PA Environment Digest Blog: Democrats On House Environmental Committee Report Out Bill To Help Prevent The Routine Abandonment Of 561 Conventional Oil/Gas Wells A Year

Tuesday, May 23, 2023

Democrats On House Environmental Committee Report Out Bill To Help Prevent The Routine Abandonment Of 561 Conventional Oil/Gas Wells A Year

On May 23, Democrats on the House Environmental Resources and Energy Committee voted to report out House Bill 962 (Vitali-D-Delaware) to restore DEP’s authority to review conventional oil and gas well plugging bonding amounts to help prevent the routine abandonment of 561 conventional oil and gas wells a year.

The bill, however, continues the exemption from any well plugging bonds for pre-April 1985 conventional oil and gas wells.

The Republicans on the Committee voted against the bill.

House Bill 962 was amended to restore the oil and gas well plugging bonding amounts before a law passed in 2022 taking away DEP’s authority to review the conventional well plugging bonding amounts.

The amendment also requires DEP to do a study to make recommendations to the Governor and the General Assembly on the cost and trends in well abandonments, evaluate the effectiveness of tools to prevent new abandonments and make recommendations on financial assurance measures for plugging wells drilled before April 1985.

The amendment was supported by DEP and the Sierra Club and adopted by a party-line vote in the Committee-- Democrats supporting.

Majority Chairman Greg Vitali (D-Delaware) said, "The amendment itself actually makes this bill much more amenable to the conventional drilling industry, and the reason we've done that was for practical considerations to increase the profit."

"The reason we’ve done that was for practical considerations to increase the probabilities of being passed,” Rep. Vitali said

He said the amendment "makes clear that we are not requiring bonding for wells drilled prior to April 1985, it brings back the $2,500 bonding amount for conventional wells and it requires a study by the DEP for the issue of orphaned and abandoned wells."

Minority Chairman Martin Causer (R-McKean) remarked, "First, I'll say that I think the bill is completely unnecessary. I will concede that this amendment makes a bad bill somewhat better."

He said the legislation's requirement to have DEP conduct a study and stated that "based on some of the studies that have come from DEP in the past, it's very obvious that they're biased against the conventional industry and treat the conventional industry very unfairly."

The Committee also--

-- Reported Out Unanimously- Chesapeake Bay Week: House Resolution 104 (Sturla-D- Lancaster/Benninghoff-R-Mifflin) designating June 4 to 10 Chesapeake Bay Awareness Week.

-- No Action - Streambank Fencing: House Bill 677 (Sturla-D- Lancaster) amending the Clean Streams Law to authorize stream bank fencing as a Best Management Practice to keep livestock out of streams.

House Bill 962 was Tabled, as per usual procedure. House Resolution 104 on the House Calendar for action.

Click Here to watch a video of the Committee meeting.

More Background On Plugging

As part of the July 2022 budget settlement, the General Assembly passed and Gov. Wolf signed into law legislation that took away the authority of DEP to review the adequacy of conventional oil and gas well plugging bonding amounts for 10 years. Read more here.

The legislation was designed to head off a rulemaking petition from the Sierra Club, Clean Air Council and other groups accepted for study by the Environmental Quality Board in November 2021 to increase the well plugging bonding amounts for both conventional oil and gas and unconventional shale gas drillers to what it now costs taxpayers to plug a well when operators walk away from their obligations. Read more here.

The Post-Gazette calculated DEP has about $15 per well on hand in well plugging bonds to plug all the active conventional wells-- somewhere over 90,545.

DEP reported in December that between 2017 and 2021, conventional operators abandoned without plugging 2,246 wells-- 561 a year, on average. Read more here.

Under the new federally-funded conventional well plugging program, Pennsylvania is set to receive nearly $400 million over the next 15 years. DEP said it would plug about 249 wells the first year. Read more here.

You can do the math, we’ll never catch up, unless changes are made in the practices used by conventional oil and gas operators.

On April 24, the Environmental Defense Fund announced the results of a new study that found 55,000 oil and gas wells owned by operators in Pennsylvania are at high risk of becoming abandoned leaving state taxpayers holding the bag for $3.7 billion in well plugging and cleanup costs. Read more here.

The overwhelming majority of these wells are conventional oil and gas wells.

“There's all the incentive in the world for those operators to walk away,” said Adam Peltz, EDF Senior Attorney for Energy Transition. “If they're bankruptcy-proof, then the state can't get them and they save all the money unplugging.”

The study also found another 51,000 wells owned by solvent operators are at risk of being transferred to new financially unhealthy companies because the net present value of the wells is negative. The state taxpayer liability for these wells is an estimated $3.5 billion.

“Solvent operators are not going to orphan [abandon] the wells because they're solvent. And if you abandon a well and you're solvent, someone's going to come get you,” said Peltz. “But what those operators are incentivized to do is transfer the wells down the value chain until they get to a low solvency entity that might then go bankrupt.”

Only 11,500 wells were determined to be of no risk of being abandoned in Pennsylvania, according to the EDF study.

There are a total of 117,500 active or idle [inactive] conventional and unconventional oil and gas wells in the state, according to EDF.

The study was based on a review of the net present value of the wells and the relative insolvency and fiscal health of the operators. Read more here.

Rep. Greg Vitali (D-Delaware) serves as Majority Chair of the House Environmental Committee and can be contacted by calling 717-787-7647 or sending email to: gvitali@pahouse.net. Rep. Martin Causer (R-Cameron) serves as Minority Chair and can be contacted by calling 717-787-5075 or by sending email to: mcauser@pahousegop.com.

Another Meeting:

-- June 5-- Tentative. House Environmental Resources and Energy Committee hearing on House Bill 652 (Bullock-D-Philadelphia) on environmental justice and permitting. LTBA

NewsClips:

-- Spotlight PA: PA Limited A Board’s Power To Regulate Oil & Gas Wells, Democrats Want To Restore It

-- The Daily Item: Conventional Well Plugging Bill Amended To Give It Better Shot At Passing Through House - Rep. Vitali

-- Citizens Voice Editorial: Renew Bonds To Close, Cleanup Conventional Oil, Gas Wells [PaEN]