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October 2, 2010

Pennsylvania’s Department of Environmental Protection (DEP) announced that residents of Dimock Township, whose well water supply suffered contamination by methane gas migration from Cabot Oil & Gas Corp. natural gas wells, are to receive public water service from Pennsylvania American Water in the future.

The state of Pennsylvania and Pennsylvania American Water Company have agreed on a plan to construct a new, 5.5-mile water main from the company’s Lake Montrose water treatment plant south along Route 29 to Dimock and install approximately seven miles of distribution line to provide water service to at least 18 homes affected by gas migration. Other Dimock residents will also have access to the utility water. The water company will also install pressure regulating stations and a new treatment facility to serve the community.

The state will seek reimbursement for the $11.8 million project from Cabot Oil & Gas Corp.

“The residents of Dimock have waited long enough for Cabot to provide a permanent solution to the gas migration issues that have plagued this community’s water supplies,” Environmental Protection Secretary John Hanger said in a release. “Today, we are announcing an agreement with Pennsylvania American Water Company to extend public water lines from Montrose and provide a safe, dependable water supply to residents here.”

After a residential well exploded on January 1, 2009, a DEP investigation found that natural gas drilling operations in Susquehanna County into the Marcellus Shale formation by Cabot Oil & Gas Corp. caused migration of methane gas into the water supply. DEP inspectors discovered well casings on some of Cabot’s natural gas wells cemented improperly or insufficiently, allowing methane gas to migrate to groundwater. Since then, methane gas has contaminated a number of other residential wells.

A November 2009 consent order and agreement between Cabot and the DEP required the gas company to fix defective cement and well casings on certain natural gas wells or plug defective wells by a March 31, 2010 deadline. The agreement also required Cabot to restore or replace resident’s affected water supplies permanently. Cabot paid a $120,000 civil penalty for violations.

By April 2010, Cabot had failed to fix or plug defective wells and correct problems regarding Susquehanna County water supplies polluted by migrating gas from Cabot’s natural gas drilling operations. In another consent order and agreement, Cabot was ordered to plug affected gas wells and install permanent treatment systems in those homes within 30 days. Cabot paid a $240,000 fine and DEP ordered the company to pay $30,000 per month until the agency determined that the company met its obligations under the 2009 order.

“The problems in Dimock were caused by Cabot’s failure to construct their natural gas wells properly, and we are holding them responsible for the damage caused by these wells,” Hanger said. “We intend to proceed with construction of a public water system for the Dimock area and will seek recovery of costs from Cabot Oil & Gas.”

Cabot Oil & Gas Corp. denied responsibility for the methane gas migration into the water supply and released the following statement in response to the actions of the Pennsylvania Department of Environmental Protection:

Cabot Oil & Gas Corporation (Cabot) today submitted a detailed letter to the Pennsylvania Department of Environmental Protection (PaDEP) outlining its position on numerous matters (including misrepresentations and factual inaccuracies) that the Department has made in its dealings with the Company. Through the letter, Cabot requests the PaDEP to review and consider the full breadth of evidence that clearly demonstrates Cabot is not responsible for methane gas migration into water wells in the Northeastern Pennsylvania region – a claim that the PaDEP has made against Cabot.

According to Dan O. Dinges, Chairman, President & CEO for Cabot, despite the fact that the company has presented overwhelming scientific evidence and historical documentation to the PaDEP proving it is not responsible for methane gas migration into local water wells, the PaDEP has chosen to ignore such evidence, preferring instead to base unprecedented and costly mandates on biased and unscientific opinions and accounts.

"We remain committed to safe, compliant operations in the Northeastern Pennsylvania region, but refuse to remain silent as the PaDEP wages a public war against us," said Dinges. "We have gone above and beyond in our role as a good corporate neighbor, and it is disappointing that the PaDEP has chosen to ignore compelling evidence that clearly proves Cabot’s operations are safe, while at the same time publicly demanding a costly, unnecessary solution for water delivery and threatening suit if we did not comply."

Among other things, the letter:

  • Reaffirms the fact that Cabot’s operations are safe and environmentally responsible.
  • Points out the fact that Cabot has successfully drilled a local water well for a resident who lives in a Northeastern Pennsylvania area in which Cabot operates.
  • Challenges the PaDEP’s arbitrary and unreasonable behavior toward Cabot.
  • Identifies and protests the PaDEP’s public accusations against Cabot.
  • Makes public for the first time the fact that emergency response officials’ investigation found that claims of an alleged well explosion and fire at local residence January 1, 2009 are false and that such an explosion never occurred.

The company has set up a website aimed at refuting the DEP claims.

Cabot also wrote a letter to the public, denying responsibility and claiming that, “Cabot wants to continue as a good corporate citizen of Susquehanna County and of Pennsylvania. We want to continue to provide jobs, opportunity and royalty revenue to our fellow citizens for many years to come.”

“Compelling Cabot, or anyone (including taxpayers), to construct a public water supply system in light of the cost, distance and limited application seems unreasonable, unprecedented and is unfair,” the letter said of the proposed water line. “No private business model would support such an investment (in excess of $10 million) for so few users.”

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