East Resources

East Resources was a Pennsylvania-based oil and gas company that was sold to Royal Dutch Shell in July 2010. It was involved in the controversial practice of fracking for methane gas in the Northeastern U.S. in the Marcellus Shale region. East Resources owned wells on the most dense shale formations in Pennsylvania. Though lauded as an environmentally-friendly alternative to coal, fracking for gas has been linked to depleting drinking water resources of local communities and polluting the wells of the people living around drill sites. According to a 2010 article in Vanity Fair, "as use of the technique (fracking) has spread, it has been followed by incidents of water contamination and environmental degradation, and even devastating health problems." And according to data released to the EPA, Halliburton, a major supplier of fracking fluid, admitted using 807,000 gallons of diesel-based chemicals in its fluids, in violation of an agreement drillers had with the EPA.

Executive Summary
East Resource (now Shell) "owns or leases 700,000 gross acres of Marcellus Shale rights in the Appalachian Basin," concentrating fracking sites in Potter and Tioga Counties in Pennsylvania, in addition to New York, West Virginia and Colorado. Its CEO was one of the highest paid executives in the U.S., ranked the 110th wealthiest person in the U.S. with a net worth of nearly $3 billion. . East Resources, and its sister company East Resources Inc., have been accused of numerous safety violations, including polluting farmland and livestock and spoiling drinking water by contaminating it with methane gas. East Resources and its executives have also been very active in making partisan political donations, predominantly in favor of Republicans. This company, headquartered in rural Pennsylvania, has invested the most significant funds in elections in Pennsylvania of any other company, a state with large shale deposits, and its owner was a major spender in the election of the new governor of Pennsylvania, Tom Corbett.

East Resources and Royal Dutch Shell
On July 29, 2010, Royal Dutch Shell purchased East Resources and its subsidiaries for $4.7 billion. In the process,"it acquired 1.25 million acres and over 2,400 producing oil and gas wells in New York, Pennsylvania, West Virginia and Colorado and active exploratory drilling programs in Wyoming." Most notably, East Resources owned around 650,000 acres of Marcellus Shale rights in Pennsylvania, West Virginia and New York at the time of sale, one of the most hotly-contested and lucrative areas for methane gas drilling in the U.S. Their offices are still located in Warren County, Pennsylvania and the company has added to its 283 wells since being sold to Shell.

Shell's Web site currently states that "jobs are focused in Tioga County, Penn, with 185 employees located in Pennsylvania and 50 employees in Tioga County."

Partisan Political Activity
Although East Resources has donated to campaigns on both sides of the aisle since it began drilling in the Marcellus Shale area in 1984, the majority of its political donations has gone to pro-fracking Republicans. 2010 was the biggest year in gas and oil political contributions by corporations hoping to encourage lawmakers to continue with the lax restrictions surrounding methane gas drilling. Nowhere was this seen more than in Pennsylvania, where the majority of the Macellus Shale area lies. According to MarcellusMoney.org, a project of Common Cause PA and Conservation Voters of Pennsylvania, East Resources raised $525,973.00 for Pennsylvania candidates during the 2010 election season, including an incredible $305,000 dollars for Republican Pennsylvania Governor, Tom Corbett, who is a known ally of the fracking industry in Pennsylvania.

Corporate Political Action Committee
East Resources did not form their own political action committee like many of the other Marcellus Shale fracking companies.

Political Donations by Company Execs
Senior management has donated large amounts of money to politicians, front group PACs and the Republican National Committee.

Pegula and his wife, Kim, were frequent funders of pro-drilling politicians. Kim Pegula donated the most money in 2010 to a single candidate: $360,000 to Tom Corbett. Pegula and his wife are also major contributors at the federal level, with donations of $106,350 since 2006 to the National Republican Senatorial Committee and national and state Republican committees.

Pegula has also donated to his alma mater. In September 2010, he gave $88 million to build a Division I arena for Penn State's hockey team. Penn State is also the home of The Penn State Marcellus Center for Outreach and Research. The center funds research for the advancement of methane drilling technology and procedures in the Marcellus Shale area. They are currently conducting a study on the safety of tap water in the homes surrounding the wells and fracking sites owned by East Resources and Shell.

Politicians who received contributions: Governor Tom Corbett (R-Pa.), Gubernatorial Candidate Lynn Swann (R-Pa.), Senator Don White (R-Pa.), Senator Joseph Scarnati (R-Pa.), Congressman Glenn Thompson (R-Pa.) and Seantor Patrick Toomey (R-Pa.).

Below is a list of East Resources employee contributions between 2002-2010:


 * Terrence and Kim Pegula - CEO and President - $630,000
 * Robert Long - Executive Vice President - $50,000
 * William Fustos - Chief Operating Officer - $7,000
 * Jack Showers - Director of Community Relations and Regional Affairs for East and Shell - $1,500
 * Paul Dudenas - Engineer - $1,000

Lobbying
According to Common Cause's "Deep Drilling, Deep Pockets", Pegula and his wife, Kim's, donations to lobbying groups and candidates accounted for 15 percent of all donations by the fracking industry.

Front Groups
East Resources was a supporter of several special interest groups that push for expanded drilling rights and limited or no regulation of fracking.

Steve Rhoads, Director of External Affairs, is on the board of The Pennsylvania Independent Oil and Gas Association, West Virginia Natural Oil and Gas Association, Independent Oil and Gas Association of West Virginia (Dave Drennon, Chair on East Resources Board, is the Communications and Education Committee Chair) Interstate Oil and Gas Compact Commission and the Marcellus Shale Coalition

Health and Safety Violations Alleged
A review of studies and Pennsylvania public records shows East Resources had a below-average track record of complying with environmental laws and regulations among 75 companies that drill in the Marcellus Shale area. "Pennsylvania Land Trust Association did a study on the environmental impact of natural gas drilling and found that East Resources Management LLC ranked first among about 45 drillers cited for violations during that period, with 138 violations at 140 wells." The Pennsylvania Department of Environmental Protection has fined East Resources $129,241 since 1997, according to records obtained by The News in Buffalo, New York.

2010: The most notable violation was in May 2010 when East Resources was fined $29,000 when "agriculture officials quarantined 28 beef cattle on a Pennsylvania farm after wastewater from a nearby gas well leaked into a field and came in contact with the animals." East Resources was cited for four violations of environmental regulations in Tioga County, Pennsylvania; the same well was cited for five violations five months earlier. "Upon being notified May 2, the company immediately fenced off the Johnsons' pasture and began to empty the impoundment and remove all contaminated soil. The well has since been shut down."

2008: In October 2008 East Resources mailed about 1,000 letters to Pennsylvania landowners they had lease agreements with. Hancock Gas Lease.com reported that "East is invoking the fine print of their leases, putting payments to landowners on hold because of a downturn in the price of methane gas. They’re claiming that they’re unable to make payments because of tight fiscal times, and apparently there’s a clause in the contracts that allow them to defer payments. Luckily, that same clause allows the landowners to terminate the lease at their own discretion." The affected land totaled around 40,000 acres.

Between 2008-2011, the Pennsylvania Department of Environmental Protection shows all violations in the Marcellus Shale area. East Resources violations, all in Tioga and Potter Counties, range from administrative to environmental and safety such as: "Improperly lined pits with holes"; "Discharge of residual waste from pit into ground surface that has the potential to impact a stream"; "Frac fluid on the ground/spill"; "Failure to take all necessary measures to prevent a spill"; "Drilling within 100 ft. of surface water or wetland without variance".


 * 2008: 16 violations
 * 2009: 20 violations
 * 2010: 74 violations
 * 2011: 1 violation as of February

A full list of fines can be seen here: The Buffalo News

Lawsuits
East Resources has numerous land royalty lawsuits. Not much information can be found on them. Below are links to two records of individuals who have sued East Resources in the past.

Phoenix Drilling, Inc. v. East Resources, Inc.,, East Resources Management, LLC and SWEPI, LP

Charles H. Bronk and Tracylea Byford v. East Resources, Inc.

Revenue and Profits
As of February 2011, after the acquisition of East Resources to Dutch Royal Shell, Forbes, MarketWatch and BusinessWeek have all deleted their financial records online for East Resources.

Executives and Annual Compensation

 * CEO and President Terrence Pegula: Ranked the 110th wealthiest person in the U.S. with a net worth of nearly $3 billion

The salaries of former East Resources executives have been deleted from Web sites after the sale of East Resources to Dutch Royal Shell.

Senior Executives

 * Terrence M. Pegula: Founder, President and CEO - Pegula founded East Resources in 1983 and sold it to Royal Dutch Shell for $4.7 billion. He is now the owner of the NHL Buffalo Sabres. Also, Pegula and his wife Kim together founded the Black River Music Group, in Nashville, and the Ayrault Sports Agency, in Charlotte, N.C. He also gave $88 million to Penn State University for the formation of the hockey team and to build a new arena. He has been the biggest individual political contributor in the Marcellus Shale area. He and his wife now reside in Boca Raton, Florida.
 * John Sieminski: Chief Legal Counsel - Sieminski's LinkedIn page states that he is still a lawyer at East Management Services.
 * Stephen Rhoads: Director of External Affairs - Rhoads is on the Board of the West Virginia Oil and Natural Gas Association and is now the Chairman of PADEP Water Resources Advisory Commitee.
 * Scott Blauvelt: General Manager, Environment, Health & Safety - No information has been found for Blauvelt as of February 2011.
 * Paul Dudenas: Manager of Engineering - Dudenas is on the board of the Pennsylvania Independent Oil and Gas Association (PIOGA), a front group for methane gas lobbying. After the sale of East to Shell in 2010, Dudenas became the Spokesperson for Shell Appalachia.
 * Dale Fidurko: Petroleum Engineer - No information is found on Fidurko as of February 2011.
 * Rick Ford: Project Manager - No information is found on Ford as of February 2011.
 * Doug Mehan: Assistant Manager of Environmental, Health and Safety - Mehan is now the Director Health Safety & Environmental at Dallas-Morris Drilling, Inc. and is the Chairman of PIOGA's Health and Safety Committee.
 * Jack Showers: Community Relations Liaison in Northeast Pennsylvania - Showers is now the Director of Community Relations, Regional Affairs for East Resources/Dutch Royal Shell.
 * Robert Long: Executive Vice President - "Long serves as Vice President of Sabre Oil & Gas, Inc. He served as an Executive Vice President of East Resources, Inc. He worked with Felmont Oil, Olean, NY from 1974 to 1979 and Energy Production Corp., Pittsburgh, PA. from 1980 to 1983. He has been Director of Vineyard Oil & Gas Co since 2002."
 * William Fustos: Chief Operating Officer - Fustos became COO of East Resources in 2002 and " with over 30 years of experience in the oil and gas industry with Texaco, Delta Drilling, Kerr McGee and Shawmut, he oversees the day-to-day operations of the company. His responsibilities include all drilling, completion, production, marketing and financial aspects of East Resources." He is now serving as Chairman of the Executive Board at Vineyard Oil and Gas.

=Contact Information=

East Resources headquarters are located in Warrendale, Pennsylvania and Shell headquarters are located in The Hague.

East Resources 301 Brush Creek Road Warrendale, PA 15086-6599 (724) 772-8600

Dutch Royal Shell P.O. Box 2463 Houston, TX 7725 (713)-241-6161

Visit Shell: Shell's Appalachia Web site

External Resources

 * Pegula speaks about his $88M gift to fund Penn State hockey and a new arena"
 * Safety Study from Penn State University"
 * Marcellus Center for Outreach and Research'
 * Appalachia Web Site
 * Campaign Money
 * Marcellus Shale.us
 * Common Cause
 * Propublica

Related SourceWatch Articles
Source Watch has a special clearinghouse on fracking, Fracking for Gas.

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