How Pa. lawmakers are clawing back the state’s power to plug abandoned wells

‘Essentially, what we’re trying to do is to take the law back to where it was,’ state Rep. Greg Vitali, D-Delaware, said

By: - May 31, 2023 6:30 am

A rusting oil derrick in the woods of Warren County, Pennsylvania. Photo: Althom/Getty Images/Capital & Main).

By  Audrey Carleton 

A majority-Democrat state House panel voted last week to advance legislation that would resurrect regulators’ ability to address the commonwealth’s orphaned and abandoned oil and gas well crisis after that power was stripped last year.

Altogether, there are estimated to be between 300,000 and 500,000 orphaned and abandoned oil and gas wells in Pennsylvania — they pose risks of explosion to surrounding communities, and they leak methane, a planet-warming greenhouse gas, into the atmosphere and toxins into nearby homes and waterways.

The House Environmental Resources and Energy (ERE) committee voted 12-9 on 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-Delaware, on April 19, the bill restores the authority to raise bonding amounts for conventional oil and gas wells to the Environmental Quality Board (EQB), the independent board that votes on and passes regulations for the Department of Environmental Protection (DEP).

Currently, the state requires operators of any conventional and unconventional wells drilled after 1985 to put forth a bond of $2,500 and between $4,000 to $10,000, respectively, when they drill or acquire it. Such a bond is meant to cover the cost of plugging in the event that the operator abandons the well — and lower per-well rates are available for operators that put forth what’s called a blanket bond for a grouping of wells in one go. Unfortunately, these bond amounts represent a mere fraction of the true cost of plugging, which can run more than $100,000.

The EQB’s authority over well bonding for conventional (typically older, shallower vertical wells) was stripped last year with the passage of HB 2644 — which is now codified as Act 96 — after environmentalists formally asked the DEP to raise how much money it collects from oil and gas companies to prevent the proliferation of abandoned wells. Had HB 2644 not passed, the agency could have done so, and worked to prevent the abandonment of wells by disincentivizing the routine practice of walking away.

The bill’s passage was the result of a deal a Republican legislator with family ties to the conventional oil and gas lobby made with then-Gov. Tom Wolf’s office in exchange for education funding in the final hours of budget deal-making, Capital & Main reported exclusively at the time.

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

“Essentially, what we’re trying to do is to take the law back to where it was,” Vitali continued of HB 962. A previous version of the bill also attempted to raise bonding amounts for conventional wells to that of unconventional; this clause was removed from the version that passed committee in an attempt to make it “amenable to the conventional drilling industry,” Vitali said in Tuesday’s voting meeting.

HB 2644 was introduced in June 2022 by Rep. Martin Causer, of McKean County, the committee’s ranking Republican. His district also includes Cameron and Potter counties. All three are home to a clustering 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, campaign finance records show). In Tuesday’s voting meeting, Causer called HB 962 a “bad bill” that was not “worth voting for.”

In contrast to unconventional wells — a term that encompasses what are broadly thought of as fracking wells, which are typically newer, penetrate more deeply into the ground, and usually involve horizontal drilling — conventional wells are shallower, low-producing, typically vertical and are much more common across the commonwealth.

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

These small, leaky wells often end up getting hot potatoed, one by one, between increasingly insolvent companies until they eventually land in the hands of an operator without the funds to pay for them. That’s how Pennsylvania’s vast swath of abandoned wells (for which an operator is known, but it has walked away) has proliferated alongside many orphaned wells (for which an operator is not known or has ceased operation).

Many of the commonwealth’s legacy orphaned wells are left over from countless booms and busts since the first oil well was drilled in Titusville, Pennsylvania, in 1859, and the country’s first oil fields grew thereafter. Rusty infrastructure with no traceable owner dots the state, abandoned long before regulations were developed. The state has no log of the vast majority of these wells.

In the fall of 2021, the Sierra Club and five other environmental groups asked regulators to address this crisis, filing two petitions to raise bond amounts to $38,000 and $83,000 for conventional and unconventional wells, respectively. HB 2644 was introduced some nine months later and passed into law as Act 96 one month after that.

And, “Just last Friday…we received the official report from the DEP stating our rulemaking petition for the conventional industry was denied because Act 96 is on the books,” said Kelsey Krepps, senior campaign representative at the Sierra Club Pennsylvania chapter at an April 24 hearing of the House ERE committee on Pennsylvania’s orphaned and abandoned well crisis.

Should HB 962 pass, it would reinstate the EQB’s ability to deliberate over petitions like this one —  the legislation would not update bonding amounts to reflect the true cost of plugging, but give regulators the option of doing so, which Laurie Barr, abandoned well hunter and citizen scientist, called a “baby step” in a statement sent out after the hearing. The bill also requires the DEP to conduct a study on other financial mechanisms beyond bonds that it could employ to account for abandoned well plugging costs, and the applicability of these tools to wells drilled before 1985, which are currently not covered by state bonding law.

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

According to estimates by Peltz and the EDF, it would take each oil and gas operator paying $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 his testimony to the ERE committee.

An annual flat fee could take some of the guesswork out of the bonding scheme that Arthur Stewart, president of conventional well operator Cameron Energy and secretary of the Pennsylvania Grade Crude Oil Coalition, testified was unfairly burdensome for small companies and those that properly plug all their wells compared to, say, a penalty for companies that walk away in bad faith. Stewart called Act 96 a “compromise.”

“The outcry for higher bonding 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.”

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

This is notably true for small, financially insolvent ones that have acquired low-producing wells from large operators, as often happens, without the means to pay for true plugging costs. Per an EDF analysis, Pennsylvania is currently home to 55,000 wells that are at risk of being orphaned based on their production volumes and their owners’ financial wellbeing — around five times the number that the organization identified as being at low risk of being orphaned.

And solvent operators, Peltz says, are just incentivized to pass the buck. These operators “transfer wells down the value chain, until they get to a low solvency entity that might then go bankrupt,” leaving taxpayers on the hook for the cleanup, he said at the hearing.

Instituting a full-cost bond for each oil and gas well would help ensure that no financially unstable companies purchase wells without the means or intention to plug them. This rate could be doled out per well, or the state could adopt a set of higher rates that reflects 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 have risk of becoming orphaned, and thus they need to have some money set aside to cover their plugging.”

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

“The one thing that’s for sure is, someone’s going to have to spend billions and billions of dollars to plug the 100,000 conventional wells that are currently out there,” he said. “The question is who. Ideally, it should be the operators.”

Audrey Carleton is a reporter for Capital & Main, where this story first appeared

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