On February 7, the Department of Environmental Protection announced conventional oil and gas drillers with unresolved environmental violations will not be awarded contracts to plug conventional wells under the new federal Bipartisan Infrastructure Law oil and gas well plugging program.

DEP’s comments came at an informational meeting held by the House Environmental Resources and Energy Committee on the new well plugging funding.

Over the next 15 years, DEP is expected to receive approximately $395 million from the federal Bipartisan Infrastructure Law to plug oil and gas wells abandoned by conventional drillers.  [Read more here.]

Rep. Greg Vitali (D-Delaware), Minority Chair of the Committee, prompted DEP’s comments by asking-- “Will the DEP-- in putting out these contracts to plug wells-- review the compliance history of the companies it awards these plugging contracts too?

“In 2019 and 2020, according to a DEP report, 813 notices of violations were issued to conventional oil and gas drillers for attempting to abandon [their] oil and gas wells without plugging them,” said Rep. Vitali.  “Are you going to factor in [that] you have operators who are cited for abandoning these wells, will they get plugging contracts?”

[Note: Overall, conventional well drillers had 4,386 violations of environmental regulations in 2021-- nearly two and a half times the violations reported just two years ago and four times the violations of the unconventional (shale) gas drilling industry.  [Read more here.]]

Kurt Klapkowski, Director, Bureau of Oil and Gas Planning and Program Management, told the Committee, “We actually do compliance checks as part of the contracting process.

“There's really two places that we go for that, [first] the contractor responsibility program. And that's more the issue where we have folks violating the terms of contracts.

“But we also do an internal check in our [DEP] compliance databases to make sure that any outstanding violations were being addressed to the satisfaction of the department before we would let those contracts.

“Historically, this is the way it has worked when we do the requests for bids.

“So, I feel pretty confident that we would not be issuing contracts to operators that had significant outstanding violations either on the contracting side of things or on the environmental protection side,” said Klapkowski.

133 interested Companies

With the award of the initial federal funding just last week, Scott Perry, DEP Deputy for Oil and Gas Management, explained-- “With the initial $25 million [in new federal money] we’ve identified approximately 500 [conventional oil and gas] wells and we’re going to put together contracts in the eight to ten well range so that’s exclusively basically that small business can compete for this money.

“There will be smaller contracts we will be able to add on to those as we find new wells, as we go along,” said Perry.

“It is our intention to go after the highest priority wells with a variety of contracts, mostly small contracts to include as many Pennsylvania small businesses as possible-- that is our plan,” said Perry.

“Most of our [existing] contractors are Pennsylvania businesses.  In the Southwest we’ve had a paucity of contractors.  Hydrocarbon [Well Services] is a company that bids almost exclusively on our contracts in the Southwest and I think they are out of West Virginia. But all the other contracts are with Pennsylvania small businesses.”

“I do know that some of the procurement rules where you have a 150 percent of the contracting amount [for a bond] as well as paying prevailing wages can be challenges for lower capitalized business,” Perry explained.

“But, our problem has been just getting people to bid on the jobs… period,” said Perry. “And what Kurt [Klapkowski’s] team has done is to reach out to as many plugging contractors as possible and get them into the [DEP] registry of potential bidders and then conducted a survey to gauge their appetite for the work we’re proposing.”

“I think they’ve done as good a job as possible to attract as much attention to this [new opportunity],” said Perry.  “But it is a potential challenge for us if people do not bid to do this work then we’re not going to get those wells plugged.”

“We have to have alternatives in the back of our mind where we let larger contracts to operators who would be more interested in plugging a larger number of wells,” said Perry.

Even with these limitations, Perry said in his written testimony 133 oil and gas well operators and plugging support contractors have responded to DEP’s call for companies interested in plugging wells.  Read more here.

Klapkowski also mentioned DEP is looking at the possibility of a request for proposal model as well for getting the work done which gives the agency more leeway in contracting.

Perry said DEP has so far identified 26,908 abandoned or orphaned wells that still require plugging and estimates there are 200,000+ more abandoned wells throughout Pennsylvania that haven’t been located or identified yet.

You Must Keep Conventional Drillers In Business

Arthur Stewart from Cameron Energy represented conventional oil and gas drillers and the PA Grade Crude Oil Coalition at the Committee informational meeting.  He also serves on DCED’s PA Grade Crude [Oil] Development Advisory Council.

[Note: Actually, Stewart was the former owner and founder of D&I Silica, the largest independent provider of hydrofracking sand during the first 10 years of the Marcellus Shale natural gas boom in Pennsylvania.  [Read more here.] 

[D&I Silica was sold to Hi-Crush Partners in 2013 for $125 million.  Read more here.]

“The conventional industry is a logical place for the plugging resources that we've talked about,” said Stewart.  “We're the logical go-to industry for at least a significant share because we already have the equipment, we already have the workforce, we already have the knowhow. And for those difficult wells, we're the only industry that I'm aware of that has that rare equipment.

“In my career, I've plugged hundreds of wells,” said Stewart.  “But my company plugs more wells than we drill every year. On average, I plug about 20 wells a year, and I drill about 17. We'll ramp up with the better prices [for oil], but I'll also ramp up my plugging.”

100,000+ Abandoned Wells Will Remain

“I'm here now putting my advocate hat on for the conventional [drilling] industry. Let's be careful to not squeeze the conventional industry out of business,” said Stewart.  “You're gonna need a robust industry because even when this federal program is done, there are going to be many abandoned wells remaining.”

“If we do get $300 million [in federal funds], at the end of the day, we'll still have a hundred thousand plus [abandoned and orphan] wells to solve, which is not necessarily a disaster,” said Stewart.

100,000+ Active Wells We Don’t Want To Abandon

“And remember, we have a hundred thousand-plus wells that we currently operate,” added Stewart.  “We don't want to see those go into the abandoned category and make the situation worse. We wanna plug those responsibly, while the industry is robust and alive to do it.”

[Note: Pittsburgh Post-Gazette: PA Faces A New Wave Of Abandoned Conventional Oil and Gas Wells.]

Proposed Bonding Increase

“And then [there are] challenges to a robust conventional industry,” said Stewart.  “There's a push now for [increased] bonding [on conventional wells].

“But it's interesting. When bonding in the oil and gas industry is compared to the solar industries, I think it came up with HB 2104, we saw the position [from DEP], well, we really don't need to bond wind and solar facilities, but we need to bond oil and gas facilities. That doesn't make any sense to me. That's a tilted playing field,” said Stewart.  [Read more here.]

[Note: Stewart made this same argument at the December meeting of the PA Grade Crude [Oil] Development Advisory Council forgetting that wind and solar energy farms don’t release methane into the atmosphere, or serve as a conduit for contaminating ground and surface water and don’t produce millions of gallons of wastewater that need to be disposed of every year and finally-- don’t blow up.  [Read more here.]]

[What Stewart also didn’t mention was DEP’s testimony on HB 2104 pointed to the fact conventional oil and gas wells drilled before 1985 are not required by law to have any bond to cover plugging and the bonding required for other wells is totally inadequate. Pre-1985 wells are the overwhelming number of wells now active, according to DEP.  [Read more here.]

[Stewart also did not mention the Pittsburgh Post-Gazette reported DEP has less than $15 per well available to plug the over 100,500 active conventional oil and gas wells in Pennsylvania.

[In November, the Environmental Quality Board accepted a petition to increase the bonding amounts for both conventional and unconventional oil and gas wells to the cost taxpayers would have to pay to plug them if abandoned by drilling companies.  [Read more here.]]

Updated Conventional Drilling Standards

“There are some things in the [proposed DEP] Chapter 78 regulations [related to conventional drilling] that I think are punitive,” said Stewart.  “There are, for example, word choices and requirements that were ruled illegal by the Commonwealth Court that are still contained in the Chapter 78 regulations being brought forth currently. This doesn't make sense to me, and I see that as an indication of a tilted field designed to, to, to put us out of business.”

[Note: DEP corrected Stewart several times at the December meeting of PA Grade Crude [Oil] Development Advisory Council meeting pointing out the issues he identified in the Chapter 78 regulations have not yet been resolved and are still pending before the PA Supreme Court.  [Read more here.] ]

“I'm very proud of our president, Dave Clark, PA Grade Crude Oil Coalition’s president, who a few years ago came up with the concept at PGCC--  “Get caught doing something good,” said Stewart.

“[For example,] we put out a call to plug wells voluntarily. And so we have plugged over half a dozen wells voluntarily at the cost of our members,” explained Stewart. 

“The [US] Forest Service [in the Allegheny National Forest] came to us with a problem well, and a half a dozen of our members gathered together at no cost to the Forest Service or to the state,” said Stewart, as one example

“We plugged that well.  So that's the spirit that PGCC and the conventional industry brings to this new challenge of plugging all of these wells.

“I think we're up for it, but when we're done with the federal money, there will still be a challenge awaiting. We need a robust conventional industry for that, so I ask that we be cognizant to not put us out of business in the meantime,” concluded Stewart.

Many Other Options

Actually, the unconventional (shale) gas drilling industry routinely plugs many, many, many more oil and gas wells abandoned and orphaned by conventional drillers to maintain the integrity of their deep drilling operations.  Ask the Marcellus Shale Coalition.

There are also other alternatives for plugging wells effectively and at less cost-- just ask companies like Hydrocarbon and other well service firms now working in Pennsylvania.

To date, Scott Perry said 133 oil and gas well operators and plugging support contractors have responded to DEP’s call for companies interested in plugging wells.  Read more here.

Click Here to read about how one company sees opportunity in plugging wells in Pennsylvania and other states under the Bipartisan Infrastructure Law program.

So, conventional well drillers aren’t the only game in town as portrayed by Mr. Stewart. 

There will be $395 million available for well plugging over 15 years and those competitive companies that find a way to do this work will get a big piece of this action for quite a while.

These innovative companies and workers don’t ask for handouts and welfare or to live in the past like some conventional well drillers that continue to try to abandon wells without plugging them.

Why do conventional oil and gas drillers keep saying they won't mess up the place they live in when we have 200,000+ abandoned conventional wells?  And why did Stewart say during this meeting, that it was "not necessarily a disaster."

Visit DEP’s Rewriting Pennsylvania’s Oil & Gas Legacy webpage for more information  on the new conventional well plugging program.

Click Here to watch a video of the hearing.  Written testimony includes--

-- Scott Perry, DEP Deputy for Oil and Gas Management

-- Arthur Stewart, PA Grade Crude Oil Coalition

Rep. Daryl Metcalfe (R-Butler) serves as Majority Chair of the House Environmental Committee and can be contacted by calling 717-783-1707 or sending email to: dmetcalf@pahousegop.com. Rep. Greg Vitali (D-Delaware) serves as Minority Chair and can be contacted by calling 717-787-7647 or sending email to: gvitali@pahouse.net.

NewsClip:

-- PG - Anya Litvak: For Diversified Oil, Well Plugging Goes From Liability To Moneymaker; Company Sees Tremendous Potential Under Bipartisan Infrastructure Law Funding

Related Articles This Week:

-- Scott Perry No Longer DEP Deputy For Oil & Gas Management

-- DEP To Prohibit Conventional Oil & Gas Drillers With Unresolved Environmental Violations From Getting Conventional Well Plugging Contracts; 133 Companies Interested In Doing Well Plugging Work

-- Representative Of Conventional Oil & Gas Well Drillers Compares Their History In PA To The Holy Bible - But He Left Out Some Parts

-- Protect PT Hosts Feb. 15 Webinar On Proposed Increase In Oil & Gas Well Bond Amounts To Protect Taxpayers Paying To Plug Wells Conventional, Unconventional Drillers Abandon 

-- PUC Invites Public Comments On Enhancements To Regulations Covering Petroleum & Hazardous Liquids Pipelines 

Related Articles:

-- DEP Receives First $25 Million From Federal Bipartisan Infrastructure Law For Plugging Oil & Gas Wells Abandon By Conventional Drillers

-- DEP Outlines 2022 Priorities: Make Up Deficit In Oil & Gas Funding; Get Resources Needed To Invest New Federal Mine Reclamation, Oil & Gas Well Plugging Funds

-- Gov. Wolf Proposes $450 Million Growing Greener III Initiative Funded By Federal American Rescue Plan; Bipartisan Support Building For Conservation Allocation

-- DEP: Conventional Oil & Gas Drillers Tried 813 Times To Abandon Wells Without Plugging Them; Failed To Report Waste Generated 836 Times Over 2 Years

-- Conventional Oil & Gas Well Drillers Press DEP To Reduce Environmental Safeguards For Drilling And Treat Them The Same As Wind, Solar Energy Facilities 

[Posted: February 7, 2022]

2/14/2022