Chesapeake stems flow from blown Pennsylvania gas well

NEW YORK (Reuters) - Chesapeake Energy has stemmed the flow of leaking drilling fluids from a natural gas well that suffered a blow-out late on Tuesday in Pennsylvania and prompted the company to suspend a controversial gas production technique in the state.

Chesapeake, one of Pennsylvania's biggest shale gas producers, used a mix of plastic, ground-up tires and heavy mud to plug the well -- an operation that echoes BP's "top kill" effort to seal its ruptured Gulf of Mexico oil well last year.

"Late Thursday afternoon, efforts to seal the leak and regain control of well pressure were successful," Chesapeake said in a statement on Thursday evening.

The company said it still did not know the cause of the blowout nearly two days after it occurred. It was planning to start an investigation into the accident, the statement said.

The blowout in northeastern Pennsylvania, which spilled toxic fluid into a local waterway, has stoked an already fierce debate in the United States over hydraulic fracturing, or fracking -- a process to release gas trapped in shale formations by blasting a mix of water, sand and chemicals into the rock.

Proponents say extracting shale gas through fracking will slash U.S. reliance on foreign oil and cut carbon emissions. President Barack Obama has made natural gas the cornerstone of his energy policy, in part thanks to the huge reserves unlocked by the use of fracking. Shale gas now accounts for 23 percent of U.S. natural gas production, rising from a negligible amount in 2004.

But environmentalists and residents complain that fracking can pollute water supplies, raising calls for increased regulation on natural gas production.

"This is the kind of incident that is likely to shine a spotlight, again, on the fact that despite repeated assurances from industry and regulators in Pennsylvania, things there keep somehow going wrong," said Kate Sinding, senior attorney for the New York-based Natural Resources Defense Council.

The accident comes at a sensitive time for energy drillers, just a year after an explosion that led to the massive BP oil spill. Regulators are now considering whether to allow the technique in neighboring New York state.

Immediately after the blowout, the Chesapeake well spewed thousands of gallons of fracking fluid, Bradford County emergency management officials said on Wednesday. The fluid initially flowed into a nearby creek.

Chesapeake has suspended fracking on wells in Pennsylvania following the leak.

"We have put all well completion operations on hold. Hydraulic fracturing is completely within that process," company spokesman Rory Sweeney said. He said seven well sites were affected by the suspension.

Well completion, which involves fracking, is work to prepare a site for production after drilling has been completed.

Chesapeake was listed as the largest shale gas driller in Pennsylvania, with 87 active wells in the second half of 2010.

Chesapeake stock fell 0.8 percent in early Thursday trade but shares have moved little since the blowout.

DRILLING TECHNIQUE UNDER SCRUTINY

Workers lost control of the hydraulic fracturing well in the state's Marcellus Shale natural gas formation at 11:45 a.m. (1545 GMT) on Tuesday.

Tests from the nearby Towanda Creek indicated little contamination, Chesapeake added.

Gas drilling in Pennsylvania, and in particular in the Marcellus Shale play, has drawn the attention of major energy companies due to estimates that the region holds enough gas to meet total U.S. needs for a decade or more.

Senator Jim Inhofe, an Oklahoma Republican, on Thursday defended the use of fracking as a way to boost U.S. energy supplies, and said the technique has not resulted in any documented cases of groundwater contamination in his home state, where it has been used since 1948.

The Pennsylvania spill "has nothing to do with hydraulic fracturing," Inhofe said in an interview with Fox News Radio, noting the spill was above ground.

(Additional reporting by Joshua Schneyer, Janet McGurty, David Sheppard in New York, Dan Wiessner in Albany and Roberta Rampton in Washington, DC; Editing by Matthew Robinson and Frank McGurty)