EPA Cancels Water Delivery to Pa. Town

The U.S. Environmental Protection Agency reversed their decision to deliver fresh water to residents of a northeastern Pennsylvania village where residential wells were contaminated by a natural gas drilling operation, only 24 hours after promising them the water.

The about-face left furious residents scrambling for water for drinking, bathing and washing dishes.

Agency officials would not explain why they reneged on their promise, or say whether water would be delivered at a later date.

“We are actively filling information gaps and determining next steps in Dimock. We have made no decision at this time to provide water,” EPA spokeswoman Betsaida Alcantara said in an email to The Associated Press.

The state has found that at least 18 residential water wells were polluted.

The eleven families who sued Houston-based Cabot Oil & Gas Corp. and were relying on water from the EPA say they have been without a reliable source of water since Cabot won permission from state environmental regulators to halt deliveries more than a month ago.

Cabot, which was banned in 2010 from drilling in a 9-square-mile area around the village, took legal responsibility for the Dimock methane contamination, but claims that water wells in the area were already tainted with methane before the company set up shop. They also say they met the state deadline to restore or replace Dimock’s water supply, installing treatment systems in some houses that have removed the methane.

But homeowners say their wells are tainted with methane gas and toxic chemicals that are used in hydraulic fracturing, a technique in which water, sand and chemicals are blasted deep underground to free natural gas from dense rock deposits.

Dimock resident Craig Sautner said an EPA staffer in Philadelphia told him Saturday the water delivery was canceled. He said the EPA staffer, on-scene coordinator Rich Fetzer, would not explain why.

“You can’t be playing with people’s lives like this,” said Sautner, whose well was polluted in September 2008, shortly after Cabot began drilling in the area.

Sautner and the other homeowners had been relying on deliveries of bulk water paid for by anti-drilling groups, but the last delivery was Monday, and some of them ran out.

The environmental group Water Defense, founded by actor Mark Ruffalo, said it would send a tanker from Washingtonville, N.Y., to replenish the residents’ supply.

Dimock has become a focal point in the national debate over the so-called fracking method, which has allowed energy companies to tap previously inaccessible reservoirs of natural gas while raising concerns about its possible health and environmental consequences. The industry says the technique is safe.

Gas drilling companies have flocked in recent years to the Marcellus Shale, a massive rock formation underlying New York, Pennsylvania, Ohio and West Virginia that’s believed to hold the nation’s largest deposit of natural gas. Pennsylvania has been the center of activity, with thousands of wells drilled in the past few years.

The latest twist in the three-year-old Dimock saga left residents with plenty of questions, but no answers.

“What happened? Who had the power here? Who had the power to change their minds? Was it the governor? Was it somebody from Washington? Was it Cabot? What happened? We don’t know. We’re really confused,” said Wendy Seymour, an organic garlic farmer.

Seymour said an EPA official in Philadelphia told her Friday that she could expect a delivery. On Saturday, another EPA official called her and “apologized for the confusion” and said EPA was still assessing the situation.

Claire Sandberg, executive director of Water Defense, said the EPA owed them an explanation.

“It’s tragic to see the EPA raise these people’s hopes and then dash them, to see the EPA suggest they were beginning to accept their responsibility to protect the public, and then back out a few hours later when these people are so desperate,” she said.

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Oil Giant’s Shell Game Scams elderly farmers

Records reviewed by Reuters show that Oklahoma-based Chesapeake Energy Corp., the nation’s second-largest gas driller, created a shell company, Northern Michigan Exploration LLC, that scammed hundreds of farmers in northern Michigan.

The farmers had signed leases with local brokers permitting drillers to tap natural gas and oil beneath their land. They were owed thousands of dollars in bonuses that had been promised in exchange, but none knew for certain whom to go after.

That’s because the company rejecting their leases hadn’t signed them to begin with. In fact, the company issuing the rejections wasn’t much of a business at all. It was a paper-only firm with no real operations.

One land owner, Eric Boyer-Lashuay, called to complain to the broker who had handled his lease. Northern, he recalls saying, is “a shell company … a blank door with no one behind it.”

Today, he puts it this way: “It was all a fake, all a scam.”

Reuters investigation has found that Northern voided hundreds of land deals, and was indeed a facade created so that one of America’s largest energy companies could conceal its role in the entire operation.

Chesapeake created one shell company that set up another, Northern Michigan Exploration. Next, Northern hired brokers who signed leases with residents such as Boyer-Lashuay, and those brokers were under strict orders not to divulge Chesapeake’s role.

The orders in Michigan came directly from the top, Chesapeake’s CEO Aubrey McClendon. In corporate filings that Chesapeake made public earlier this year, nine months after McClendon’s agents began signing Michigan land leases, McClendon is named as the chief executive officer of Northern, the shell company that voided hundreds of those leases.

President Barack Obama has called on other nations to improve corporate transparency, but under state laws governing corporate formation in America, privately held businesses aren’t required to disclose the individuals or companies who really own them.

Chesapeake’s own website advises land owners that their “main consideration” before leasing should be “to discover who will ultimately be producing your minerals.” But Chesapeake’s strategy made that extremely difficult for the Michigan land owners.

Legal scholars say the operation serves as an intriguing test case of the use of shell companies.

The tactics “raise moral and ethical questions about how entities can be used,” says Joshua Fershee, a contract law professor at the University of North Dakota.

Chesapeake, defends the need to use shell companies and front companies – contractors with local ties who do business on behalf of a larger corporation. John Lowe, a professor of energy law at Southern Methodist University, calls it “business as usual.”

One lawmaker, Rep. Raul Grijalva, a Democrat from Arizona, says he will be “arguing for some intervention” to control the use of shell companies in such deals.

“Private property owners who enter into these transactions with good faith shouldn’t be getting duped by a front company,” says Grijalva, a member of the House Committee for Natural Resources. “It’s deception and you can’t call it anything else. It’s a good example where the intervention of government to require disclosure and binding contracts is needed.”

The effort to secure leasing rights in Michigan was part of Chesapeake’s national “land grab,” a term the company has used in its filings with the U.S. Securities and Exchange Commission.

Chesapeake’s Michigan land rush quickly ended. In court this month, lawyers for land owners alleged that lease agreements were voided after Chesapeake learned a well it drilled in the state had come up dry.

Bonuses promised to land owners went unpaid, according to court documents.

Northern Michigan Exploration, the Chesapeake-affiliated shell company, rejected more than 97 percent of the leases its Michigan agents had signed with farmers and other land owners. More than 800 Michigan land owners, many of them elderly farmers, had their leases terminated.

As a consequence, owners missed opportunities to lease their land to other oil firms. At least 115 have sued, alleging that Chesapeake breached their contracts and defrauded them. On average, they each had been expecting $95,000 in bonuses, those lawsuits show.

The near-blanket cancellation of the contracts raises the question of whether Chesapeake ever intended to pay if it failed to find oil or gas immediately, says Mark Gergen, a contract law professor at the University of California-Berkeley law school.

“It suggests they might have had a strategy going in of not honoring their agreements,” he says. “The shells would have facilitated that” because Chesapeake could blame the shells for the cancellations, suffering no damage to its reputation.

If land owners prove that they should have been paid, at issue is who will be held accountable: Chesapeake, a corporation with $37 billion in assets, or Northern, a shell company with no publicly documented assets.

Governor Tom Corbett says colleges should drill for gas…

Republican governor Tom Corbett’s proposed budget for Pennsylvania would cut $2 billion from education and reduce aid to colleges and universities by 50 percent. How does he suggest schools make up for the cuts? Why, drilling for natural gas of course.

According to Corbett, six of the 14 college campuses in the Pennsylvania State System of Higher Education are located on the Marcellus Shale formation, an underground natural gas deposit that is currently being explored and extracted.

The Marcellus Shale formation sits under Pennsylvania, New York, West Virginia and Ohio; but Pennsylvania has seen the most activity with regards to drilling. There have been more than 2,000 wells drilled in the past three years in PA and there are thousands more planned.

Shale drilling requires injecting huge amounts of water underground to help shatter the rock, also known as hydraulic fracturing. Some of the water returns to the surface, in addition to the gas, as salty brine tainted with metals like barium and strontium, trace radioactivity and small amounts of toxic chemicals injected by the drilling companies.

Corbett also refuses to tax the gas drilling, making Pennsylvania the largest gas-producing state without a gas extraction tax.

Studies say natural gas may be worse for the environment…

In the on going debate over how the U.S. should solve it’s energy issues, natural gas is starting to look more and more like a front runner to ease our reliance on foreign oil and reduce global warming, but two new studies show that the process of obtaining natural gas may actually be worse for the environment.

One study led by Robert Howarth, a professor of ecology and environmental biology at Cornell University, states that huge amounts of planet warming methane gas are escaping into the atmosphere when natural gas is collected. Professor Howarth said that “The old dogma of natural gas being better than coal in terms of greenhouse gas emissions gets stated over and over without qualification,” and “I don’t think this is the end of the story, I think this is just the beginning of the story, and before governments and the industry push ahead on gas development, at the very least we ought to do a better job of making measurements.” The natural gas industry on the other hand says that they’ve actually decreased the amount of escaping methane due to new technologies and upgraded pipe fittings. Howarth’s study also looks at findings by The Goddard Institute for Space Studies at NASA that showed that when mixed with certain aerosol particles methane’s greenhouse impact is strengthened.

The Obama administration has made natural gas a part of it’s overall energy strategy. White House spokesman, Clark Stevens said that the administration’s energy priorities were not about choosing one energy source, but about diversifying the nation’s energy usage. “This process will continue to be based on the best science available to ensure our energy sources, including our nation’s natural gas reserves, are developed safely and responsibly,” said Mr. Stevens.

Geoscientist David Hughes of the Post Carbon Institute, is releasing a study in May that examines natural gas as a substitute for coal in electricity generation and oil in transportation. According to Mr. Hughes use of natural gas in both cases were practical impossibilities.

“I think it’s going to be very challenging, to put it mildly, to ramp up shale gas production by fourfold, which is the federal government’s projection for 2035,” Mr. Hughes said. “I’m not saying it can’t be done, but if it was done, the amount of drilling you’re looking at to make that happen is staggering.” Mr. Hughes also used some of the data from Mr. Howarth’s study to conclude that replacing coal with natural gas for base load electricity production will most likely make greenhouse gas emissions worse.

David Hawkins, the director of climate programs with the Natural Resources Defense Council says that that studies like Mr. Howarth’s are important, but relied on too slim a data set to be considered final. “This is a huge and growing industry, and we just don’t have the information we need to make sure that this resource is being developed as cleanly as it can be,” Mr. Hawkins said. He also said regulators could push drillers to capture more of the lost methane, but that it is often more economical for the industry to just let it escape.