Pennsylvania lawmakers reclaim state power to plug abandoned wells

Pennsylvania Democrats voted on Tuesday to advance legislation that would resurrect regulators’ ability to deal with the crisis of orphaned and abandoned oil and gas wells in the Commonwealth after that power was removed last year.

In total, it is estimated that there are between 300,000 and 500,000 orphaned and abandoned oil and gas wells in Pennsylvania – they pose explosion hazards to surrounding communities and they release methane, a greenhouse gas greenhouse that warms the planet, in the atmosphere and toxins in neighboring houses. and waterways.

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The House Environmental Resources and Energy (ERE) committee voted 12-9 along party lines to pass HB 962 on May 23; it will now go to the floor of the House of Representatives for a full vote.

Introduced by Rep. Greg Vitali (D-166) on April 19, the bill restores authority to raise bond amounts for conventional oil and gas wells to the Environmental Quality Board (EQB), the independent board that votes and makes regulations for the Department of Environmental Protection (DEP). Currently, the state requires operators of conventional and unconventional wells drilled after 1985 to post a bond of $2,500 and between $4,000 and $10,000, respectively, when drilling or acquiring it. Such a bond is intended to cover the cost of plugging in the event the operator abandons the well – and lower per-well rates are available for operators who offer what is called a blanket bond for a group of wells in one one time. Unfortunately, these bond amounts are only a fraction of the actual cost of patching, which can exceed $100,000.

The EQB’s authority over well bonding for conventional wells (usually older and shallower) was removed last year with the passage of HB 2644 – which is now codified as Law 96 – after environmentalists officially asked the DEP to collect the amount of money it collects from oil. and gas companies to prevent the proliferation of abandoned wells. If HB 2644 had not passed, the agency could have done so and worked to prevent well abandonment by discouraging the common practice from moving away.

“Bad environmental policy is usually a bargaining chip that Republicans want in exchange for something else.” ~ Greg Vitali, Pennsylvania State Representative

The passage of the bill was the result of a deal that a Republican lawmaker with family ties to the mainstream oil and gas lobby reached with the government of the day. Tom Wolf’s office in exchange for education funding in the final hours of budget deals, Capital & Main exclusively reported at the time.

“Unfortunately, in Harrisburg, broad agreements covering many topics are being reached,” said Vitali, who is also majority chairman of the House Environmental Resources and Energy (ERE) committee. “Bad environmental policy is usually a bargaining chip that Republicans want in exchange for something else.”

“Essentially what we’re trying to do is bring the law back to where it was,” Vitali continued of HB 962. A previous version of the bill also attempted to increase bail amounts for conventional wells to those of unconventional wells; this clause was removed from the version adopted by the committee in an effort to make it “suitable for the conventional drilling industry”, Vitali said during Tuesday’s voting meeting.

HB 2644 was introduced in June 2022 by Rep. Martin Causer (R-67), minority chairman of the ERE, which serves McKean, Cameron and Potter counties, home to a cluster of conventional oil and gas wells. (Causer also accepted $7,500 from the Pennsylvania Grade Crude Oil Coalition, a conventional industry trade group, in 2022, according to campaign finance records.) At Tuesday’s vote meeting, Causer called HB 962 a “bad bill” that was “not worth voting for.”

Unlike unconventional wells – a term that encompasses what are generally thought of as frac wells, which are usually newer, go deeper into the ground and usually involve horizontal drilling – conventional wells are shallower, at low production, usually vertical and are much more common across the Commonwealth.

These low-production wells are more likely to be owned and operated in small numbers by family operators than hydraulic fracturing wells, but even so, the “vast majority” are in the hands of “large, well-capitalized companies,” according to the Environmental Defense Fund (EDF).

These leaky little wells often end up becoming hot potatoes, one by one, between increasingly insolvent companies until they eventually land in the hands of an operator without the funds to pay for them. This is how Pennsylvania’s vast swathe of abandoned wells (for which an operator is known, but have moved away) have proliferated alongside many orphan wells (for which an operator is not known or has ceased operations). activities). Many Commonwealth legacy orphan wells are the remnants of countless booms and busts since the first oil well was drilled in Titusville, Pennsylvania, in 1859, and the nation’s first oil fields developed thereafter. Rusting infrastructure with no traceable owner dots the state, abandoned long before regulations were developed. The state has no logs of the vast majority of these wells.

At stake is $70 million in federal funding available to states that improve their orphan and abandoned well regulations.

In fall 2021, the Sierra Club and five other environmental groups called on regulators to address this crisis, filing two petitions to raise bonds of $38,000 and $83,000 for conventional and unconventional wells, respectively. . HB 2644 was introduced about nine months later and enacted as Law 96 a month later.

And, “Last Friday…we received the official report from the DEP that our petition for rulemaking for the conventional industry was denied because Bill 96 is on the books,” said Kelsey Krepps, senior representative. of the campaign at the Sierra Club Pennsylvania chapter during an April 24 House ERE committee hearing on the crisis of orphaned and abandoned wells in Pennsylvania.

If HB 962 were passed, it would restore the EQB’s ability to deliberate on petitions like this – the legislation would not update bond amounts to reflect the true cost of clogging, but would give regulators the ability to do so, which Laurie Barr, a good hunter and citizen scientist, called a “small step” in a statement sent after the hearing. The bill also requires the DEP to conduct a study of other financial mechanisms beyond bonds that it could use to account for the costs of plugging abandoned wells, and the applicability of these tools to drilled wells. before 1985, which are currently not covered by the Government Bonds Act.

At stake is not just the fate of a warming planet and the safety of the people of Pennsylvania, but $70 million in federal funding made available to states that improve their regulations regarding orphaned and abandoned wells, noted Adam Peltz, director and senior counsel, energy transition, at EDF, who also spoke at the hearing.

Peltz and EDF estimate that each oil and gas operator would need to pay $1,100 per well per year to properly address the state’s abandoned well crisis. “These dollar amounts are sobering, but they speak to the magnitude of the problem in Pennsylvania,” Peltz said in testimony before the ERE committee.

A fixed annual fee could take some of the guesswork out of the bonding system, which Arthur Stewart, president of conventional well operator Cameron Energy and secretary of the Pennsylvania Grade Crude Oil Coalition, said was unfairly burdensome on small businesses and those plugging in properly. all their pits against, say, a penalty for companies walking away in bad faith. Stewart called Bill 96 a “compromise”.

“The outcry for higher bail amounts is not supported by … statistical data,” Stewart said. “We are tired of fighting demagogues who preach a false narrative to pursue a global environmental agenda.”

Pennsylvania is currently home to 55,000 wells at high risk of becoming orphaned, according to an analysis by the Environmental Defense Fund.

Peltz argues that relying solely on fines to deter well abandonment takes up valuable administrative time and resources — as it stands, many operators have “all the incentive in the world to walk away,” he said. he said during the hearing.

This is particularly the case of small, financially insolvent, who have acquired less productive wells from large operators, as often happens, without having the means to pay the true costs of clogging. According to an analysis by EDF, Pennsylvania is currently home to 55,000 wells that are at risk of being orphaned based on their production volumes and the financial well-being of their owners – about five times the number identified by the organization as being at risk. low risk of being orphaned.

And creditworthy operators, says Peltz, are simply incentivized to pass the buck. These operators “transfer the wells along the value chain, until they come to a low-solvency entity that could then go bankrupt,” leaving taxpayers responsible for the cleanup, he said during the interview. the hearing.

Bonding the full cost of each oil and gas well would help ensure that no financially unstable company buys wells without the means or intention to plug them. This rate could be distributed per well, or the state could adopt a set of higher rates reflecting the average cost of plugging.

“No well should be exempt from bonding,” Peltz said in his testimony. “I don’t understand why they would be; all of these wells are at risk of becoming orphans, so they have to set aside money to cover their clogging.

“You just need to have more money in the system to be able to plug the wells,” he told Capital & Main separately.

“The only thing that is certain is that someone is going to have to spend billions and billions of dollars to plug the 100,000 conventional wells that currently exist,” he said. “The question is who. Ideally, it should be the operators.

Copyright 2023 Capital & Main


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