Pennsylvania has lost a key tool that would have helped it address its abandoned oil well problem
- Post by: Irjar Jira
- July 25, 2022
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An estimated 200,000 abandoned oil and gas wells pockmark Pennsylvania’s Appalachian plateaus and lush forests. These wells once produced oil and gas, but were abandoned by their owners. They emit methane which is a powerful greenhouse gas and pose a threat to the environment and public safety. Of the state’s approximately 100,000 active wells, many produce just a few barrels of oil and gas annually and are nearing the end of their lives. Operators often ignore these obligations, even though fossil fuel companies are required to clean up the sites after they cease producing.
To prevent the backlog of abandoned wells growing, Pennsylvania’s Environmental Quality Board (DEC) and Department of Environmental Protection began to look at ways to strengthen regulations that require companies to issue bonds prior to drilling. The state can claim these financial assurances if a company fails to pay its environmental obligations or goes bankrupt. Even companies that move on are still liable, and the taxpayers do not end up paying the bill.
These efforts came to an abrupt halt last week when Democratic Governor Tom Wolf failed in his veto of a bill that would have prohibited future increases in financial insurance amounts for conventional vertical wells (as well as fracking wells) for the next ten year. Wolf apparently allowed the bill’s passage as part of a deal with Republican legislators to secure additional funding for education.
“It gives the conventional oil and natural gas industry the green light to keep doing what they have done in the past, which was to abandon these wells whenever it feels like it,” stated David Hess who is a former director of Pennsylvania Department of Environmental Protection or DEP.
Pennsylvania has no current financial requirements to cover the cost for plugging and cleaning out wells. The state requires operators to post $2,500 per well or a “blanket” bond of $25,000 for all of a company’s wells. Operators with more than 100 wells can pay $250 per each well. DEP has estimated that average plugging costs for conventional wells are approximately $33,000 per well, meaning public funds are a critical backstop if operators fail to plug wells. Nearly 70,000 of the state’s wells were drilled prior to April 1985 and are exempt from bonding requirements altogether. As a result, the state has less than $15 in bonds per operational well.
In light of this, the state’s Environmental Quality Board received petitions from environmental groups in November to increase bonding amounts to pay for the true cost to cleanup. House Bill 2644,, sponsored by Martin Causer (a Republican from Northwest Pennsylvania), was an immediate response to the Board’s rulemaking.
The new law, which took effect on Wednesday, does raise the blanket bond amount from $25,000 to a maximum of $100,000 for new wells drilled six months from now, but it also bans the Environmental Quality Board and DEP from raising or otherwise adjusting bond amounts. It codifies the exemption for wells drilled prior to 1985, and it requires DEP to hand out 20 percent of funding provided to it by a well plugging grant program in the Bipartisan Infrastructure Law to “qualified well pluggers” — a category that appears to include the very companies that drill and abandon wells in the first place. Pennsylvania is eligible to receive $395 million over 15 years from the federal government to plug abandoned oil and gas wells. The state has been $104million thus far.
The bill defines “qualified well plugger” as any entity that has either drilled or plugged 10 wells or otherwise demonstrates access to equipment and services needed to plug wells. Hess is concerned that the bill will allow non-compliant fossil fuel companies to have access to cleanup funds through the grant program. This would mean that money could be given to “bandits in the industry that caused the problems.”
“Setting aside an automatic 20 percent of this money to go to [oil and gas companies] with very few restrictions on them and with no bidding sets up a bad precedent,” Hess told Grist.
About $40 million of the funding from the Bipartisan Infrastructure Law is contingent on the state making efforts to reduce the number of new abandoned wells through “financial assurance reform, alternate funding mechanisms for orphan well programs and reforms to programs relating to well transfer for temporary abandonment.” It’s unclear whether the new law jeopardizes that funding, since it weakens the bonding program overall.
” The administration has serious concerns” about the law, Jamar Thrasher, spokesperson for the DEP, stated. “The Administration is currently looking at the next steps to ensure that the industry is held responsible in order to protect our environment and that we don’t lose millions of dollars in federal funds for well plugging .”
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In a presentation to a DEP advisory board, Kurt Klapkowski (the department’s acting deputy chief for oil and gas management) stated that there were still options the agency could pursue in order to secure additional funds that did not depend on increasing bonding amounts, which was the option that the legislature had just eliminated.
While the law prohibits the Environmental Quality Board or DEP from raising bonding amounts for conventional oil wells, it does not take away the authority for increasing bonding for unconventional wells. These wells account for less that 5% of all wells in the state. Some states have added requirements to oil and gas operators that they report when they plan on retiring old wells to their bonding programs. This allows state environmental agencies to be more vigilant about wells that are nearing the end or may need to be abandoned. Some states also use regulation at the time that operators sell old wells off to other companies to enforce cleanups.
” They have removed one tool from our toolbox but haven’t eliminated the rest,” Klapkowski stated in his presentation.