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A significant debate is starting this legislative session in Harrisburg over a long-standing and misrepresented issue facing Pennsylvania in its role as the birthplace of the world’s oil and natural gas industry, with oil exploration dating to 1859 near Titusville and commercial natural gas production to 1878 in Murrysville.
At the heart of the current debate is legislation that would increase bonding amounts that must be paid to the state Department of Environmental Protection by small, independent energy producers that drill “conventional” wells, with the rationale for that increase being the belief that low bonding rates “encourage” those producers to walk away from some wells, shirking a responsibility to operate and then properly plug them when they stop bringing oil or natural gas to the surface. It is claimed by some individuals that “hundreds” of conventional wells are abandoned every year, leaving taxpayers with the liability to plug them.
A review of the facts shows that there is no evidence that such a practice is taking place.
It is important to begin an analysis of this issue with a couple of important facts. First, the companies that produce oil and gas from conventional wells – almost all of them in about 19 western Pennsylvania counties – have been doing so for decades, providing good jobs to local residents, being good stewards of the environment and responsible members of their communities. The natural gas those companies produce is used locally to heat homes in the winter, and the oil is sent to local refineries and made into gasoline, lubricants and a range of other products we use every day.
Second, as with any number of other examples in U.S. history, there are lessons learned from the past and challenges in dealing with a legacy of under-regulation. Every segment of our economy and society has dealt with similar realities. It is a reality that oil and gas wells drilled decades ago in Pennsylvania and no longer producing need to be identified and plugged, just as the commonwealth needs to address thousands of acres of abandoned mine lands. The people and companies that drilled those wells and mined that coal are no longer here, and we are left to manage what remains.
Those legacy wells, drilled and abandoned before bonding requirements were established in 1984 and for which there is no responsible party, are called “orphan” wells. Wells drilled since that time that have been neglected for one reason or another, or are no longer producing, but belong to a known responsible party, are referred to as “abandoned” wells. Orphan wells are certainly a problem. Abandoned wells are not. And they are not the same thing, as some observers tend to believe.
DEP’s statistics tell the story. The agency notes that there are currently 1,836 wells classified as abandoned, with only 121 of them being drilled after the 1984 bonding requirements. That amounts to the abandonment of about three wells each year over the course of the 39 years since bonds were required.
Next, let’s look at what little impact a bond amount increase would have on abandoned wells, starting with the fact that more than 60 percent of the state’s conventional wells were drilled before 1984, with no bonding requirement. The number of abandoned wells that fall within the pre-1984 regulations is 1,715, or more than 93 percent of the 1,836 abandoned inventory. That means an increase in bonding amounts would impact less than seven percent of that inventory.
Returning to the fact that virtually all of the state’s oil and gas operating companies are long-established companies that are local employers and responsible members of their community, it is highly likely that they want to avoid DEP enforcement actions, and there are a number of legal tools at DEP’s disposal to encourage compliance with environmental laws, including well plugging requirements. Those tools include administrative orders, civil penalties amounting to $25,000 coupled with additional daily penalties of $1,000, the imposition of a lien on some or all of an operator’s property and wells. DEP also has the big stick of criminal penalties, which include imprisonment for up to one year and daily fines of $5,000.
A conventional oil and gas producer that flaunts environmental regulations or irresponsibly abandons wells should be penalized according to the laws of the commonwealth, just like any individual or entity forced to defend their actions in an administrative process or court of law. Any objective assessment of Pennsylvania’s conventional oil and gas companies would reach the conclusion, however, that they are providing an essential product to their neighbors – energy to power their lives – and doing it responsibly.
Daniel J. Weaver is president and executive director of the Pennsylvania Oil & Gas Association
Originally published by The Center Square. Republished with permission.
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