ENFORCEMENT

In Texas water contamination case, the fire still burns

WEATHERFORD, Texas -- Steve Lipsky can light his water on fire.

It's been said more than once, by people who should know, that he can't do this. But, earlier this month, in the shadow of his 12,000-square-foot house outside Fort Worth, he set a barbecue lighter next to the pipe from his water well and ignited a fist-sized dagger of flame atop the stream.

"That," he said, stepping back, "is what would be going into my house."

For showing that to the world, and complaining about it, Lipsky has been accused of "outright fraud" by a conservative filmmaker, disparaged by the oil and gas industry, and accused of a "deceptive" demonstration as part of a "conspiracy to defame" by a Texas judge.

That's because Lipsky blames Range Resources Corp. for the flammable flow. Range, based in Fort Worth, is one of the most aggressive shale gas drilling companies in the country. In 2009, the company drilled a well on ranchland about 2,000 feet from Lipsky's house. Range says it's not just wrong to blame it for the stray gas, but fraudulent.

Lipsky's complaints to U.S. EPA in 2010 sparked one of the biggest battles of the country's shale drilling boom. Federal regulators brought a high-profile enforcement case against Range for contaminating the water. Then they bailed out, leaving few answers after more than a year of litigation.

But as the convoluted case heads into its fourth year, the simmering complaints and suspicions EPA left behind are starting to resurface.

As soon as today, EPA's internal watchdog is expected to release the results of its investigation into the case. Since July 2012, the EPA inspector general has been investigating why the allegations were leveled and then withdrawn.

In addition, a team from Duke University has been sampling the water at the homes of Lipsky and his neighbors and finding troubling levels of methane contamination, many times higher than what Range provided to regulators. The researchers are preparing their findings for publication but also have been providing them to individual homeowners.

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Armed with those results, Lipsky has renewed his complaints with state and federal officials. And this time he's been joined by a handful of neighbors also concerned that drilling might have contaminated their groundwater.

Inspectors with the state agency that handles drilling, oddly enough called the Texas Railroad Commission, have visited the area at least twice, and the cases remain open.

Haves and have-nots

It's tough to feel sorry for Steve Lipsky. He's a talkative guy with a wheeler-dealer style who made a bundle processing mortgages. The real estate crash hurt but didn't leave him broke. He still has an office with 30 employees nearby in Weatherford, a bustling bedroom community off Interstate 20 a few exits west of Fort Worth.

He also has a custom-built, two-story home on 13 acres along a bay of the Brazos River in a development called Silverado. The four-car garage fits his Range Rover, his Audi R5 sports car and his wife's SUV, with room for motorcycles and ATVs. He and his wife, Shyla, reserved but always smiling, have three adorable kids.

But you wouldn't want to drink his water. The stuff that flows from his well isn't just flammable. It's gray, cloudy and bubbly, and it smells bad.

He doesn't want to drink his water, either. So he doesn't.

He pays $400 a month to have water trucked in from the nearby city of Granbury. That's enough for drinking, baths, cooking and about everything else the family needs. He pretty much turns on the groundwater pump only for testing and to show inspectors and visiting media types that he can light the stream on fire.

You wouldn't want to drink Shelly Perdue's water, either. It bubbles and smells bad, and she says she can light hers on fire, too.

But she can't afford to truck in water from the city. She drinks bottled water and has since she moved here in the '90s. But she uses well water for watering the lawn, dish washing, showers and everything else.

She's more like the people who usually suffer the downsides of America's uptick in energy production. Rural and busy with the concerns of making ends meet. It took her a while to decipher the bureaucracy, the different roles of agencies like the Railroad Commission and EPA.

"I thought they were the same thing," she recalled, sitting on a swaying metal couch on her weathered deck on a recent afternoon.

Her lot backs up to the Silverado development, and her mobile home is only about 1,500 feet from Lipsky's private cul-de-sac. But it takes 20 minutes to drive between them. And the two might as well be from different planets.

She's on a rutted street in a neighborhood of mobile homes and ragged pier-and-beam houses called Lake Country Acres. There's a strong fence between Silverado and the yards on her side. Some have litters of cars on blocks, hoods up. Hers doesn't, though. Her mobile home could politely be called rough around the edges, but it's one of the nicer in the neighborhood. And it's home.

And, she notes, "it's paid for."

Across the street is the white gravel driveway to the wells drilled by Range. There's a round indentation of gravel in her grass from trucks turning into the drive. And there's the constant hum from a compressor station behind the wells.

Most of her neighbors in Lake Country Acres are on a community water system. But the previous owners of her property hadn't joined. Instead, they drilled a water well nearly 400 feet deep.

When Range was drilling the wells in 2009, the bubbling she noticed in the water was only one of her worries.

"It was the trucks and the dust and the noise," she said. "It wasn't just the water."

Someone told her to call a county commissioner about the trucks driving on her property. His advice: Stand on her corner with a shotgun.

She figured that might land her in jail. Instead, she parked her car at that corner and stood next to it with her arms crossed. Fuming drivers called her names and waved crude gestures, but they never dinged her sedan.

When the drilling was done, Range flared the gas, a bright hot flame in the middle of a searing Texas summer. Trying to keep her home livable, she ran her air conditioner so hard her electric bill for one month totaled $700. Then the central unit gave out. She got window units, and space heaters for winter, because the unit was also her heater.

After that, the truck traffic went from constant to frequent. But there's still the persistent drone of a compressor on the well pad. On a recent day, it sounded like a lawn mower that never stopped. Her neighbors say it can grow to something more like an airplane.

"When you're sitting outside at night, hoping to hear the crickets, all you hear is this," Perdue said, pointing up.

And then there's the water. It always smelled bad. But after the wells were drilled, it turned cloudy and bubbled.

"It would sound like a glass of champagne," she said.

She still doesn't drink it, but she fears that deadly gas from the saturated water is building up in her home. A consultant hired by Lipsky at one point found the air in her kitchen was more than 2 percent gas, approaching the explosive level.

She talks matter-of-factly of headaches and occasionally passing out in her house. She's a single mother working odd jobs, so she doesn't have health insurance or the money to get herself checked out.

Methane is common in drinking water wells in some areas of the country and is not toxic in water. But if it collects, it can explode inside a house or asphyxiate someone at high concentrations. And sometimes more harmful toxins, such as benzene, come with it.

Methane migration is an established, if not common, problem when drilling oil and gas wells. Failure to properly seal wells with cement can allow gas from different formations to drift into drinking water aquifers.

Range says that Perdue's 368-foot-deep well was drilled into the gas-bearing Strawn formation. But that presents its own problems. About 600 feet away, Range's two wells were sealed with cement only a little farther down than that -- 394 and 409 feet. Other nearby gas wells are sealed twice as deep. That suggests that Range might not have sealed off the well from the Strawn, which produces both usable gas and usable water.

That Lipsky and Perdue have methane in their water doesn't prove where it came from.

Without base-line testing of the groundwater, performed before the drilling began, it's immensely complicated to figure that out.

EPA determined that the gas in Lipsky's water well matched the gas Range was producing. But then it dropped the case. The Railroad Commission said they didn't match. But it heard from only Range's hand-picked experts.

Range, though, has gone beyond denying that it contaminated the water. The company says methane occurs naturally in area water wells, but it also ridiculed the idea that there was contamination. In court filings, Range attorneys wrote that "Mr. Lipsky has falsely claimed he can light his water on fire, and that statement has been repeated to the media."

And in early 2011, at the height of the EPA case, the company sent letters to homeowners attesting to the quality of the water. Lipsky's letter read, in bold print, "The water is safe to drink, and there is no danger in using it in your home."

It was a pretty strong statement. On the next page was a graph showing that gas had built up to about eight times the explosive level in his wellhead (the letter reminded him to vent the wellhead, which he says he does).

And the water was never very good. Perdue decided that back in the '90s, when she was fixing the site up to move a home onto it. Many Silverado homeowners kept water in holding tanks to let the sulfur dissipate.

"This area always had problems," Lipsky said. "Range just made it worse."

But Range is known for strong statements and taking a hard line. Many companies in such a situation would issue brief, meaningless statements of innocence and let lawyers and industry trade groups lead the hand-to-hand combat. But Range spokesman Matt Pitzarella has fired back each time someone raises the possibility that Range's wells contaminated local water. And last year, company attorney David Poole fired off a cease-and-desist letter to the former EPA regional administrator, Al Armendariz, when he publicly stood by the allegations.

This isn't the only case where Range has taken public relations risks. It sued a Pennsylvania township for delaying approval of new drilling, has subpoenaed activists and bloggers, and is answering questions about whether a nondisclosure agreement it has with a Pennsylvania couple binds their children as well (EnergyWire, Feb. 20).

Recently, though, Range has gone quiet. Pitzarella has not responded to numerous requests for comment for this story and several previous ones.

Range is a well-known independent gas producer, but with a market capitalization of about $12 billion, it's far from the largest. It's known for being aggressive and nimble. It was the first company to complete a well in Pennsylvania's Marcellus Shale in 2004 and is one of the biggest drillers in the Keystone State.

The Barnett Shale under the Dallas-Fort Worth area and Lipsky's house isn't a focus of Range's operations. The company sold its Barnett properties, including the Butler 1H and Teal 1H wells near Lipsky and Perdue, as part of a $900 million, 390-well deal in 2011 with Legend Natural Gas, financed by the Carlyle Group and Riverstone Holdings LLC.

EPA steps in

Perdue, a slight, slender woman, is not the type to pick up the phone and demand action. Lipsky, the businessman, has no such hesitation.

In 2009, his water pump kept failing after working fine for several years. So he called the company that drilled it. The workers who came to fix it told him the pump wasn't broken, there was just too much gas in the water.

Then, he said, "I called everybody" -- the county fire marshal, EPA, the health department and the Railroad Commission.

It was state inspectors from the Railroad Commission, he said, who first told him there was a well bore drilled under his property. He'd thought drilling wasn't allowed in his development.

The inspectors found evidence of a small leak on one of Range’s gas wells, known as "bradenhead pressure," and cited Range for a violation. But then the state inspectors disappeared, from Lipsky's perspective. The agency never offered a reason for the sudden appearance of methane, and officials there went silent for months.

Range dispatched the violation in October by performing a test for the state showing the well had mechanical integrity. But that didn't fix the methane in the water.

EPA initially had deferred to the state, but when months went by and officials in the regional office in Dallas determined the state wasn't going to act, they called Lipsky and came out to visit.

The regional office in Dallas was led by Armendariz, an Obama appointee and former college engineering professor. He was taking an aggressive stance with oil and gas companies accused of harming the people who live amid their drilling. In May 2010, at a town hall meeting in Dish, Texas, he offered a vivid description of how he deployed limited enforcement resources.

"It was kind of like how the Romans used to conquer little villages in the Mediterranean," Armendariz explained. "They'd go into a little Turkish town somewhere, they'd find the first five guys they saw and they would crucify them. And then you know that town was really easy to manage for the next few years. And so you make examples out of people who are in this case not compliant with the law."

He'd prefaced those remarks by saying they were "a little crude and not appropriate," but he kept going. He would later wish he hadn't, especially with the "crucify" part.

EPA officials jumped into the case. They collected data and sent it to Isotech Laboratories, whose president, Dennis Coleman, told staffers that the gas in Lipsky's water well and Range's production wells were "likely to be from the same source," according to EPA notes. But he added a qualifier -- "one must evaluate the potential for other sources."

Satisfied with the connection, Armendariz was fearful that the methane leaking from the water or even the ground might cause houses to explode. He wrote off the Railroad Commission as too cozy with the oil and gas industry to be effective.

On Dec. 7, 2010, Armendariz brought a rare enforcement action, called an "emergency order," against Range. It charged that Range's two wells, Butler and Teal, had contaminated wells belonging to Lipsky and Rick Hayley, a neighbor who is now out of the picture.

EPA backs off

It quickly became clear that this wasn't just about the groundwater under a large-lot subdivision in the far reaches of the Dallas-Fort Worth metroplex.

It was about whether the shale drilling that was coming to more and more communities across the country was safe and well-regulated. That boom was made possible by advances in a process called hydraulic fracturing, or fracking, but the high-pressure injection of fluid underground wasn't at issue in this case.

The emergency order was a slap not only at Range, but also the state and the Railroad Commission. It charged that the agency, headed by three elected officials, hadn't done enough to help its constituents.

Stung, the commissioners lambasted EPA for intruding in state affairs. The commissioners scheduled a hearing and exonerated Range in short order.

Things heated up in Washington, too. In March 2011, then-EPA Administrator Lisa Jackson took a face-to-face meeting with Ed Rendell, who'd just ended two terms as governor of Pennsylvania. At the suggestion of Range's top lobbyist -- his former deputy chief of staff -- Rendell urged Jackson to back off Range.

A year later, in March 2012, EPA suddenly dropped the case.

Range officials stress that this was not a negotiated settlement, where each side gives a little. Instead, they maintain that EPA higher-ups in Washington beat a full retreat when they realized their people on the ground in Dallas had brought the case based on flawed science.

EPA has never confirmed that, and hundreds of pages of internal emails released under the Freedom of Information Act reflect no doubts about the strength of the water contamination case. EPA has also declined to back up Range's assertion that the water in the area is safe to drink.

What EPA did say when it dropped the case was that Range would test the water wells in the neighborhood. The agency also announced that Range had agreed to provide access to its well sites for the agency's multiyear study of hydraulic fracturing.

In the wake of the dismissal, Armendariz's 2010 "crucify" comment caught up with him. Pro-drilling Sen. James Inhofe (R-Okla.) released a video of the remarks as proof that Armendariz had been out to get Range all along. Armendariz apologized, then resigned.

But when asked publicly about the situation later that year, Armendariz said he still believed that Range's gas was in Lipsky's well (EnergyWire, Oct. 22, 2012).

In the wake of the dismissal, Inhofe and several other Republican senators asked EPA Inspector General Arthur Elkins to investigate why the case was brought. When Rendell's involvement surfaced, environmental groups asked him to investigate why it was dropped (EnergyWire, Feb. 12).

Officials from the Inspector General's Office conducted an exit interview at EPA last month. Two sources told EnergyWire the report could be released as early as today.

About that burning water

After EPA bailed out, Lipsky sued Range, and Range sued back. The judge threw out Lipsky's case on procedural grounds. But he came down on Range's side in ruling that Lipsky was part of a "conspiracy to defame" the company because he'd circulated a video "calculated to alarm the public into believing the water was burning."

The water does burn. But it wasn't water burning in that video. It was gas flowing from a vent in his water well that's designed to bleed off methane when the water surfaces. Without it, the wellhead might explode. He'd hooked a garden hose up to the vent, so he could direct the flow when he lit it.

But the video posted to YouTube in January 2011 bore the title "Hydraulic Fracturing turns gardenhose to flamethrower," leaving open the suggestion that water was supposed to be coming out the hose. In the background was the trickling sound of the water from the pump.

The judge, Trey Loftin, later said some things indicating Lipsky may not have gotten a fair hearing. Running to keep his job in 2012 in a county where President Obama would get only 16 percent of the vote, he boasted in campaign literature that "Obama's EPA backed down only after" his ruling. Still, Loftin lost the election and then agreed to recuse himself from the case.

The idea that Lipsky was somehow lighting a natural gas line has gotten traction in the oil and gas community and the fevered comments that collect under news articles about fracking. It gained legitimacy with the release of "FrackNation," a pro-drilling documentary by Phelim McAleer. McAleer said the judge had called it "outright fraud."

"The video was faked," McAleer says in the film. "They intentionally pumped gas into the water line in order to set it on fire."

It's a voice over an image of Loftin's order, which doesn't mention a water line.

Asked in an email exchange about the inconsistencies, McAleer replied: "Quite simply it is someone who is pushing for a big pay day -- a multi-million dollar lawsuit -- who a judge has found committed a fraud in pursuit of the lawsuit."

Re-engaging in battle

Lipsky and Perdue had never met until about a year ago, when Lipsky was showing some reporters around the neighborhood. They chatted for a long time that day, and now they talk regularly. She's even accompanied him and Shyla to Washington for a protest at the White House and meetings with interested committee staffers on Capitol Hill.

He's hardly a classic environmental activist. He prefers SUVs to hybrids. And the irony is not lost on him that he's become a face of the anti-shale-gas movement, even though he has fireplaces with gas logs and a propane tank. Filmmaker Josh Fox profiled him and Shyla in his anti-gas documentary "Gasland II," and Fox stays in his guesthouse when he's in town.

Lipsky's resources have kept the case going in the face of a backlash that would have silenced many. He says he's spent hundreds of thousands of dollars on attorneys, consultants and testing.

That's a lot more than the $400 he pays each month to truck in water. But instead of cutting his losses, he's re-engaged. He worries that his outside water supply could be cut off as rationing becomes more common with the Texas drought.

Beyond that, he's galled by Range's assurances that the water is "safe" and fumes at being called a liar by the company and Loftin, the ex-judge.

About a year ago, a team from Duke University arrived and started sampling air and water at the homes of Lipsky's neighbors. The results came back higher than what Range had provided in 2011, in some cases much higher.

For example, Range's contractors tested Perdue's well in November 2012 and found methane at a level of 20.1 milligrams per liter, which is twice the "action level" set by the state. But Duke tested a month later and found it at 54.7 mg/l, more than five times that action level.

The Duke team is led by Rob Jackson, who earned the scorn of the oil and gas industry and Pennsylvania oil and gas officials when he found methane contamination rose in drinking water near drilling sites.

With those results, Lipsky filed a new complaint with the Railroad Commission. This time, Perdue and a handful of other neighbors have joined in. While some of them were angered when they compared Duke's results with Range's, others have begun to wonder about health problems, and some say the contamination has simply worsened since 2010.

The routine

"Safe to drink and use in your home." It's a line Lipsky repeats as he watches the flame dance at the end of a 4-foot PVC pipe in the dark. The flow is flooding the ground below, which over time has become gray and chalky under the grass.

The water well itself is a squat cement column, about 2 feet high, between his home and the basketball court, next to a shed with enormous black water tanks.

He's done this often enough that he's put a metal collar on the end of the tube to stop the flame from melting the plastic.

He does have to fiddle with the valves. Open it up too much, the gas overwhelms the flame and snuffs it out. Tighten up, and the flame will grow until it dies off.

"It takes a little bit of playing with," he explained, relighting the flow. It took a few clicks, but the gas caught again and grew. The flame was mostly orange, with tiny bubbles, but the methane gave it a border of blue.

He stepped back and watched it flicker.

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