East Resources Responds to Unflattering WSJ Article on Violations

On Monday, the Wall Street Journal published a story titled “As Big Drillers Move In, Safety Goes Up.” The premise and tone of the article is that in the early days of Marcellus Shale drilling, there were many smaller, less-experienced companies drilling in the Marcellus–companies not as safety conscious and careful as the big boys. Now that the big boys have arrived, safey and accidents are down–way down.

The opening few paragraphs are none too flattering to one company in particular–East Resources. East is still around, although they sold their Marcellus operation to Shell in 2010. The WSJ article opens this way:

A firm called East Resources Inc. was among the first to drill into the Marcellus Shale, a rock layer found to be rich in natural gas. As the small wildcatter drilled, starting in 2008, regulators repeatedly cited it for spills or other environmental infractions, almost two for every shale well it drilled.

In 2010 Royal Dutch Shell PLC bought East Resources. The first thing the oil giant did was shut down the rigs for two weeks and retrain the workers. Since taking over, Shell has averaged less than one violation for every four wells.

A similar pattern is showing up across the Marcellus Shale, a vast underground stretch that holds more natural gas than any other rock formation in the U.S., by government estimates. As big energy companies buy out smaller rivals, one side effect is an improving environmental record, according to a Wall Street Journal analysis of Pennsylvania records.

The state offers a glimpse of the direction the U.S. drilling boom may be headed in Texas, North Dakota and elsewhere, as Big Oil increasingly takes over from the smaller, risk-embracing but often cash-strapped companies that pioneered tapping oil and gas from shale. Regulators and some environmentalists say the multinationals bring more rigorous approaches, mindful that one big mistake can affect their ability to operate everywhere. Superior financial resources allow them to wield teams to analyze and reduce violations as they carry out the complex process needed to unlock oil and gas trapped in shale.

The growing role of the largest companies in shale-gas extraction “increases the likelihood of excellent drilling,” said John Hanger, secretary of Pennsylvania’s Department of Environmental Protection from 2008 to 2011. He cautioned that a big wallet doesn’t guarantee that a company will operate safely, or that it will own up to its mistakes.(1)

Read the rest of the WSJ article by clicking the link below.

East is not happy at being thrown under the bus by the WSJ and responded yesterday to set the record straight:

On April 2, 2013, the Wall Street Journal published an article entitled, “As Big Drillers Move In, Safety Goes Up.” The article featured a number of statements about East Resources, Inc. (“East”) and its environmental compliance record with respect to the Marcellus Shale well program conducted prior to the sale of East’s Pennsylvania assets in July of 2010 to an affiliate of Royal Dutch Shell. East would like to correct a number of inaccuracies and provide additional information about its Marcellus Shale program.

East’s active development of the Marcellus Shale began in 2008 and concluded in July of 2010 upon the asset sale to Shell. It was East’s top priority to conduct its operations as a good corporate citizen, contributing to the economy and local communities, while striving to protect the environment and personal and public safety. Consistent with that philosophy, in 2009, East made a $750,000 contribution to the Susquehanna River Basin Commission to provide funds to create a network of remote water quality monitoring stations in areas of the basin where East’s (and other operator’s) Marcellus Shale development was most active. The objective of the monitoring network was to verify whether natural gas development activity was causing adverse impacts on water quality. This donation earned East the Interstate Oil and Gas Compact Commission’s Chairman’s Stewardship Award, representing the IOGCC’s highest honor for exemplary efforts by the oil and gas industry in environmental stewardship.

East was a founding member of the Marcellus Shale Coalition (“MSC”). East suggested the creation of and chaired the MSC’s Stray Gas task force, a group that was commissioned to review and set standards for well construction and operational practices that would seek to prevent any migration of natural gas from wells. While its Marcellus Shale program was active, East:

  • Instituted a practice of installing monitoring wells on its well pads in order to protect the integrity of local water resources.
  • Engaged an independent environmental consultant to perform inspections of East’s well locations in order to insure environmentally safe management of water, waste water, drilling fluids, and fuel and compliance with environmental regulations. In 2010, this engagement represented an annual cost to East of over $1 million.
  • Actively participated in industry groups and activities aimed at responsible development of the Marcellus Shale.

During East’s period of development, its operations were frequently inspected by personnel from the Pennsylvania Department of Environmental Protection (“PA DEP”). A significant number of inspections were completed with a “no violation” result. It is important to note that Notices of Violation were almost always the result of unintentional and undesired occurrences and many were minor administrative oversights.

East, through its internal environmental and regulatory compliance personnel, responded to all notices of violations in a deliberate and responsive manner. During the relevant period the regulatory framework was evolving and was subject to interpretation. Where indicated, East made significant and permanent changes to its operational methods while working closely with representatives of the PA DEP. There were also instances in which East vigorously contested the notices. There were no long term environmental issues associated with East’s Marcellus Shale development.

The article mentions the storage of wastewater in lined pits.  At the time the practice was utilized by East, it was an acceptable and compliant method of containing wastewater. As a result of an internal review of its own practices, East stopped using pits well in advance of the asset sale to Shell. The article states that East had approximately two violations for every Marcellus Shale well it drilled.  East is not privy to the data that the Wall Street Journal reviewed, but East’s own tabulation indicates that the correct ratio is actually less than one violation for every well drilled.

The facts cited in this statement belie the notion that East ever put profit ahead of sound environmental practices. East’s experience, knowledge and leadership paved the way for the safe and environmentally responsible development of the Marcellus Shale. Many of the larger companies that have moved to Pennsylvania during the past five years are now benefiting from the groundbreaking work that East helped pioneer.

Finally, Mr. Pegula declined an interview request made immediately prior to the Easter Holiday and during the lead up to the National Hockey League trade deadline as the request was untimely under the circumstances.(2)

(1) Wall Street Journal/Rigzone (Apr 1, 2013) – As Big Drillers Move In, Safety Goes Up

(2) East Resources, Inc./Rock Hill (SC) The Herald (Apr 2, 2013) – East Resources Responds to Wall Street Journal Article