A settlement was reached on Thursday, June 21, between residents of Terry Township and Chesapeake Energy in the amount of $1.6 million after the natural gas company's drilling operations had allegedly caused methane contamination to three wells on Paradise Road near Wyalusing in July of 2010, according to Attorney Todd O'Malley.

"A settlement has been reached by Chesapeake Energy and the plaintiffs involved, McMicken, Phillips and Spencer, after the company failed to acknowledge that their operations had caused water contamination and denied them (the plaintiffs) meaningful damages that would have allowed them to relocate," O'Malley said.

Chesapeake submitted a statement to the Review that read "Chesapeake Appalachia, LLC has entered into a settlement agreement with three families who live on Paradise Road in Bradford County, Pa., regarding water-quality concerns that date to 2010.

"The terms of the settlement include a total payment of $1.6 Million with the plaintiffs to convey their property to Chesapeake or its designees on or before December 31, 2012," the statement continued. "Chesapeake has agreed to pay fair market value plus other compensation as part of the total payment. The company believes there is no permanent damage that would prevent a future sale, enabling Chesapeake Appalachia, LLC to recoup a significant portion of the settlement.

"While Chesapeake remains confident that the water supply is consistent with area water quality standards, it has entered into the settlement so the families and the company could bring closure to the matter."

The statement went on to note that testing data was not obtained from these homes prior to drilling because the homes were not near enough to the well site.

"A difficult aspect of this investigation has been the lack of pre-drill water testing on some of the water sources," the statement read. "The PA Department of Environmental Protection currently recommends pre-drill testing within a 2,500-foot radius of any oil or gas drilling operation, and Chesapeake meets or exceeds that recommendation with its testing.

"All of these water sources are beyond that testing radius, and thus Chesapeake had not collected pre-drill data for the water sources."

According to the company's statement, test data that was obtained from nearby homes within the 2,500 foot radius show methane levels before Chesapeake had begun operations on the well pad.

"The pre-drill testing that we do have in the area shows that a significant percentage of the residential wells had measurable methane levels prior to any Chesapeake drilling activity in the area," the statement continued. "Furthermore, many wells exceeded at least one of the drinking water standards set by the U.S. Environmental Protection Agency with arsenic, iron and manganese being common findings.

"While efforts over the past two years have been made to restore the residents' confidence in their water wells, it increasingly became clear - through the actions of the residents and their legal counsel - that reasonable solutions, including treatment systems, would not satisfy their concerns."

According to a report by the Daily Review in May of 2011, "Mike and Jonna Phillips, Scott and Cassie Spencer, and Jared and Heather McMicken, all of Paradise Road near Wyalusing, by and through their attorneys, had petitioned the court for an order and judgment compelling Chesapeake Appalachia LLC, Chesapeake Energy Corporation, and Nomac Drilling LLC to arbitrate a dispute with them, as they say is provided by their written arbitration agreements, according to court papers."

The report also noted that the Marcellus Shale Oil & Gas Litigation Group had said that the individuals involved were, "experiencing daily suffering due to the negative effects of oil and gas drilling."

According to a Times-Shamrock report from August of 2010, Chesapeake had provided water to the those families at the time, but did not admit causing the pollution.

"While Chesapeake doesn't believe the facts implicate its drilling operations is causing the water issues at hand, we are continuing to work cooperatively with residents and with the PA Department of Environmental Protection to determine the cause," Chesapeake Director of Corporate Development Brian Grove said at the time, according to the report. "While we continue to investigate, we have offered to temporarily provide water supplies to residents and have offered to drill new water wells in an effort to improve the situation."

Johnny Williams can be reached at (570) 265-1639; email: jwilliams@northeastdriller.com.