LITTLE ROCK — Houston-based Cabot Oil & Gas Corp., which has been fined hundreds of thousands of dollars in Pennsylvania after the contamination of water supplies, is joining the search for oil in south Arkansas.
Cabot, one of the largest independent oil and gas exploration companies in the United States, got a permit last week to drill a well in the Lower Smackover Brown Dense in Union County, according to Arkansas Oil and Gas Commission records.
“We will watch Cabot as we do all operators to ensure compliance with our rules and regulations,” Shane Khoury, deputy director for the state Oil and Gas Commission, said in an e-mail Tuesday.
The Brown Dense, which lies beneath parts of south Arkansas and north Louisiana, is a shale formation that companies are hoping produces oil through horizontal drilling and hydraulic fracturing, or fracking - the process of blasting millions of gallons of water mixed with sand and chemicals into a well to break up the rock and release trapped oil and natural gas.
The Smackover field has lain virtually fallow since its glory days of the 1920s. Wells in the area now are bit players in the nation’s oil production.
Fracking has taken off in the past seven years, leading to a boom in natural-gas production, including in the Fayetteville Shale formation in north Arkansas.
More recently, the technique has led to a significant increase in oil production in the United States.
Last week, Cabot sough tpermission from the Pennsylvania Department of Environmental Protection to resume drilling in a 9-squaremile area of Susquehanna County after state regulators said Cabot contaminated water for 19 homes in Dimock Township, the Associated Press reported. The contamination is alleged to have occurred in 2008 when residents started noticing their residential water wells were smelly, and even caught fire.
The case is cited by environmental groups as the prime example of why fracking needs more regulation by state and federal regulators.
Records with the Pennsylvania regulators show that Cabot was fined more than $500,000 and had to supply water to residents in Dimock since methane gas and metals were found in water wells in 2008.
In a letter to Pennsylvania regulators last week requesting permission to resume drilling, Cabot said it has done extensive scientific research and that wells are no longer contaminated, adding that its research shows it was not at fault. Pennsylvania regulators disagree and have not yet allowed Cabot to resume drilling.
“Cabot has worked hard to comply with environmental laws and regulations,” the company said in a letter to Pennsylvania regulators last week. “In a highly regulated industry, it is always possible that a company will violate a provision of the department’s regulations. Such a violation, however, does not indicate a lack of intent to comply with the laws and regulations.”
Cabot was also fined $56,650 in Pennsylvania after regulators said it spilled more than 10,000 gallons of fracking fluid within one week in September 2009 into a local water source, killing fish and harming a wetland. The spills were attributed to loose pipe connections.
The Pennsylvania Department of Environmental Protection did not return a call Tuesday.
The Arkansas Oil and Gas Commission permit gives Cabot permission to start drilling on Tuesday. Cabot intends to drill vertically about 9,550 feet and then horizontally into the Brown Dense before fracking.
A spokesman with Cabot said the company would not comment until the well is drilled and more is known about production.
Cabot has mineral leases in Texas, Louisiana, Oklahoma, Ohio, West Virginia and Pennsylvania.
Southwestern Energy Co. of Houston, the largest natural-gas producer in the Fayetteville Shale, has been drilling in Union and Columbia counties since August. Production numbers could be released later this week when it issues its third-quarter earnings report, spokesman Susan Richardson said.
Business, Pages 29 on 10/26/2011