Energy Company to Pay $3.2 Million Penalty to Resolve Clean Water Violations in West Virginia / Chesapeake Appalachia LLC to spend estimated $6.5 million to restore areas damaged by natural gas extraction activities

WASHINGTON - The E.P.A. and the Department of Justice announced that Chesapeake Appalachia, LLC, a subsidiary of Chesapeake Energy, the nation's 2nd biggest natural gas producer, will spend an EPA-estimated $6.5 million to restore 27 sites damaged by unauthorized discharges of fill material into streams and wetlands and to implement a comprehensive project to comply with federal and state water protection laws at the company's natural gas extraction sites in West Virginia, many of which involve hydraulic fracturing operations.

The company will also pay a civil penalty of $3.2 million, one of the biggest ever levied by the federal government for violations of the Clean Water Act (CWA), under the Section 404 program, which requires a federal permit prior to the discharge of dredge or fill material materials into wetlands, rivers, streams, and other waters of the United States.

"Ensuring environmentally-sound and legal natural gas production is critical to protecting wetlands and local water supplies that communities depend on," said Cynthia Giles, Assistant Administrator of EPA's Office of Enforcement and Compliance Assurance. "By enforcing the law with a large producer like Chesapeake Appalachia, we're also helping to level the playing field for businesses in this industry."

"With this agreement, Chesapeake is taking important steps to comply with state and federal laws that are essential to protecting the integrity of the nation's waters, wetlands and streams," said Robert G. Dreher, Acting Assistant Attorney General of the Justice Department's Environment and Natural Resources Division. "We will continue to ensure that oil and gas development, including development through the use of hydraulic fracturing techniques, complies with the Clean Water Act and other applicable federal laws."

The federal government and the West Virginia Department of Environmental Protection (WVDEP) allege that the company impounded streams and discharged sand, dirt, rocks and other fill material into streams and wetlands without a federal permit in order to construct well pads, impoundments, road crossings and other facilities related to natural gas extraction. The alleged violations being resolved by today's settlement occurred at 27 sites located in the West Virginia Counties of Boone, Kanawha, Lewis, Marshall, Mingo, Preston, Upshur and Wetzel, including 16 sites involving hydraulic fracturing operations. The government alleges that the violations impacted over 12,000 linear feet of stream, or approximately 2.2 miles, and in excess of 3 acres of wetlands.

The settlement requires that the company fully restore the wetlands and streams wherever feasible, monitor the restored sites for up to ten years to assure the success of the restoration, and implement a comprehensive compliance plan to ensure future compliance with the CWA and applicable state law. The company will also perform compensatory mitigation, which will likely involve purchasing credits from a wetland mitigation bank located in a local watershed.

E.P.A. discovered some of the violations through information provided by the public and routine inspections. In addition, the company voluntarily disclosed potential violations at 19 of the sites following an internal audit. In 2010 and 2011, E.P.A. issued administrative compliance orders for violations at eleven sites. Since that time, the company has been correcting the violations and restoring those sites, in full compliance with EPA's orders.

The settlement also resolves alleged violations of state law brought by WVDEP. The state of West Virginia is a co-plaintiff in the settlement and will gain half of the civil penalty.

In a related case in December 2012, the company pled guilty to 3 violations of the CWA related to natural gas extraction activity in Wetzel County, at one of the sites subject to today's settlement. The company was sentenced to pay a $600,000 penalty to the federal government for discharging crushed stone and gravel into Blake Fork, a local stream, to create a roadway to enhance access to a drilling site. The company has already fully restored the damage done to the site.

Filling wetlands illegally and damming streams can result in serious environmental consequences. Streams, rivers, and wetlands benefit the environment by reducing flood risks, filtering pollutants, recharging groundwater and drinking water supplies, and providing food and habitat for aquatic species.

Chesapeake Appalachia engages in the exploration and production of natural gas in the Appalachian Basin. The company has oil and natural gas properties in West Virginia, Pennsylvania, and Ohio.

The consent decree, lodged today in the Northern District of West Virginia, is subject to a 30-day public review period and court approval. The consent decree is accessible for review at www.justice.gov/enrd/Consent_Decrees.html

More information about the settlement: http://www2.epa.gov/enforcement/chesapeake-appalachia-llc-clean-water-settlement

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