PA Environment Digest Blog: DEP: 768 Abandoned Conventional Oil & Gas Wells May Be Plugged In Next Year; Over 27,000 New Abandoned Wells May Have Been Found; Alternatives To Well Plugging Bonds

On June 25, the Department of Environmental Protection reported to the Oil and Gas Technical Advisory Board federal funding will enable the plugging of an estimated 768 oil and gas wells abandoned by conventional well owners over the next year, noting the largest number of wells the agency plugged previously in one year was 441 in 2002.

In addition to the basic federally-funded conventional well plugging program, DEP said the 768 wells includes the--

-- Orphan Well Plugging Grant Program which has 32 conditionally approved applications covering 155 wells; and

-- Methane Emissions Reduction Grant Program which has 35 applications covering 311 wells.

None of the actual well plugging is underway with these two programs because the applications are waiting for work to be done to satisfy federal requirements and/or federal approvals.

“Keep in mind, in terms of the IIJA [federal funded] wells and everything, we only plugged 140 wells in 2023, and we're talking over 700 wells at this stage of the game with more contracts and more everything coming, and that's really encouraging,” said Kris Shiffer, Director of DEP's Bureau of Oil and Gas Planning, Program Management. “We could potentially, within one year, be talking about the 1000th well [plugging] event.”

27,000 More Wells

DEP also reported a project to identify previously unidentified oil and gas wells abandoned by conventional well owners has potentially found over 27,000 more abandoned wells-- double the number in the inventory DEP has for the federal well plugging program.

Shiffer said the one year project with Harrisburg University and Indiana University of Pennsylvania to locate undocumented wells involved digitizing and geo-referencing historical well records.

Kurt Klapkowski, DEP Deputy Secretary for Oil and Gas Management, noted-- “When we get 27,000 data points, now all of a sudden the question becomes, how do you verify that those wells are actually in those locations, get [latitude and longitudes] for them, do a site [visit], I'll call it a well characterization, run it through our scoring system and that process in terms of the condition of the well and the potential impacted resources and the vicinity of that well.”

Klpakowski mentioned another project to identify undocumented conventional wells with the Environmental Defense Fund in a limited area found over 250 “magnetic anomalies” using drone over flights and other remote sensing equipment. [Read more here]

“The question becomes sending oil and gas inspectors or DEP staff to do that fieldwork to verify those data points are actually wells in the field,” said Klapkowski.

“So it's going to be a massive task for us to be able to work and actually do that fieldwork to get that information into our databases and begin to prioritize those wells for future plugging contracts, either invitation to bid contracts or under the request for proposals moving forward.”

Klapkowski said he hopes to use a federally-funded contractor they will soon retain [Read more here] to do much of that work because DEP inspectors have other work to do like inspecting facilities and responding to complaints.

“I think defining the scope of this problem in a very concrete and serious way is really a prerequisite to having the longer term conversations that we need to have around how Pennsylvania is going to address this legacy [well plugging] issue in Pennsylvania,” said Klapkowski.

“And while the potential for federal funding to extend into the future is something that I'm very hopeful about, obviously we can't count on that, and I think we have to figure out a way in Pennsylvania to deal with Pennsylvania's problems,” Klapkowski added.

Alternative Financial Assurance

Kris Shiffer, Director of DEP's Bureau of Oil and Gas Planning, Program Management, gave a short overview of options to cover future conventional oil and gas well plugging funding needs.

“And really to solve this problem, it will take a public-private partnership to fully address Pennsylvania's orphan and abandoned well problem,” said Shiffer. “And both sides [need to be] open to hear and listen to different opportunities, different things, concepts that maybe you see in other states that might be working. And I think we have to work together to really solve this problem.”

He pointed out states like Texas, Ohio, West Virginia and Kansas have well plugging programs funded primarily by the industry that allows the private sector to actually build a well plugging business.

Shiffer said relying on well plugging bonds to cover future plugging obligations has severe limitations.

[Editor’s Note: 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.]

“Currently right now in the oil and gas industry, we utilize bonds. When we take a look at the amount of the bond, the amount that it costs to plug a well, it's nowhere near sufficient,” Shiffer said. “Take into account that half of the active well population on the conventional side don't require a bond, it really sort of exacerbates the problem.”

“So we took a look in terms of some of the previous CDAC [DCED Crude [Oil] Development Advisory Council] presentations [to the conventional oil and gas industry] in terms of a private sector insurance model where an operator could pay into a fund and actually gets invested so that there's future plugging liability, future coverage for the plugging of a well.” [Read about a well “life insurance” approach DEP made.]

“Thirty, 40 years from now when that well goes to plug, they can actually tap into a fund that they helped pay in to help cover the costs of those wells, that's fully invested.

“So there's some concerns, though, with the private sector type account like that.”

Shiffer said another possibility for an alternative well plugging financial assurance is the Underground Storage Tank Indemnification Fund (USTIF) model used to clean up leaking tanks that has been in place since 1989.

Shiffer said DEP will be doing a feasibility study to determine “what it would take to continue with a USTIF model type program that would sort of incorporate not only future plugging liability for everyone that an operator could actually tap into for future plugging needs, but also to assist with any type of environmental coverage too.”

“Our [tank] owners of the Storage Tank Program have found compared to private sector insurance policies, the state model is extremely cheap and less burdensome, actually, that what other states as well as other tank owners look at in terms of private sector insurance policies.

“When you consider the USTIF model, the rates have not [been] raised since 2004 I believe [1.1 cents per gallon of gasoline]. You find me an insurance company that hasn't raised your rates since 2004, and I'll be very eager to sign up to get my homeowners and auto insurance policy from that company.”

[Editor’s Note: The conventional oil and gas industry is very cool to any changes and said during a House Environmental Committee hearing June 12 “What is in place is already working.” Read more here.

[While conventional owners have a sweet deal doing nothing, taxpayers are getting stuck with cleaning up their mess.

[At that same House hearing, DEP reported 3,108 conventional wells were cited for abandonment in the eight years between January 2017 and December 2024-- only 17% appeared to be abandoned prior to January 2017. Read more here.

[2,070 conventional wells-- 66% of those abandoned wells were not required to have a well plugging bond by law. Read more here.]

Shiffer also said the oil and gas industry needs to be innovative and look at the current opportunities for carbon offset credits as well as repurposing wells for geothermal energy production.

“[DEP is] Trying to make people aware of the possibilities and the opportunities because like I said, it's not just going to be state funds that help alleviate this problem,” said Shiffer.

For available handouts and more information, visit DEP’s Oil and Gas Technical Advisory Board webpage. Questions should be directed to Todd Wallace at twallace@pa.gov or (717) 783-6395.

For more information on environmental programs in Pennsylvania, visit DEP’s website. Submit Environmental Complaints; Click Here to sign up for DEP’s newsletter; sign up for DEP’s eNotice; Like DEP on Facebook, Follow DEP on Twitter and visit DEP’s YouTube Channel.