Monday, April 25, 2022

Financial Assurance, Plugging Regulations To Be Reviewed To Prevent New Abandoned Oil & Gas Wells Under Federal Bipartisan Infrastructure Law Plugging Program

On April 25, Kurt Klapkowski, Acting DEP Deputy Secretary for Oil and Gas Management, told the
Oil and Gas Technical Advisory Board DEP will be reviewing its bonding, financial assurance and well plugging requirements for conventional and unconventional oil and gas wells to see if the state can qualify for an additional $70 million in funding from the federal Bipartisan Infrastructure Law Conventional Oil & Gas Well Plugging Program.

Klapkowski explained there are three kinds of performance grants available to states, in addition to the formula grants states receive.

The three performance grants are for strengthening well plugging requirements ($20 million and financial assurance ($20 million)-- both designed to prevent new abandoned oil and gas wells-- and for increasing state funding for the existing well plugging program ($30 million).

Klapkowski said DEP will be reviewing its regulations and requirements in the first two categories to strengthen them and do a financial evaluation for the third program in an attempt to qualify for these grants, however, DEP is still waiting for U.S. Department of Interior details on how to qualify.

“It really has to do with keeping active wells from moving to the abandoned well list,” said Klapkowski. 

 “The way we’re reading this [first program] right now is, [we’re] going into our regulations and upgrading them.”

“We’ve seen in other states where once a well gets below a certain production threshold, other requirements kick in, like heightened reporting requirements or other things like that,” said Klapkowski. 

“So that’s not just a financial assurance upgrade, but it is something that would change the system of how we think about the well’s state and what we do with it,” said Klapkowski.

“Financial assurance could certainly be part of that discussion.  Let’s say we double the bond amount and we went back to [Interior]... they might say, ‘That’s good enough,’ here’s your second $20 million,” said Klapkowski.

“[The changes will] probably have to be something after the passage of the [Bipartisan] Infrastructure Act,” said Klapkowski.

“Those two look like they’re gonna require program development updates.  We’re hoping to start discussions with Interior at some point, probably once the formula grant guidance comes out and turn to this issue about what does this actually mean on the ground in terms of these kinds of updates?”

Klapkowski also said there is a provision in the law that prohibits the rollback of any enhancements made to plugging, bonding and financial assistance requirements to prevent new abandoned oil and gas well for the full 15 years of the program.

Click Here for Ohio River Valley Institute Summary Of Available State Grants.

New Abandoned Wells A Significant Problem

Conventional oil and gas companies were issued over 4,270 notices of violation for abandoning oil and gas wells without plugging them in the last six years, according to DEP’s Oil and Gas Compliance Reporting system.  Read More Here.

    DEP’s records show the practice of abandoning wells without plugging them is routine in the industry, and not an isolated event.Read More Here.

From 2016 through 2022, DEP issued NOVs for abandoning wells without plugging them to not just to a few companies, but to 256 separate conventional oil and gas companies.  Read More Here.

The Department of Environmental Protection has issued 12 unconventional shale gas drillers notices of violation for abandoning gas wells without plugging them at 35 wells pads (each with multiple wells) in 17 counties between 2016 and 2022, according to DEP’s Oil and Gas Compliance Reporting system.  Read more here.

DEP’s Oil and Gas Compliance System reports conventional oil and gas drillers were issued 77 notices of violation for attempting to abandon wells without plugging them in the first three months of 2022.  Read more here.

Unconventional shale gas drillers were issued 8 NOVs for attempting to abandon wells without plugging them during the same time period. Read more here.

Bond Amount Increases

In November the Environmental Quality Board accepted a rulemaking petition to increase the bonding amounts for both conventional and unconventional oil and gas wells to the cost taxpayers would have to pay to plug them if abandoned by drilling companies. Read more here.

Increasing bond amounts to the real taxpayer cost of plugging and closing the loophole in state law that exempts wells drilled before April 1985 from any bonding requirement will go a long way to protecting taxpayers from billions of dollars in liability for plugging these wells if drilling companies walk-- and they are walking, particularly the conventional drillers.  Read more here.

DEP may report back to the EQB on the general status of its evaluation of the petition at the May 18 meeting.

April 28 Webinar

The Department of Environmental Protection will host an online information session on the federal Bipartisan Infrastructure Law Conventional Oil and Gas Well Plugging Program April 28 from 3:00 to 4:00 p.m..

This session, presented by DEP Oil and Gas staff, will provide participating stakeholders,  local government officials, academic institutions and commonwealth citizens with information relating to its projected plans, needs, timelines and vendor protocols which will allow for the most effective utilization of the potential funding across the state.

Visit DEP’s Office Of Oil & Gas Management webpage to learn more about this program.

For more information and available handouts, visit DEP’s Oil & Gas Technical Advisory Board webpage.  Questions should be directed to Todd Wallace, 717-783-6395.

Related Articles:

-- New Abandoned Wells: DEP Records Show Abandoning Oil & Gas Wells Without Plugging Them Is Pervasive In Conventional Drilling Industry; Who Is Protecting Taxpayers?

-- 12 Unconventional Shale Gas Drillers Issued DEP Notices Of Violation For Abandoning Wells Without Plugging Them At 35 Well Pads In 17 Counties 

-- Quarterly Report: DEP Issued 77 Notices Of Violations To Conventional Drillers, 8 To Shale Gas Drillers For Attempting To Abandon Wells Without Plugging Them 

Related Articles:

-- DEP: Federal Bipartisan Infrastructure Law Prompting Review Of On-Site Disposal Options For Oil & Gas Well Plugging Wastes; Radioactive Waste Disposal

-- DEP: Draft Updates Coming To Regs. On Conventional Oil & Gas Waste Disposal As Early As July; Waste Reporting Changes Invited

-- DEP Not Seeing Uptick In Oil & Gas Drilling; Expects $8 Million Deficit In Funding Oil & Gas Regulatory Program

[Posted: April 25, 2022]  PA Environment Digest

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