First criminal case against a Shale firm opens

WILLIAMSPORT, Pa. - A former state environmental inspector indicated Wednesday that there was evidence of previous, unreported spills on a Marcellus Shale gas drilling site where he discovered toxic wastewater gushing onto the ground in 2010.

Jeremy Daniel, 32, an inspector for the Pennsylvania Department of Environmental Protection at the time, said he found puddles of wastewater, sand, and a "defined area of dead vegetation" flowing from several steel wastewater storage tanks on a Lycoming County well site operated by XTO Energy Inc.

Daniel was called as a witness in a preliminary hearing on criminal charges that the state brought in September against XTO, Exxon Mobil Corp.'s shale-drilling subsidiary. The state says XTO spilled more than 50,000 gallons of toxic wastewater at its drilling site without reporting the leak as required.

The case, the first criminal action against a Marcellus Shale drilling company since the natural gas boom began five years ago, has taken on political and symbolic importance largely because of the players involved - Pennsylvania Attorney General Kathleen Kane vs. the nation's largest oil company.

Both sides brought lots of legal and public relations firepower to the courtroom Wednesday. XTO has hired three legal firms to "vigorously" defend itself. The Attorney General's Office was represented by some of its top lawyers from Harrisburg.

The presence of two well-supported legal teams and a case involving complex environmental law was staggering for District Judge James G. Carn, a veteran magistrate who usually hears misdemeanors and traffic violations in his 18- by 35-foot courtroom. "This is whole new territory for me," he told the lawyers.

After hearing a full day's testimony from six witnesses called by the Attorney General's Office, Carn took the case under advisement. He must decide whether it can move ahead to a full trial in Lycoming County Court.

The charges involve a spill that Daniel discovered by chance during a routine, unannounced inspection on XTO's Marquardt well site in Penn Township on Nov. 16, 2010.

There is little dispute that wastewater produced by hydraulically fractured wells leaked from the site. How much leaked, and whether the leak was a criminal act, is at issue.

Environmental groups have lauded Kane for going after a high-profile target to set an example for an industry they think has run rampant.

XTO says the spill was an accident committed by a contractor and criminal charges are baseless. It says it paid $1.3 million to clean up the site and negotiated a $100,000 federal civil settlement, including an agreement to upgrade its wastewater handling procedures at a cost of about $20 million.

A key aspect of the case is that it remains a mystery who pulled the plug on the tank containing fracking water.

"Who caused the spill?" asked Thomas J. Kelly Jr., a Washington lawyer on XTO's team.

"I don't know, sir," said Daniel, who left DEP in August to work for a natural gas pipeline company.

The exchange prompted an objection from Glenn A. Parno, the attorney general's top environmental prosecutor, who argued that the state does not have to blame an individual responsible, or even show nefarious intent. XTO, as the permit holder, is responsible for safe drilling operations on its site.

XTO is charged with five counts of unlawful conduct under the Clean Streams Law and three counts under the Solid Waste Management Act.

XTO portrays the spill as a minor event - it says closer to 6,300 gallons leaked - that resulted in no lasting environmental damage.

In addition to Kelly, XTO is represented by James M. Becker of Buchanan Ingersoll & Rooney's Philadelphia office and Edward J. Rymsza of Williamsport.