* Company to pay regulators $240,000, $30,000/month
* Called "most aggressive" action taken by Pennsylvania
* Shares close 12 cents lower
(Adds details, comments from DEP, changes dateline)
By Jon Hurdle
PHILADELPHIA, April 15 Pennsylvania fined Cabot
Oil & Gas Corp (COG.N) $240,000 and ordered it to permanently
shut three gas wells in the state's most aggressive action so
far to control development of natural gas in the Marcellus
The state's Department of Environmental Protection said
Cabot failed to comply with a November 2009 order to fix
defective well casings that discharged natural gas into
groundwater, contaminating the drinking water of 14 homes in
the rural community of Dimock, northeast Pennsylvania.
The new order directs the company to install permanent
water-treatment systems in the homes within 30 days. Cabot must
also pay a fine of $30,000 a month until it meets the DEP's
DEP Secretary John Hanger called the action the "most
aggressive" taken by Pennsylvania so far toward any company
drilling in the Marcellus Shale and said it should be taken as
a warning to others that regulators will not tolerate the law
The DEP also banned Cabot from drilling any new wells in
the Dimock area for at least a year and blocked any new
drilling statewide until it meets the requirements of the new
Cabot is seeking at least 25 additional drilling permits in
other areas of the state, said DEP Secretary John Hanger.
Officials are looking at 15 other Cabot gas wells that may
also be shut off if they are found to be the source of
migrating methane, the statement said.
Recent exploitation of massive shale gas reserves in
Pennsylvania and other states offers the United States a
potentially abundant source of clean energy that would reduce
dependence on imported oil.
But the Marcellus' development may be slowed by regulation
as a result of fears about escaping methane and contamination
of ground water by the chemicals used in the hydraulic
fracturing drilling technique.
Concern about the drilling, also known as "fracking," has
so far prevented its use in New York state and prompted a bill
in Congress that would require companies to disclose the
In November last year, Dimock residents sued Cabot,
claiming gas drilling contaminated their water wells with toxic
chemicals, caused sickness and reduced property values.
"Gas migration is a serious issue that can have dire
consequences to affected communities and we will not allow
Pennsylvania's citizens to be put in harm's way by companies
that chose not to follow the law," said Hanger, in a
Cabot agreed to provide potable water to the 14 households,
and to pay the fines.
"This modified order does not impact the number of wells
scheduled to be drilled under Cabot's 2010 drilling effort, nor
will it impact our production guidance," Cabot chief executive
Dan Dinges said in a statement.
DEP spokesman Tom Rathbun said the gas migration appears to
have resulted from Cabot drilling through the shallow Devonian
rock formation to reach gas in the deeper Marcellus reserve.
Hanger said Cabot has established the worst record in the
"I'm glad to say that Cabot has so far been in a class by
itself," Hanger told Reuters.
Cabot Oil shares closed down 12 cents at $40.39 in on
Thursday on the New York Stock Exchange.
(Additional reporting by Vinay Sarawagi in Bangalore; editing
by Gopakumar Warrier and Andre Grenon)