More actions coming in wake of XTO leak

Criminal charges against XTO Energy, a division of Exxon Mobil, aren't the first or the last actions to be taken against the Marcellus Shale operator for a wastewater release in November 2010.

As Pennsylvania Attorney General Kathleen Kane revealed the results of a grand jury investigation Tuesday, the Pennsylvania Department of Environmental Protection said its enforcement efforts are still to come.

The DEP was waiting for the U.S. Environmental Protection Agency and the Department of Justice to complete their joint investigation into the release of about 57,000 gallons of gas well wastewater in Penn Township, Lycoming County. The waste flowed from an unplugged rear valve of a tank that held flow-back water waiting to be recycled.

The federal probe ended in July, with a settlement and no criminal charges.

Former DEP Secretary John Hanger, who is now seeking the Democratic nomination for governor, referred the case to the attorney general's office in January 2011 and was happy to see the grand jury's results.

"Free advice to XTO -- look in the mirror and ask hard questions of yourself," Mr. Hanger said Wednesday. "That kind of performance by any company in the industry is inexcusable. A very strong message needs to be sent."

XTO, the Marcellus Shale Coalition and the Pennsylvania Chamber said the attorney general's action does indeed send a strong and discouraging message to everyone in the industry.

Katie Klaber, CEO of the Marcellus Shale Coalition, said the charges create an "untenable business situation" in the state and will discourage investment, but wouldn't expound on why that is.

XTO said on its website the charges "could discourage good environmental practices, such as recycling."

Company spokesman Alan Jeffers explained in an interview that the spill occurred from tanks that held water meant for recycling. If the company wasn't recycling, he argued, the water wouldn't have been stored there and wouldn't have leaked.

"There was an incident -- there's no evidence that we did anything intentionally," Mr. Jeffers said.

According to the grand jury document, XTO told the DEP inspector who discovered the spill during an unannounced inspection that the release was a result of vandalism. But, after in internal investigation, the company amended that theory.

"As best as we can determine, it happened as a result of an individual working for our independent contractor that was managing the site," Mr. Jeffers said.

XTO's best guess is that an employee of the recycling company -- which, according to the grand jury document, was Texas-based Bosque Systems Inc. -- left a tank unplugged by accident. Then, when Clark Trucking, a Muncy, Pa.-based water hauler, came to fill the tanks with new wastewater from XTO's well operations, the liquid went right through the unplugged vessel and leaked out on the other side.

"There's no real way to know for sure, because nobody was really there to see the cause of it," Mr. Jeffers said. "Criminalizing a small recycling spill sends the wrong message to the industry."

In November, then-Attorney General Linda Kelly charged the owners of Clark Trucking with misdemeanors, alleging they instructed their employees to dump wastewater from gas wells into ditches and on the side of the road instead of disposing of it properly. That case is awaiting trial in Lycoming County Court of Common Pleas.

Joe Peters, a spokesman for the attorney general's office, said the two cases are separate and unrelated.

A preliminary hearing for XTO is likely to be scheduled next month in Lycoming County.

Mr. Jeffers said the company intends to aggressively fight the charges and noted that the federal investigation -- which ended with a $100,000 penalty and a consent decree that requires XTO to spend $20 million improving its wastewater handling practices -- didn't find cause for criminal charges.

But Mr. Peters said the federal standard is different than the state's. In this case, the attorney general is arguing strict liability, which doesn't require that intent or even recklessness be proven.

"There are some actions, some conduct, that the legislature deems so dangerous," he said, that just demonstrating it occurred qualifies under strict liability. "We're not saying they went and opened the spigots on purpose, because we don't have to prove that."

XTO didn't have secondary containment in place in case of a leak. And it didn't have security or personnel on site to monitor the contractors. In other words, the company should have known better, Mr. Peters said.