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Chesapeake Fined in Pennsylvania

BP CHK XOM

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Chesapeake Energy Corporation (CHK - Analyst Report) – the largest owner of leases in Pennsylvania’s Marcellus Shale – has been fined $565,000 by the state authorities. The amount includes charges for three separate cases of environmental violations.

In the first case, the Pennsylvania Department of Environment Protection found Chesapeake guilty of permitting residues from a drilling site in Potter County to enter a stream during a heavy rainstorm. The company has been charged $215,000 for this environmental damage. 
 
The second incident took place in April 2011. Chesapeake lost control of a gas well in Bradford County, allowing chemicals above ground to enter a waterway in proximity. This cost the company $190,000.
 
In the third case, faulty designing of a drilling pad by Chesapeake in Bradford County resulted in erosion and unauthorized filling of one third acreage of wetlands. This led to a fine of $160,000.
 
According to Chesapeake, the company willingly inked agreements with the regulators to make amends. Further, the company intends to maintain its duty toward the protection of environment and thus embarked on a program to install erosion controls and contribute to expenses for pollution clean-up. Chesapeake has also approved the construction of 2.55 acres of new wetlands and associated regular monitoring of the environment.
 
After several incidents of oil spills, which have had catastrophic effects on the surrounding environment, regulators have become very strict. Companies such as ExxonMobil Corporation (XOM - Analyst Report) and BP Plc (BP - Analyst Report) have had to pay heavy fines for environmental violations.
 
Chesapeake is an independent oil and gas company engaged in the acquisition, development, and production of onshore U.S. natural gas resources. The company has grown rapidly and is now a leading U.S. natural gas producer. The company has also demonstrated considerable drilling prowess, capitalizing on its extensive inventory of acquired undeveloped acreage to make substantial reserve additions. 
 
Chesapeake holds a Zacks #3 Rank, which is equivalent to a Hold rating for a period of one to three months. For the long term, we maintain a Neutral recommendation on the stock.

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