directional boring under a Class A trout stream.
Other companies that were fined the largest amounts last year include PVR Partners ($170,000), U.S. Energy Development Corp. ($150,000), Antero Resources ($148,250), Pennsylvania General Energy ($125,500), Range Resources ($120,050), Schreiner Oil & Gas ($112,000), XTO Energy ($74,261), and Chesapeake Energy ($71,362).
Oil and gas companies emphasize that the total fines they paid last year do not necessarily reflect their overall performance record.
A recent state performance report released by the Governor’s Budget Office found that the number of oil and gas enforcement actions declined 19 percent and violations declined 36 percent between fiscal years 2011-2012 and 2012-2013. Between the start of 2010 and the end of 2013 – the period when DEP found most of the violations that led to the 2013 fines – regulators made nearly 95,000 oil and gas inspections across the state and recorded violations during 7.6 percent of them.
“It is a mischaracterization to simply judge an operator by a fine paid in any given year, since violations are negotiated over time and often do not reflect an incident from the year in which a settlement is reached,” Boulware said.
“We constantly adjust our procedures, which has led to a decline in operational infractions each year,” he said. “And that’s a trend we expect to continue.”
DEP’s oil and gas program issued fewer fines overall in calendar year 2013 than in 2012 or 2011 but the average penalty amount was higher: $18,750 in 2013 compared to $15,000 in 2012 and $16,500 in 2011, according to the compliance report.
A 2012 update of the state’s oil and gas law raised the maximum civil penalty for unconventional operators from $25,000 plus $1,000 per day to $75,000 plus $5,000 per day, but DEP has not yet needed to use the increased penalty ceiling in its enforcements, Shirk, the agency spokesman, said. The reason is, in part, that one incident often violates more than one environmental law and DEP has the discretion to consider them together.
“For example, a violation that results in a discharge or spill to a waterway would likely be a violation of the Clean Streams Law as well as the Oil and Gas Act,” he said.
George Jugovic Jr., chief counsel for the environmental organization PennFuture who used to direct DEP’s southwest regional office, said monetary penalties are meant to deter companies from repeating violations, but the size of a fine alone can’t tell you whether it will make an impact.
“It’s more about corporate policy and corporate culture,” he said. “Do they hold persons responsible in their organization when an environmental violation occurs? Because that’s going to make a difference.”
Regulators do not rely on fines alone to enforce environmental laws. Under Pennsylvania’s oil and gas law, for example, companies can be denied a drilling permit in some circumstances if they have continuing violations elsewhere in the state. But a powerful compliance tool available to regulators in the solid waste and mining programs is not an option for oil and gas regulators under the current law, he said. In those programs, a company’s historical compliance record is also taken into account when regulators decide whether to grant a major permit.
“That has a real strong effect on corporate culture,” he said. “People start thinking it’s not just about correcting an existing violation and moving on. If I commit a violation as a corporation, and I rack up enough of them and they are serious enough, I may not be able to do business in the state anymore.”
Here are the five largest fines last year that were not announced by DEP (and a sixth that was announced). Click on the dollar amounts to read annotated penalty agreements:
Seneca Resources: $198,500
Williams Field Services: $169,648
Laser Northeast Gathering: $164,622
U.S. Energy Development: $150,000
PVR Marcellus Gas Gathering: $150,000
Antero Resources: $148,250
Here are all of the fines included in the compliance database for 2013:
[spreadsheet key=”0AlrF4wibqMprdGZtYnlXZ2ZrYnR2R0podGNsamJPTUE&usp” source=”DEP Oil and Gas Compliance Report” filter=0 paginate=1 sortable=1]