When violations of laws relating to oil and gas development occur, the DEP has the ability to issue notices of violation, cease and desist orders, suspend or deny permits, or issue monetary penalties to violators.
As seen in this chart, over past decade the total number of enforcement actions in Pennsylvania more than doubled, from 426 in 2002 to 976 in 2011. Over that same time period, however, there was nearly a four-fold increase in violations, from approximately 1,153 in 2002 to 4,069 in 2011. This suggests that enforcement actions have not been keeping pace with the number of violations.
Yet enforcement actions have not increased relative to violations. In fact, as seen in the chart and table, a larger percent of violations are going unpunished now than in any of the past 10 years.
In April, May and June of 2012 (the period in which inspectors have had “greater authority” to enforce violations) an average of 20% of violations resulted in enforcement actions. This is down from 2011, when enforcement action was taken on 24% of violations, and nowhere near 2004, when DEP took action for more than half of all violations.
The Pennsylvania DEP developed an enforcement policy in 2002 that includes basic principles, such as:
A review of 2010 data shows inconsistent application of enforcement actions and penalties for companies that violate the same rules in Pennsylvania. As seen in Table 17, Clarion Oil and Gas and Alpha Well Inc. both repeatedly violated the same rules, yet Alpha was issued NOVs for the violations and Clarion was not. This is despite the fact that Clarion violated the two rules much more often than Alpha (Clarion had 29 violations, Alpha 12).
Baker Gas Inc. and Oil and Gas Management Inc. also violated the 201TAG and 210UNPLUG rules in 2010, yet both companies were issued NOVs and were penalized for their actions. What is even more interesting is that these companies violated each rule just once (in contrast to the numerous violations incurred by Clarion and Alpha).
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There are also cases in Pennsylvania in which the punishment fails to address the severity of the violation(s). Between 2007 and 2009, DEP inspectors found more than 300 violations at U.S. Energy Development Corp. well sites. Yet the company received a penalty of just $29,750 in 2009. In 2010, U.S. Energy Development Corp had 44 violations and resolved just 29 of them. While this is a better record than 2009, it is clear that the company did not learn to correct violations in a timely manner.
When such a record of noncompliance receives small or no fines, the possibility that enforcement serves as a deterrence factor for bad behavior declines dramatically.
Others have wrestled with DEP penalty data
Fractracker, a web-based clearinghouse of information related to natural gas development in Pennsylvania, has attempted to make sense of DEP penalty data. Here’s what they had to say:
Sometimes, however, it seems like the simplest questions have an answer that starts off with, “Well, it’s complicated…” Such is the case when it comes to fines issued by the the Pennsylvania Department of Environmental Protection’s (PADEP) Office of Oil and Gas Management. Luckily PADEP releases data about fines issued to operators in its compliance report, but unfortunately, it can be confusing to interpret.
Take for example, the recent announcement of a fine issued by PADEP to Ultra Resources for improper storage of flowback water at a Potter County site. The announcement mentions a $40,000 fine, but the data reflects three fines assessed to Ultra for that amount on March 23, 2012 for three incidents with unique Violation ID numbers.
DEP does not publish annual statistics on oil- and gas-related penalties assessed and collected by the agency. DEP’s Oil and Gas Compliance Report system includes data on penalties, but it is not a straightforward task to determine the total penalties assessed per year. When penalties are assessed through a Consent Assessment of Civil Penalty (CACP), a Consent Order and Agreement (COA), or some other method, the negotiated penalty amount may be listed multiple times in spreadsheets downloaded from the Compliance Report system. The annual penalty amounts shown in the chart were derived by removing redundant penalties from the data.
It should also be noted that information on penalties in DEP’s Compliance Report system may not be complete. For example, a May 17, 2011 DEP News Release announced that “Under a Consent Order and Agreement, or COA, Chesapeake will pay DEP $900,000 for contaminating private water supplies. . . Under a second COA, Chesapeake will pay $188,000 for a Feb. 23 tank fire.” The Compliance Report system shows just one COA with $188,000 in penalties assessed to Chesapeake in May 2011.
As seen in this chart, although violations remained high in 2011, the dollar amount of assessed penalties plummeted. Similarly, the number of enforcement actions taken in 2011 was higher than in previous years, while the total amount of penalties declined. This suggests that on average, the amount of the fines were not as large in 2011 as in previous years.
While DEP’s enforcement actions and penalties have increased in the past few years, they have not been enough to deter operators from violating oil and gas rules. More resources need to be allocated to enforcement efforts to reverse the increasing trend in violations. Levying higher fines may also be necessary to create a stronger “deterrent effect” among operators.