An article in the Wall Street Journal this week underscored the reality that any boom in natural resource development – including natural gas – ultimately recedes. Too frequently, the end of the boom results in tremendous environmental and financial burdens for states.
Pennsylvania knows this burden all too well. Our state has thousands of miles of rivers and streams devastated by abandoned mine drainage, with public remediation costs projected to exceed several billion dollars.
Right now, more than a 100,000 abandoned, and often unidentified, natural gas and oil wells are situated across the Commonwealth. There is no current estimate for what the remediation costs for those wells will be, but they unquestionably vastly exceed resources on hand.
But production continues to grow, and with it do concerns about Pennsylvania’s ability to deal with the costs of remediation down the road – whether next week or several decades from now.
While Act 13 of 2012 made substantial changes to bonding requirements for unconventional natural gas wells, it allowed operators to secure “blanket bonds” for their wells. This was opposed by PEC before passage of the Act (see also: PEC’s review of Act 13).
Nonetheless, Act 13 provided at least a measure of improvement on previously inadequate standards. The Department of Environmental Protection is now tasked with utmost vigilance in inspection and enforcement to ensure that problems are addressed before it’s too late.
Part of that effort will be guided in large part by new regulations still under review, but an equal challenge falls to the General Assembly and Governor to provide the Department with adequate funding to perform these critical functions to prevent unwarranted costs down the road.
This challenge is complicated by the tens of thousands of existing conventional wells currently in operation across Pennsylvania, which are “grandfathered” under prior, insufficient bonding requirements.
These wells pose significant risk to the Commonwealth, as experience shows they are the likeliest candidates to become abandoned and left to the public to remediate. The Commonwealth must take steps to prevent this from happening.
The Department has announced the formation of a new Conventional Oil and Gas Advisory Committee. One of the Committee’s immediate priorities must be identification of sufficient, long-term financial assurance for plugging and restoration of both active and abandoned conventional wells.
Industry associations like the Pennsylvania Independent Oil & Gas Association (PIOGA) and the Pennsylvania Independent Petroleum Producers (PIPP), who have been determinedly engaged in regulatory debates concerning conventional operations, must step up to the plate and work with the Department to find the means to meet this challenge.
Benjamin Franklin said an ounce of prevention is worth a pound of cure. The Commonwealth must assure the industry’s responsibility and ability to pay for the prevention, before the citizens of Pennsylvania are once again stuck with the price tag for the cure.
(Written By: John Walliser, PEC Vice President for Legal and Government Affairs, reprinted from the PEC Blog. Walliser can be contacted by sending email to: jwalliser@pecpa.org.)
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