PA Environment Digest Blog: House Committee Meets May 2 On Bill To Restore Authority To Review Conventional Oil/Gas Well Plugging Bonding Amounts; Help Prevent Routine Abandonment Of An Average Of 561 Wells A Year

The House Environmental Resources and Energy Committee is scheduled to meet May 2 on House Bill 962 (Vitali-D-Delaware), legislation that would restore DEP’s authority to review conventional oil and gas well plugging bonding amounts every two years.

The bill, however, does not clearly repeal the provision in existing law that exempts wells drilled before April 1985 (which is most conventional wells) from having to submit any plugging bonds.

Bonding, along with aggressive use of administrative and enforcement tools, could help stem the tide of the now routine abandonment of an average of 561 conventional wells a year. Read more here.

In fact, a spokesperson for the conventional operators-- Arthur Stewart, head of Cameron Energy and representing the PA Grade Crude Oil Coalition-- told the House Environmental Committee at an April 24 hearing--

“If I were in the shoes of the head of the DEP, I would go after the scofflaws, and I would take their money.” Read more here.

Background

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.

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.

The meeting will be held in Room 60 East Wing starting at 10:00 a.m. Click Here to watch live.

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.

NewsClips:

-- The Center Square - Anthony Hennen: House Committee Warned Of Lurking Taxpayer Cost For Plugging Conventional Oil & Gas Wells

-- Bradford Era/The Center Square: Committee Warned Of Lurking Taxpayer Cost For Plugging Conventional Oil/Gas Wells

-- Bradford Era: Rep. Causer Applauds Conventional Oil/Gas Well Owner Art Stewart For Testimony On Orphan Wells [Actually They’re Confused-- Current Conventional Operators Abandon 561 Wells A Year, On Average; 55,000 More At High Risk Of Abandonment]