A state agency approved $12 million in financing Tuesday to extend municipal water service to 18 rural Susquehanna County residents whose wells, regulators say, were contaminated by Marcellus Shale natural-gas drilling.

The Pennsylvania Infrastructure Investment Authority board (Pennvest) voted in Harrisburg to approve the controversial project over the objections of Cabot Oil & Gas Co., the gas operator the state Department of Environmental Protection says will have to pay for the water main.

Cabot, joined by a citizens' group and the Borough of Montrose, had asked the Pennvest board to delay the vote. That would have put off a decision until after the installation of Gov.-elect Tom Corbett, whose administration is expected to be more accommodating of gas interests.

But approval was assured because the project's chief architect, DEP Secretary John Hanger, is vice chairman of the Pennvest board. The vote was 9-2, with two abstentions.

Hanger and Cabot have been locked in an increasingly hostile public battle over responsibility for the contamination of the water wells in Dimock Township, which has become an icon for anti-drilling activists. Hanger said Dimock has attracted media interest from Britain, Russia, and Japan.

"Cabot may not be concerned about its reputation, but there's been a huge damage to Pennsylvania's reputation throughout the world," Hanger said in an interview.

Cabot spokesman George Stark said the Houston-based company contends that its drilling did not contaminate the Dimock wells.

But he said Cabot was willing to pay for less expensive remedies, including the installation of individual well-water treatment systems or the repair or construction of wells.

In a filing with Pennvest, Cabot said the decision to extend the water main 12 miles from Montrose, the county seat, to Dimock at a cost of more than $650,000 per resident was "ill-conceived, unnecessary, and economically wasteful."

"We're doing everything in our power to resolve this," Stark said, adding that the company might sue.

Last month, Montrose Borough President Todd Chamberlain wrote Hanger to object to the water main, saying that borough water customers would be left holding the bag for its costs if DEP was unable to force Cabot to pay.

"The likelihood that any judge would go along with DEP on this claim is slim, and taking into account Cabot's enormous financial resources to defend itself legally, your chance of success is doubtful at best," Chamberlain wrote.

Hanger objected to Cabot's "full-scale public-relations campaign" to rally its vendors, allies, and beneficiaries against Dimock residents, who have sued over the contamination. Cabot has engaged Bracewell & Giuliani, a law firm active among energy companies.

"They're running a PR campaign," Hanger said. "When you do that, inevitably you're going to pit neighbors vs. neighbors."

He said that the DEP had assembled "an overwhelming case" implicating Cabot's drilling in the contamination, and that the water main, expected to eventually serve other residents along its route, was the best solution.

"There is no ideal solution," he said. "The only ideal situation would have been had the contamination not occurred in the first place."

The new water main will be built by Pennsylvania American Water Co., which operates the Montrose system.