On January 11, the Commonwealth Court of Pennsylvania decided the case of EQT Production Company v. Department of Environmental Protection of the Commonwealth of Pennsylvania, and granted EQT Production Company’s (EQT) application for certain relief under the Declaratory Judgments Act, 42 PA. C.S. §§ 7531 et seq., with respect to the Department of Environmental Protection of the Commonwealth of Pennsylvania’s (DEP) interpretation of certain penalty provisions under The Clean Streams Law, 35 P.S. §§ 691.1-.1001.

EQT owns and operates natural gas wells and an adjoining impoundment, fitted with an impervious synthetic liner to contain the water produced by EQT’s natural gas production. According to the Commonwealth Court, in May 2012, EQT notified the DEP that its impoundment was leaking into the subsurface beneath the impoundment. In short order, EQT undertook remedial actions in response to the leak, including actions required by state law to remediate the spill, which seems to have been satisfactory.

In May 2014, the DEP made a settlement offer to EQT for its alleged violations of The Clean Streams Law; the DEP proposed that EQT pay $1.3 million to settle these violations. According to the DEP, most of this amount was based on “new, continuing and ongoing impacts to the multiple waters of the Commonwealth” after the initial May 2012 release from the impoundment. EQT challenged this action in court and, in discovery, EQT learned that the DEP’s proposed penalty was based on continuing violations of The Clean Streams Law (the continuing pollution to groundwater), and that the DEP’s internal deliberations disclosed that it believed it could make a claim for almost $82 million.

The Commonwealth Court rejected the DEP’s interpretation of The Clean Streams Law that every time a person allows its industrial waste to flow from one body of water to another that person is committing a new and separate violation of The Clean Streams Law. The Commonwealth Court held that the DEP’s argument was not supported by a close reading of the text of The Clean Streams Law, and moreover, if that interpretation were to be sustained, a simple unpermitted release would confront the defendant with potentially limitless liability.