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Thursday, July 11, 2024 | Back issues
Courthouse News Service Courthouse News Service

Problems Rain on Chesapeake Energy

CHEYENNE, Wyo. (CN) - Chemicals illegally stored at a Chesapeake Energy waste treatment facility in Wyoming exploded, burning and permanently disfiguring two men, they claim in Federal Court.

Chesapeake Energy, the nation's second-largest producer of natural gas, has weathered continuing bad news recently. It has been sued more than 700 times since Jan. 1, 2015, according to the Courthouse News database, generally in disputes over royalties.

Its share price has fallen by 50 percent this year, and trading in its shares was stopped eight times Monday, as the price fell as low as $1.51. Chesapeake shares were trading above $7 as recently as November. The Monday rout was attributed to rumors that Chesapeake had hired corporate restructuring attorneys at Kirkland & Ellis.

Chesapeake said late Monday morning that Kirkland & Ellis has been advising it since 2010, and that it has no plans at the moment to seek bankruptcy protection. Shares rebounded to $2 after that statement.

But the fall in energy prices has inflicted multibillion-dollar losses on the company, which has not reported turning a profit for three consecutive financial quarters. Chesapeake shares were priced at $2.04 before the market opened Tuesday morning.

Plaintiffs in the new federal lawsuit, Kory Thompson and Joseph Pinkelman, worked for Susquehanna Services, which specializes in "solids control:" processing and disposing waste from oil and gas drilling.

They were working at the Hageman 11-22 site, an oilfield water treatment and disposal facility in Converse County, when it exploded on May 1, 2015, engulfing them in flames and causing them "severe and permanent injuries."

The explosion came as they were offloading 120 barrels of fluid that came from an oilfield belonging to either Chesapeake Energy Corp. or The Williams Cos., gas producers who had entered into an agreement for waste disposal at the Hageman site, which is owned and operated by Chesapeake, according to the Feb. 5 lawsuit.

The site is about 4 miles north of Douglas, Wyo., a town of about 6,000 people, and a center of heavy drilling in recent years.

"During the course of attempting to offload and process the fluid delivered to the site, fumes escaped and accumulated in the area ... where plaintiffs were working," according to the 11-page complaint. "The fumes ... exploded and caught fire. Plaintiffs suffered severe ... burns to their faces and heads, arms, upper torsos, hands and backs."

The explosion was caused by "volatile and explosive materials" shipped by IBEX, an transportation company based in Rexburg, Idaho, according to the complaint.

"Initial test results of the fluids delivered by IBEX show that it was a highly volatile and flammable substance with a very low flashpoint. The explosive fluid was natural gas condensate or some other fluid containing hydrocarbons that was volatile and explosive," the complaint states.

The plaintiffs say the Hageman facility was not equipped to offload or store the material.

"The Hageman site ... was not constructed or permitted by the State of Wyoming to process or dispense of explosive compounds such as those delivered by IBEX," the complaint states. "The injection well located at the Hageman site, pursuant to the rules, regulations, and orders imposed on said injection well by the Wyoming Oil and Gas Commission, cannot lawfully be used to dispose of any unused product or substance other than produced water and spent treatment fluids."

The IBEX truck that delivered the material was "not marked with appropriate hazardous materials placards or warnings to inform people in and around the truck or the disposal site that the truck was carrying dangerous fluids," according to the complaint.

Thompson and Pinkelman say the companies knew what they were doing and that it was illegal, but continued to ship and store the material, anyway.

"Hazardous, flammable and explosive compounds were knowingly and intentionally delivered to the Hageman site by or at the direction of IBEX, Chesapeake and Williams supervisory personnel on numerous occasions," the complaint states.

Thompson and Pinkelman suffered second- and third-degree burns, their attorney Daniel Fleck told Courthouse News. He said Pinkelman is only 19 years old, but declined to comment further, citing Wyoming's ethics laws.

After the explosion, Chesapeake Energy said through a spokesman: "The safety of those working on our sites is Chesapeake's number one priority."

The Associated Press reported on the day of the blast that a generator had been running while the material was being pumped from containers, but that the state fire marshal had not yet determined what ignited the volatile fumes.

Chesapeake Energy Corp., which does business as Chesapeake Operating LLC, is headquartered in Oklahoma City, and is the second-largest natural gas producer in the United States.

The Williams Cos., dba Northwest Pipeline LLC, is a Fortune 500 and S&P 500 company based in Tulsa.

Thompson and Pinkelman seek lost wages and benefits, medical expenses and punitive damages for permanent physical disfigurement, severe trauma, mental injuries, negligence and continued physical pain and suffering, and sanctions because "defendants' actions are so reprehensible as to warrant additional sanctions to achieve punishment and deterrence."

Attorney Fleck is with The Spence Law Firm in Jackson, Wyo. Patrick Crank in Cheyenne and Randall Reed, with Dray Dyekman Reed & Healey, also of Cheyenne, are co-counsel.

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