Saturday, March 12, 2016

Briefing: Abandoned, Orphan Oil & Gas Wells Means They’re Abandoned And Orphans

A question came up in the House hearing on the Department of Environmental Protection’s budget on how many times DEP inspects abandoned and orphaned oil and gas wells “it owns” in Pennsylvania.
The answer to this question is really simple-- DEP doesn’t own these abandoned and orphaned wells.
First, “abandoned” and “orphaned” mean, by definition, no one owns these wells, including the state.  The conventional oil and gas drillers who bought the mineral rights to drill these wells way back when didn’t transfer that ownership to anyone else.
They simply walked away from their responsibility to either produce the well or plug them properly.
Since 1859 when the first oil well was drilled in Pennsylvania the conventional drilling industry drilled as many as 325,000 oil and gas wells, but it could be more.  We don’t know.
For nearly 100 years they walked away from any responsibility for those wells when production ended or they didn’t want to produce them any more or they went bankrupt leaving property owners or taxpayers to clean up the mess they left behind.
They weren’t even required to tell anyone where they drilled their wells.
It wasn’t until 1956 when Pennsylvania passed the first law to regulate oil and gas drilling in even the most basic way that the state even knew where new wells were being drilled, aside from well blowouts and water well owners lighting their faucets and garden hoses on fire.
It wasn’t until 1984 that conventional oil and gas operators were first required to put up limited bonds to cover the cost of plugging wells that were no longer produced.  
It wasn’t until 1985 that operators were required to register the location of their old wells.
If an abandoned well is discovered by an operator or property owner now, DEP is to be notified within 60 days of finding it.  But, they are often very difficult to find (see photo), unless problems develop.
In 1992 an amendment to the 1984 Oil and Gas Act first gave the Department of Environmental Protection the authority to plug orphan and abandoned wells in certain circumstances.  Surcharges were established on new permits to fund the new Abandoned and Orphan Well Plugging Program.
Where no responsible party is identified for abandoned or orphan wells, which makes them abandoned or orphan, they can be plugged using the surcharges from the Abandoned and Orphan Well Plugging Fund.
In 1999, with the creation of the Environmental Stewardship (Growing Greener) Fund, more funding was devoted to the abandoned and orphan well plugging program, but rarely more than about $5 million a year.
In 2003 most of the Growing Greener Funding was diverted to pay for debt service on the Growing Greener II bond issue.  It wasn’t until 2012 when the Act 13 drilling impact fees were passed that the well plugging program was revived somewhat.
With limited resources, DEP is only able to plug and take responsibility for the abandoned or orphan wells that present the biggest environmental or safety threats.
As of the end of 2014, DEP has plugged just over 3,000 abandoned and orphan wells; nearly half of those wells-- 1,336-- were plugged during the first few years of the original Growing Greener Program.
With the development of the Marcellus and Utica Shale unconventional natural gas industry, DEP put more emphasis on having operators identify abandoned or orphan wells within the areas of planned drilling because of safety and environmental concerns.
In 2014 DEP began an effort to digitize the locations of abandoned and orphan wells it has and that permittees identify.  About 12,301 abandoned and orphan well locations have been confirmed out of an estimated 200,000 wells out there somewhere.
If members of the General Assembly want to require DEP to inspect the 12,301 abandoned and orphan wells in the state it knows about, DEP could certainly do that, provided the people and money are made available to do the job.
Right now, DEP’s Oil and Gas Program is funded primarily by permit fees, fines and penalties on the industry, not tax money.  Adding 12,301 new wells to inspect (and many more) would mean a significant increase in permit fees on the industry at a time when DEP is already considering fee increases because of a downturn in the oil and gas industry.
Nothing is free.
So to summarize--
1. “Abandoned” and “Orphan” means, by definition, abandoned and orphaned, no one owns these wells, including the state, because ownership was not transferred anywhere.
2. No one knows the location of the overwhelming majority of these wells, so even if someone wanted to inspect them, no one knows where most of them are.
3. The state’s Abandoned and Orphan Well Plugging Program, due to very limited resources, is only able to plug those wells of greatest concern DEP knows about.
4. If the General Assembly directs DEP to inspect the abandoned and orphan wells it knows about, it would mean a significant increase in permits fees on the oil and gas industry during the most severe downturn in industry history.
For more information, visit DEP’s Abandoned & Orphaned Well Plugging Program webpage. Click Here for a factsheet on the program.  Click Here to find abandoned and orphan wells near you included on DEP’s inventory of 12,301.
Efforts Under Way To Find Abandoned Gas, Oil Wells
Additional Link:
Abandoned Oil & Gas Wells-- More than Just A Rusty Eyesore

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