Last Week in Environmental Contingencies and Proceedings Disclosure – Oil and Gas Extraction Industry Edition!

As we’ve posted in the past, public companies must generally disclose material legal proceedings in their annual and quarterly reports to the SEC. Today we’ve pulled some disclosures of environmental liabilities from companies in the Oil and Gas Extraction Industry. We did this by limiting our search on the knowledgemosaic SEC filings page to the following Standard Industrial Classification Codes: 1311, 1321, 1381, 1382, and 1389.

Given the recent hubbub surrounding methane-contaminated drinking water near fracking sites, we think you’ll find the disclosure from Chesapeake Energy Corp especially interesting.

  • TETRA TECHNOLOGIES INC | Form 10-Q | 5/10/2011

One of our subsidiaries, TETRA Micronutrients, Inc. (TMI), previously owned and operated a production facility located in Fairbury, Nebraska. TMI is subject to an Administrative Order on Consent issued to American Microtrace, Inc. (n/k/a/ TETRA Micronutrients, Inc.) in the proceeding styled In the Matter of American Microtrace Corporation, EPA I.D. No. NED00610550, Respondent, Docket No. VII-98-H-0016, dated September 25, 1998 (the Consent Order), with regard to the Fairbury facility. TMI is liable for future remediation costs and ongoing environmental monitoring at the Fairbury facility under the Consent Order; however, the current owner of the Fairbury facility is responsible for costs associated with the closure of that facility.

In August of 2009, the Environmental Protection Agency (EPA), pursuant to Sections 308 and 311 of the Clean Water Act (CWA), served a request for information with regard to a release of zinc bromide that occurred from one of our transport barges on the Mississippi River on March 11, 2009. We timely filed a response to that request for information in August 2009. In January 2010, the EPA issued a Notice of Violation and Opportunity to Show Cause related to the spill. We met with the EPA in April 2010 to discuss potential violations and penalties. It has been agreed that no injunctive relief will be required. We have finalized a joint stipulation of settlement with the EPA, whereby we are responsible for a penalty of $487,000, which was submitted to the Department of Justice and the U.S. District Court for the Western District of Tennessee. The settlement was entered into the record on April 28, 2011. We expect to pay this penalty amount during the second quarter of 2011 and expect the full amount to be covered by insurance.

On June 22, 2007, Riverbend Gas Gathering, LLC (“Riverbend” [a Gasco subsidiary]) voluntarily notified the United States Environmental Protection Agency (“EPA”) Region 8 office in Denver, Colorado, of its discovery that Riverbend apparently had not obtained certain air permits or complied with certain air pollution regulatory programs applicable to its operations at the Riverbend Compressor Station in Uintah County, Utah. Subsequent to this notice and negotiations on the matter, Riverbend and the EPA entered into a consent decree that was lodged in the United States District Court of the District of Utah on December 30, 2010. The consent decree resolves the apparent violations, requires Gasco to pay a civil penalty of $350,000, which was paid on May 5, 2011, specifies the appropriate corrective action, provides a schedule for Riverbend to achieve such corrective action, and includes a covenant not to sue that will authorize Riverbend to continue its operations, including certain capacity expansions, while the specified corrective action is being implemented. The consent decree was approved and entered by the reviewing court on April 6, 2011.

Under the Purchase Agreement dated January 29, 2010 by which the Company sold its gathering system and its evaporative facilities located in Uintah County, Utah to Monarch, the Company retained the obligation to pay any civil penalty assessed and the capital cost of the equipment required to be installed pursuant to the consent decree, and also agreed to reimburse Monarch for certain miscellaneous expenses incurred to finalize the consent decree and obtain certain changes to the Riverbend Compressor Station’s air permits that are required by the consent decree. Monarch is also a party to the consent decree and will be responsible for implementing most of the consent decree requirements at the Riverbend Compressor Station other than payment of the civil penalty, which has already taken place, and the installation of capital equipment. The Company believes that all necessary pollution control and other equipment required by the consent decree is already installed at the site or accounted for in our capital budget, and that the expenses required by the consent decree will not materially affect the Company’s financial position or liquidity.

  • CHESAPEAKE ENERGY CORP | Form 10-Q | 5/10/2011

There are pending against us enforcement actions initiated in the 2010 fourth quarter and 2011 first quarter by the Pennsylvania Department of Environmental Protection (DEP) related to alleged methane migration into the groundwater and residential water wells and by the U.S. Environmental Protection Agency (EPA) related to our compliance with Clean Water Act permitting requirements in West Virginia. We have responded to all pending orders and are actively cooperating with the relevant agencies. We believe that each of these actions will result in monetary sanctions exceeding $100,000. We are estimating a fine of approximately $1 million in the Pennsylvania action but are unable to estimate the amount of any fines that might be imposed by the EPA in the West Virginia action.

Following a well control incident in Bradford County, Pennsylvania on April 20, 2011, Chesapeake voluntarily suspended well completion operations in the state and has responded to a notice of violation issued by the Pennsylvania DEP. We have provided information regarding our investigation of the incident and the potential environmental impact of the event. We believe our investigation has identified the origin of the well control incident as occurring within the wellhead, and we have conducted wellhead inspections on other wells in the completion phase in the Marcellus Shale and implemented responsive measures. We are working closely with the Pennsylvania DEP to obtain its concurrence that we may resume completion operations in the state as soon as possible. We are unable to predict at this time the amount of any fines or penalties that will result from this incident.

In June 2009, Alagasco received a General Notice Letter from the United States Environmental Protection Agency (EPA) identifying Alagasco as a responsible party for a former manufactured gas plant (MGP) site located in Huntsville, Alabama, and inviting Alagasco to enter an Administrative Settlement Agreement and Order on Consent to perform a removal action at that site. The Huntsville MGP, along with the Huntsville gas distribution system, was sold by Alagasco to the City of Huntsville in 1949 with such sale being approved by the APSC. While Alagasco no longer owns the Huntsville site, the Company and the current site owner have entered into a Consent Order, developed an action plan for the site and are in the process of executing the plan. Based on information available at this time, Alagasco estimates that it may incur costs associated with the site of approximately $4.4 million, including costs previously incurred. During the three months ended March 31, 2011, the Company incurred costs of $1 million associated with the site. As of March 31, 2011, the Company has accrued a contingent liability of $2.5 million in addition to the costs previously incurred. The estimate assumes an action plan for excavation of affected soil and sediment only. If it is determined that a greater scope of work is appropriate, then actual costs  will likely exceed the estimate. Alagasco expects to recover such costs through future rates and has recorded a corresponding amount to its Enhanced Stability Reserve regulatory asset account.

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