Thursday, February 26, 2015

Wall Street Journal: DEP Reviewing Oil & Gas Well Bonding To Prevent Orphan Wells

The Wall Street Journal reported Thursday the Department of Environmental Protection is reviewing oil and gas well bonding amounts to determine whether they are adequate to prevent orphan wells that would be the responsibility of state taxpayers to properly plug, according to a DEP spokesperson.
The same article quotes Jay Parrish, former Pennsylvania State Geologist from 2001 to 2010, as saying the “bonding is outrageously small.”
Pennsylvania’s bonding ranges from $2,500 per conventional well to a $600,000 blanket bond for multiple unconventional (Shale) wells.  In 2014 the state paid to plug 48 wells from a list of 8,371 orphan conventional wells.
There are an estimated 200,000 abandoned and orphaned conventional wells in Pennsylvania dating back to the first oil well drilled in 1859 in Titusville.
Well plugging costs for conventional wells can range from $25,000 to $100,000.  For Shale wells would costs more.  Pennsylvania has not paid to plug any Shale wells to date.
Parrish was also quoted as saying Marcellus drilling could leave the state with a surge in environmentally hazardous wells without enough funds to clean them up.
“We run the risk of doing what we did with the last two iterations of lumber and coal,” he said, “where we allow the industry to walk away from problems and the state is faced with having to fix it later.”

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