Monday, May 23, 2022

DEP Federal ‘Orphan’ Well Plugging List Includes 7,300 Active Conventional Wells With Identified Owners; DEP Says Cost Recovery A Priority

Twenty-seven percent of the wells on the list of “orphan and abandoned” oil and gas wells DEP hopes to plug at taxpayer expense under the new federal well plugging program are active conventional wells that DEP lists as having identified owners, according to
Ankit Jain, Associate Attorney for the Sierra Club.

Jain said the Sierra Club is concerned these 7,300 active wells would be plugged at taxpayer expense [about $241 million] when it is the owners that benefited from the wells who should be footing the bill.

Jain also noted there are at least 57 unconventional shale gas wells on DEP’s list.

Jain made these comments at the May 18 DEP Citizens Advisory Council meeting and in a subsequent interview.

7,300 Active Wells

Through a Right To Know request, the Sierra Club obtained DEP’s list of 26,908 wells and a copy of their initial submission to the U.S. Department of Interior in December for the well plugging funds authorized under the Bipartisan Infrastructure Law.

The list represents the orphan and abandoned oil and gas wells DEP has authority to plug under existing state statutes, according to DEP.

“We looked at the list of individual wells DEP listed as orphaned and eligible for federal funding in its notice of intent application,” said Jain.  “That database indicates that DEP has included over 7,300 wells currently listed as active and with an identified owner in its list of orphaned wells.”

Jain said many of the wells were drilled decades ago, so it is possible some of the wells are actually abandoned and orphaned and DEP has not updated its records to reflect that.

“There are [also] 445 wells in this list of wells submitted DEP says are eligible for federal well plugging funding that were drilled in the last 20 years, with some drilled as recently as 2016,” said Jain. 

“An example of one of these wells-- Diversified gas and oil is identified as the current owner of well number 129-28129 which is a frack well on the banks of the Youghiogheny River just off of Route 70,” said Jain.  “ It was drilled by Atlas from 2011 to 2012. It produced gas copiously for two years and then declined very quickly. According to DEP's records its last drop of gas was pulled out in mid 2017 and by late summer 2018 it had been sold to Diversified.

“In June of 2021 DEP issued five violations against Diversified for this well, including failure to contain production fluid and a failure to plug the well upon abandonment,” said Jain.  “DEP issued another violation for failure to plug in February of 2022, just a few months ago. 

“That well is included in DEP's inventory of orphaned wells that they'd like federal taxpayers to pay to close,” said Jain. 

DEP Response

Kurt Klapkowski, DEP Deputy for Oil and Gas Management, told the Citizens Advisory Council, “Anytime you put together a list of 27,000 facilities, some of which haven't been operated in decades [and] might've been drilled a century ago, you're gonna have some errors obviously. 

“I acknowledge that this list is not perfect. There's additional data that we are attempting to gather about these wells,” said Klapkowski.  “But I think including them on the list was our best effort to identify the wells that we have the authority to plug under the [state] Oil and Gas Act.”

Klapkowski made a point of telling the Council DEP does have the authority to recover plugging costs from the owners of oil and gas wells under several provisions of state law, whenever owners are identified.

Klapkowski said DEP is seriously looking at contracting for additional resources to trace the ownership of wells to identify any viable, responsible owners, if they exist, adding, “I don’t think it’s a wise use of our inspector’s time to go through this process.”

“We will pursue cost recovery if we have to plug them because they're high priority wells and we don't wanna wait for an order to go through the process. Or we will be issuing orders to the responsible operators to plug those wells,” said Klapkowski

Jain said, in a conference call with groups on May 20, Klapkowski told the groups cost recovery from viable owners would be a “major priority” for DEP and he wants to get cost recovery from every well they plug, where they can.

Jain also said the information they obtained from DEP did not explain how DEP would determine what a high priority well was for plugging.

“We haven't seen anything about how they're planning to prioritize [plugging]. And that is something that I think we're hoping to see,” said Jain.  “Under the U.S. Department of the Interior guidance [issued so far,] it was optional to include that information on prioritization.”

Jain said in the phone call with groups on May 20, Klapkowski said DEP would generally use several factors for prioritizing plugging wells--

-- Likelihood of environmental, public or health harms;

-- Economic development potential around the well site;

-- Environmental justice considerations;

-- Ease of access; and

-- Wells in proximity to priority wells they have identified.

But, the specific process for prioritization has not yet been finalized.

Jain said as a result of the May 20 call, he “understands a little bit more about what’s going on,” but needs to talk with the rest of the Sierra Club team to see where they are on the issues.  

“I think the main issue is that we don't want Pennsylvania to be using taxpayer funding to plug wells that have clearly identified owners who are equally responsible to close the wells themselves. People who make money off a well should be paying the cost to clean up after themselves,” said Jain.

Conventional Drillers Cost Taxpayers $5.1 Billion

The cost to plug the 7,300 wells on DEP’s federal “orphan and abandoned” well list would be about $241 million, according to DEP’s current average well plugging cost of $33,000.

There are an estimated 200,000 conventional oil and gas wells the industry abandoned in Pennsylvania that DEP said could cost taxpayers $1.8 billion to plug, although no one knows for sure.  [Read more here.]

The Pittsburgh Post-Gazette recently reported DEP has only $15 per well on hand under current well plugging bonding requirements to plug the over 100,500 currently active conventional oil and gas wells in the state.  [Read more here.]

Most of these wells are not covered by any plugging bond because they were drilled before April of 1985 and therefore exempt from bonding by state law, another concession and taxpayers subsidy to the conventional industry..

It would cost taxpayers over $3.3 billion to plug those wells, if the conventional industry decided to abandon them, which they try to do on a regular basis.  [Read more here.]

Total taxpayers liability for conventional oil and gas well plugging in Pennsylvania as a result of the conventional industry’s failure to adequately provide for plugging their own wells is about $5.1 billion, a conservative number.

Over the next 15 years, DEP is expected to receive approximately $395 million from the federal Bipartisan Infrastructure Law to plug oil and gas wells abandoned by conventional drillers.  [Read more here.]

Preventing New Abandoned Wells

Another part of the federal well plugging program authorized under the Bipartisan Infrastructure Law requires DEP to evaluate its Oil and Gas Program and make changes to help prevent active wells from becoming abandoned wells and a taxpayer responsibility. [Read more here.]

DEP records show 256 conventional oil and gas drillers received over 4,270 notices of violation for attempting to abandon wells without plugging them over the last six years.  [Read more here.]

Abandoning wells by the conventional oil and gas drillers is pervasive and routine in the industry.  [Read more here.]

In addition, as noted, oil and gas wells drilled before April, 1985 [which is most of them] require no bonding at all to cover plugging costs and the existing amount of bonding in no way equals today’s taxpayer costs for plugging.

To protect taxpayers, some basic steps need be taken--

-- Close the pre-1985 well bonding exemption, but state law needs to be changed; and

-- Have real bonding for all active conventional and unconventional wells that reflect the full taxpayer cost for plugging.  There is a rulemaking petition proposal before the Environmental Quality Board by the Sierra Club now to do just that.  [Read more here.]

With respect to full-cost bonding, Jain said, “The vast majority of operators, I think, are profitable, or have a strong financial future, this is not gonna drive them out of business.

“I think, for the small portion of operators that won't be able to deal with higher bond amounts, or something of that nature, they were never going to be able to plug their wells because they never would've had the funds to plug the wells,” said Jain.

“They were relying on the taxpayers [all along] to plug the wells for them. And that was, essentially, part of their business model. They wouldn't be able to operate if they had to pay to plug their own wells,” explained Jain.

The Department of Environmental Protection may report on the status of the rulemaking petition for full-cost bonding of oil and gas wells before the EQB at their next meeting on June 14.  [Read more here.]

PA Environment Digest:

-- Compilation Of Articles On Impacts Of Conventional Oil & Gas Drilling In PA

Related Articles:

-- EQB Accepts Petitions For Study To Increase Oil & Gas Well Bonding; DEP Has $15 Per Well Available In Bonds To Plug Conventional Wells

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

-- DEP To Prohibit Conventional Oil & Gas Drillers With Unresolved Environmental Violations From Getting Conventional Well Plugging Contracts; 133 Companies Interested In Doing Well Plugging Work [2.7.22]

-- New Abandoned Wells: DEP Records Show Abandoning Oil & Gas Wells Without Plugging Them Is Pervasive In Conventional Drilling Industry; Who Is Protecting Taxpayers?  [2.23.22]

-- 12 Unconventional Shale Gas Drillers Issued DEP Notices Of Violation For Abandoning Wells Without Plugging Them At 35 Well Pads In 17 Counties [3.2.22]

-- Quarterly Report: DEP Issued 77 Notices Of Violations To Conventional Drillers, 8 To Shale Gas Drillers For Attempting To Abandon Wells Without Plugging Them  [4.7.22]

-- Guest Essay: PA's Low-Producing Conventional Oil & Gas Wells Are Leaking Too Much Methane, The Industry Needs To Take Care Of Its Own Trash

[Posted: May 23, 2022]  PA Environment Digest

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