Laurie Barr is the iconic abandoned-oil-well-hunter of western Pennsylvania whose story has been reported by, among others, The Huffington Post. Her website is SaveOurStreamsPA.org. She is currently working on the film, Releasing Methane.
The Department of Environmental Protection’s (DEP) 2018 Oil and Gas Annual Report was released on July 10, 2019. And according to the report there are 12,164 orphan and abandoned wells in the department’s database including 8,752 in need of plugging.
According to DEP as many as 300,000 to 760,000 wells have been drilled in the commonwealth since 1859. And somewhere between 100,000 and 560,000 oil and gas wells remain unaccounted for.
Regulations specify that a well is abandoned if it hasn’t produced in the preceding twelve months. At the end of a wells productive life, they are required to be plugged.
As plugs age, they shrink, crack and deteriorate and over time need to be replaced. The life expectancy of a traditional O&G well plug is about 50 years, with many failing much sooner.
Five abandoned wells were plugged by the DEP plugging program in 2018. At a plugging rate of five wells per year, it will take the DEP 20,000 years to plug 100,000 wells, and 152,000 years to plug 760,000 wells.
Currently wells are being added to the DEP plugging list faster than they are removed through plugging. In 2016 through a DEP contract, the department re-plugged six wells that were plugged in 2015.
The cost of plugging abandoned wells
DEP estimates the cost of plugging abandoned wells ranges from $10,000 to $100,000 each. Plugging 100,000 wells at $10,000 each would cost $100 million. Plugging 760,000 wells at $10,000 each would cost $7.6 billion.
According to a 2011 Carnegie Mellon University (CMU) study titled Economic Incentives and Regulatory Framework for Shale Gas Well Site Reclamation in Pennsylvania, “For orphan oil and gas wells in Southwestern Pennsylvania, the PA DEP estimates the total cost to plug and restore the site of a well approximately 914 m (3000 feet) in depth averages $60,000, but per well reclamation costs have also exceeded $100,000.”
CMU’s study also examined the costs of decommissioning unconventional wells, estimating the cost to be in the vicinity of $100,000. However, “Cabot Oil & Gas Corporation estimated that it spent $2,190,000 to properly abandon three vertical Marcellus Shale gas wells in Susquehanna County, Pennsylvania, about $700,000 per well.”
Who pays to plug wells?
The first step on the pathway toward DEP’s abandoned well database is taken when large corporations hand-off their wells to newly created LLC’s or smaller entities that don’t have the means, or possibly even the intention, to plug low producing or worthless wells. When they file for bankruptcy protection, Tag, Pennsylvania is it!
The CMU researchers spelled out the risk: “The economics of shale gas development favor transfer of assets from large entities to smaller ones. With the assets go the liabilities, and without a mechanism to prevent the new owners from assuming reclamation liabilities beyond their means, the economics favor default on well-plugging and site restoration obligations.”
On a rare occasion, The DEP gets lucky and manages to block the pathway to their abandoned well list before wells are pawned-off to the state. In July of 2018 The DEP issued administrative orders requiring three oil and gas companies to plug 1,058 abandoned oil and gas wells across Pennsylvania. The companies agreed to a $7 million surety bond for 1,058 wells, “plus an additional $20,000 to $30,000 bond for each abandoned or nonproducing oil and gas well acquired in the future.”
- Alliance (a wholly owned subsidiary of Diversified Gas and Oil) – 638 abandoned wells
- CNX – 327 abandoned wells
- XTO – 93 abandoned wells
much little operators pay up front for well plugging
There’s a considerable disparity between the bond conventional operators are required to post and the actual cost of plugging. A March 11, 2019 pressroom news release highlighted this disparity. “Under current law, adopted in 2012 as an amendment to Pennsylvania’s Fiscal Code, conventional oil and gas operators such as Diversified and Alliance are only required to secure $25,000 of blanket bonding to cover all of their wells, which in the case of the two companies, amounts to bonding of approximately $2 per well. The performance bonding negotiated in this settlement is closer to actual plugging costs that can begin around $20,000 per well and go much higher depending on well and site conditions.”
A practical solution which would significantly reduce the risk to Pennsylvania would be to require operators to put funding, equal to the estimated cost of plugging and re-plugging their wells upfront, in an escrow account, before permitting new wells.
DEP’s Well Plugging Program
Left unplugged, abandoned wells may—and often do—act as conduits, allowing natural gas to travel from deep formations to shallower formations, to the aquifer, and to the surface. An unknown number of these wells release methane, a powerful Greenhouse Gas (GHG), into the atmosphere, needlessly contributing to climate change.
Both the 2016 & 2017 DEP Annual Oil and Gas Reports warned, there’s “not enough funding currently available to DEP to plug the remaining wells. Unless additional monies are identified for this purpose, the universe of orphan and abandoned wells will remain unplugged and will be a potential environmental and safety threat for many decades to come.”
While the DEP struggles fruitlessly, chipping away at the 20,000 to 152,000 yr. long list of wells in need of locating, plugging and re-plugging every 50 years or so for the lifetime of the planet, Governor Wolf, not letting these expanding eternal costs rain on his parade, rolled out Restore Pennsylvania, a plan that would impose a severance tax on natural gas to fund high-speed internet, create parks, and fund “infrastructure that helps build manufacturing facilities and other downstream businesses for the natural gas produced in Pennsylvania while helping businesses and individuals use more of Pennsylvania’s natural gas in their homes, creating jobs, lowering costs, and improving energy efficiency.”
As the effects of climate change become clearer, and the cost of renewable energy comes down, it’s essential for legislators to recognize the need to reject Restore Pennsylvania, a plan that promotes natural gas exploration.
The DEP 2018 Annual Oil and Gas Report didn’t include the number (five) of wells the DEP plugged in 2018 or sound the alarm to bring attention to the much needed, staggering amount of funding required to locate, plug and re-plug hundreds of thousands of GHG spewing abandoned wells in a reasonably timely manner.
Since the DEP’s plugging program began in 1989 the department has spent over $34 million (about $10,000 per well) plugging 3,416 wells. However over the past decade the program’s rate of well plugging took a nosedive and has gone from plugging 238 wells in 2008 to plugging only five wells in 2018 (according to the DEP Orphan and Abandoned Wells database).
As the DEP’s abandoned well inventory grows, it is crucial that Pennsylvania legislators recognize the urgent need to put common-sense legal barriers in place to block the pathway leading to the DEP’s abandoned well list so the shale industry can’t turn the pathway into a super highway while the planet transitions from fossil fuels to a renewable energy future.