Houston-based Coterra Energy has agreed to pay $16.29 million to build a public water system for the township of Dimock in rural Pennsylvania. The company pleaded no contest to charges that it polluted residents’ water wells with methane and other contaminants. It did agree to pay a fine of $444,000 to the Pennsylvania Department of Environmental Protection.
By pleading no-contest, a defendant doesn’t admit guilt but accepts the punishment given by the court. A guilty plea could have been used as an admission of liability in any related civil cases, whereas a no-contest plea has no bearing in civil cases.
The new water treatment plant will take about 3 years to build. Coterra also agreed to pay the water bills for the next 75 years for impacted homeowners (about 20 in all).
Coterra was formed a year ago from the merger of Cabot Oil & Gas (based in Houston) and Cimarex Energy (based in Denver).
The Pennsylvania Attorney General (and soon-to-be Governor), Josh Shapiro charged Cabot in June 2020 following a grand jury investigation. Cabot began drilling in and around Dimock in 2006, and according to testimony given at the investigation, residents’ water soon turned black or orange and was often bubbling. A water well even exploded in January 2009.
The issue first gained national prominence In 2010 when Gasland, an HBO documentary, showed residents of Dimock lighting their tap water on fire.
Experts at the grand jury investigation testified that they believed the wellbore integrity was compromised by poor cementation in some of the wells that were drilled, allowing methane and other contaminants to escape into the groundwater.
Cabot had always denied the allegations, stating that the area around Dimock has a long history of methane in surface and ground water. The grand jury heard testimony that Cabot never tested for methane in its pre-drill sampling and so did not establish a methane baseline for what is known as “Swamp gas”. Other experts showed testified that the contamination far exceeded ‘normal’ local levels.
Cabot made a confidential settlement with thirty plus Dimock families in 2012 following the filing of a federal lawsuit by the families. It settled with two more families in 2017.
In its most recent quarterly report filed on November 4, Coterra stated that it is “vigorously defending itself against such charges; however, the proceedings could result in fines or penalties against the Company. At this time, it is not possible to estimate the amount of any fines or penalties, or the range of such fines or penalties, that are reasonably possible in this case”.
The company had operating profits of $1.5 billion in the third quarter, so a settlement of $16 million is not material.
The same day as the quarterly earnings announcement, the company also stated that CEO Thomas Jorden would become Executive Chairman as well, effective January 2023. He replaces Dan Dingles. Pre-merger, Mr. Jorden was the Cimarex CEO and Mr. Dingles was the Cabot CEO. That succession plan was put in place at the time of the merger.
Mr. Dingles, who was appointed CEO of Cabot in 2002, will receive a $9.6 million payment, once he leaves, as a result of the change-in-control.