Hydraulic Fracturing Update: PA Appellate Court Permits Enforcement of $1 Million Dollar Penalty Upon Fracking Operator

Recently, a Pennsylvania Appellate Court decided to permit the enforcement of a monetary penalty levied upon a driller, totaling over $1.1 million, stemming from the delay of maintenance to leaks in a damaged liner of an impoundment used to contain wastewater from hydraulic fracturing operations. 

 

In EQT Production Company v. Department of Environmental Protection, Docket # 844 CD 2017, a driller challenged the extent of a monetary assessment against it by Pennsylvania’s Department of Environmental Protection (DEP). The Commonwealth of Pennsylvania’s Environmental Hearing Board (the Board) had assessed civil penalties upon the driller under the Clean Streams Law. Leaks started to appear in the liner of a large six-million gallon disposal pit, resulting in wastewater infiltrating the ground beneath the impoundment and ultimately polluting groundwater, seeps and springs, and a stream in the vicinity. The Board levied fines on a daily basis over an approximately five-month period, and although the hundreds of holes in the liner were eventually patched by the driller, the contaminated soil was not removed from below the disposal pit until months later. 

 

During the investigation phase, the Board mostly agreed with DEP and found that although the driller had met the bare minimum regulatory standards for the impoundment, meeting minimum regulatory requirements was not an absolute defense to liability, particularly “where a reasonable person would have taken additional precautions under the circumstances.” EQT at 7. Specifically, DEP asserted that the driller did not install a proper subbase because it was of an irregular thickness, did not have a low permeable clay layer, and failed to provide screening material to eliminate rocks. The Board found that the liner itself was a poor choice because it did not comply with some of the most general requirements regarding use and durability over an extended period of time. In addition to deficiencies with the subbase, the Board also cited the driller for inadequate supervision related to the placement of hoses, which contributed to the erosion and denigration of the liner. 

 

Although the driller took steps to remedy the leaks, the Board found several problems with the way in which the driller implemented those fixes. First, instead of emptying the pit immediately, the driller began using the impaired water to frack a new well, allegedly causing substantial delay and allowing additional pollutants to escape. Also, when the pit eventually was emptied, the liner was pressure washed prior to repair of the holes, a methodology that did not minimize the environmental threat. 

 

The driller challenged the monetary penalties on several grounds, but the primary question was whether the duration of the penalty assessment was proper, given the driller’s activity to remedy and the expert testimony as to when exactly contamination stopped. DEP argued that under the Clean Streams Act, they were permitted to assess up to a $10,000 penalty per day, because contaminants continuously leaked throughout the five-month time period. Conversely, the driller argued that it had drained, cleaned, and repaired the holes in the pit liner within the first two months and thus, it was at that point when daily contaminant entries stopped. Further, the driller provided expert testimony suggesting that violations could not have kept occurring for the entire five-month period because there was no longer wastewater in the impoundment. DEP offered contradicting expert testimony, indicating that the violations continued, even after the impoundment had been drained and repaired. Ultimately, the Court upheld the Board’s full five-month, $1.1 million penalty and found no error in the Board’s decision. 

 

This case illustrates that in the event of a contamination event, meeting minimum standards may not be enough to protect against liability in Pennsylvania’s tricky regulatory climate. Not only is there a need for very fast compliance, but also the need to take steps to ensure minimum environmental impact at each and every turn. 

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