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Conventional Oil & Gas Industry Still Fighting To Make Road Dumping Its Wastewater Legal; DEP Introduces Concepts Of A ‘Life Insurance Policy’ For Plugging Wells; Certified 3rd Party Inspectors

On October 12, DCED’s PA Grade Crude Development Advisory Council, representing the conventional oil and gas industry, met on a wide range of issues, including promoting the idea of how to make road dumping its wastewater legal.

The Department of Environmental Protection introduced several new concepts for discussion, including providing well plugging financial assurance through a “life insurance policy” for wells and establishing a certified well inspector program modeled on the certified storage tank inspector program it already operates.

Kurt Klapkowski, Deputy Secretary for Oil and Gas Management, also announced Kris Shiffer has been named Director of the Bureau of Oil and Gas Planning and Program Management.

Klapkowski also said John Ryder, Director of the Bureau of District Oil and Gas Operations, has been named Acting DEP Deputy for Field Operations.

Barbara Laxon and Lauren Barr provided comments to the Committee during the open Public Comment Period on leaking production wastewater tanks in Bradford, McKean County.

Finding Ways To Legalize Road Dumping

A Committee review of a Penn State study released in August analyzing brine water pumped from played-out conventional wells and used for dust suppressants and winter road treatments triggered another discussion of the options the industry has to make road dumping their wastewater legal.

The study concluded brine water exceeded environmental and health standards for 11 major chemical contaminants, including radioactive radium, just like conventional oil and gas wastewater. Read more here.

This isn’t a surprise since the “brine water” comes from the same place as conventional wastewater-- a conventional well.

[Note: It’s important to note road dumping wastewater from unconventional shale gas drilling was prohibited in 2016, and it’s essentially the same thing.]

The August Penn State study was a followup to a study released in May of 2022 showing the environmental and health threats posed by road dumping conventional wastewater. In addition, the study said spreading wastewater didn’t work any more effectively as a dust suppressant than plain water. Read more here.

One industry representative said, “I'm not alarmed by this report. I don't think it's gone nearly to the level of proving that any of the materials put down on the roads are dangerous.

“Just common sense tells us the healthiest states in the country are Minnesota and Colorado, and the least healthy is Mississippi and Louisiana. I mean, obviously if this was having a huge effect on the health of people that live in northern climates, it would be statistically something that you'd be able to see.”

The Committee revived the idea of having the industry submit a rulemaking petition to the Environmental Quality Board to have DEP regulate all dust suppressants and all winter road treatments, including conventional oil and gas wastewater.

Arthur Stewart, Cameron Energy, said “I liken it to just Russian roulette. Boy, anything can go on roads. That's the comparison to Russian roulette, except we're not putting produced water down because that's the one out of the many that we've stopped to study.

“The initiative would be to have EQB study all so that we get to that balanced playing field and safety you're talking about in terms of not just the materials themselves, but also materials in relation to other safety considerations,” explained Stewart.

The Committee voted to have its Regulatory Review Committee look at a proposal.

Kurt Klapkowski, Deputy for Oil and Gas Management, noted in previous meetings there is an issue of whether DEP had the statutory authority to regulate materials other than oil and gas-related water.

"If CDAC wanted to take that step [doing a rulemaking petition], that would be fine. Or an individual operator or whatever. I mean, it's not something that we would necessarily discourage, I wouldn't say. It would certainly bring the issue to head.”

“What I was trying to say earlier was that because produced fluids are waste material, we have to treat them, regulate them as waste material.

“From the standpoint of comparing these materials to other materials, like I said, we're coming at it from two different directions.

“We've got to figure out a way that we can justify the use of these materials as a waste product for beneficial reuse. Whereas we have commercial products that we have to figure out if we should be restricting their use as commercial products, like window cleaner or anything else that you use in the environment.”

“I would say that the department is not in a place, as far as I'm aware, in any way, shape, or form right now to be advancing regulations on either one of those.”

“I feel like it's probably much more likely that the second set of regulations would be something that would be developed, which is restrictions on the use of these materials in particular situations, the product materials rather than working to remove the waste, the beneficial reuse.”

“Like I said, my colleagues in these other programs are actively engaged and looking at the studies.

“We're still taking a look at that information and digesting that as an agency as a whole.

“I'm going to take this back. We have a weekly deputy secretary's meeting, and this is going to be the issue that I'm going to raise among my deputy secretary colleagues.

“The radiation protection program, the waste program, have a deputy secretary and the water programs have a deputy secretary to talk about what's the path forward here?

“I understand the concerns that are being raised and frankly share them.”

Well Plugging “Life Insurance”

Kurt Klapkowski, Deputy for Oil and Gas Management, provided an introduction to Tony Sanchez from One Nexus who did a presentation on his company’s well plugging “life insurance” products.

“I met Tony back in Oklahoma City in May of this year for the Interstate Oil and Gas Compact Commission meeting. We had an interesting discussion regarding financial assurance in the oil and gas industry, and I'm using that term broadly to include all oil and gas development, not necessarily conventional only,” said Klapkoski.

Klapkowski said efforts to provide financial assurance for well plugging at the end of a conventional oil and gas well’s useful life have been limited by Act 96, a 2022 law that put a moratorium on conventional bonding increases for 10 years. [Read more here]

A related rulemaking petition by the Sierra Club and other groups to the Environmental Quality Board to increase bonding amounts to the cost taxpayers pay to plug wells was turned down as a result of that law and a lawsuit was filed by those same groups in August to try to overturn the 2022 law [Read more here].

[Note: DEP issued a report in December 2022 saying the conventional oil and gas industry routinely abandons between 400 and 600 wells every year. Read more here]

“[It] struck me that the message that Tony's group is carrying around the country, not just in Pennsylvania but all oil and gas producing jurisdictions, about how we think about financial assurance and how we might be able to think about it maybe in a-- I'm going to say a more modern way-- a more effective way to try to get to the place that I think we all agreed that we need to be. Which is that operators at the end of the economic life of an oil or gas well do what they need to do in terms of the proper plugging and abandonment of that well, reclamation to the well site,” said Klapkowski.

“I wanted to get Tony in front of this group to be able to do the One Nexus presentation so you could hear what they're thinking about, what their company's working on, some of the benefits of that, and then we could have a discussion of moving this issue forward in a constructive way, honestly, instead of spending our time in front of the Commonwealth Court passing briefs back and forth,” Klapkowski said.

Tony Sanchez of One Nexus summarized his company’s product this way-- “We have developed what amounts to a life insurance policy for your well.

“So when an operator establishes coverage for the well, let's just assume they expect the plugging costs and the surface remediation and facilities removal and all that kind of stuff to be $100,000, just to use a round number.

“Earlier on in the well’s life, we could probably price that at anywhere from a 30 to 70% discount to that face. So that policy might price at about $30,000 if it's a newer well or if it's a well further along in age, upwards of 60 or $70,000.

“But One Nexus will guarantee that when it comes time to plug that well, that that capital will be available.

“So you could think about our product as a life insurance policy that travels with the well, it's attached to the well.

“In a visual sense, you could think about it as the well having a bag of money attached to it and that bag of money releases the cash when it comes time to plug the well. It's an asset that's owned by the operator.

“When the well is sold, if it's sold, coverage travels with the well. So all along the way, ultimately these wells, as we know, get bought and sold, they tend to end up with operators of lesser credit quality.”

Click Here to watch a video of a similar One Nexus overview.

Arthur Stewart, Cameron Energy, said, “You know that you have an interested party, at least in the industry members of CDAC.”

At the same time, Stewart revived the idea yet again of having a separate law regulating the conventional oil and gas industry.

“But we know it has to happen through legislation to change the bonding. And if it's going to happen through legislation, we shouldn't throw to the ash can all the work and hours that were spent however many years ago it was, three years ago, we worked on the Oil and Gas Act that made it through the House and Senate, but then was vetoed,” said Stewart. [Read more here.]

“Who would we work with in a work group to advance a whole statutory scheme that included revamping of the lines that you're talking about?”

The Committee and DEP decided to form a work group to look at the issue further.

Certified 3rd Party Inspectors

Kris Shiffer, the new Director of the Bureau of Oil and Gas Planning and Program Management, brought the concept of establishing a certified well inspector program for the Oil and Gas Program modeled on the certified storage tank inspector program DEP already operates.

Shiffer came from the Storage Tank Program.

“If you take a look at our current oil and gas program, we have about 28 oil and gas inspectors, they come and go, they get promoted, leave, new ones [come in]. It takes time to get them in place.

“At the current inspection process, the rate that we go, it would take us a little over 15, over 16 years just to visit each well just one time.

“And we've heard concerns about operators not doing what they're supposed to be doing

And the only way to really get a sense of everything, is everyone being on the same playing field. Everyone gets inspected.

[Note: DEP reported in February the owners of over 61,000 conventional oil and gas wells failed to submit their annual production and waste generation and disposal reports. This non-reporting is a routine practice by conventional operators. Read more here.]

“So, we took a look in terms of the costs and everything, and what would it take for us to really have a state workforce necessary to inspect each well, let's say, every five years.

“We would need at least another 60 staff, in terms of inspectors. That doesn't take into account the equipment. That doesn't take into account the supervisors, or anything else associated with that.

Shiffer then explained that under a certified inspector program, DEP “provides the standards of performance over them, to ensure that the reports come in.”

“The whole idea of how this is all set up, is when the certified inspector does the inspection, there's a lag time between the time that the inspection is done, and then the report comes to DEP. And the storage tank's is 60 days.

“Why 60 days? It is because we're trying to encourage the certified inspector to work with them, identify the issues, identify any problems, and then have the oil and gas operator actually correct those deficiencies before the report is then sent in.

“When it comes to DEP, we review the report. If it was noted as a violation, maybe a valve is open, maybe there's some corrosion issues, things are replaced, things are fixed, before they're even brought into our Department.

“We enter it as a violation, yes. But then it's immediately corrected. And then we move on.

“What that does is, it allows the oil gas inspectors that we currently have, without increasing that complement, to focus on the complaints, the non-compliance, and the times that they have to go out in order to verify plugging opportunities, the drilling of new wells.

“So, that's the concept that has worked well for over 27 years in the storage tank program.

“And I would encourage any of you to talk to any of our certified companies that are out there. It created a whole new industry in the storage tank world, and the same model could really be applied here to the oil gas industry as well.”

Shiffer got lots of questions from conventional operators, mostly about the added expense of paying a private inspector to inspect their wells.

One conventional operator said, “This type of program almost seems like an unnecessary cost to an operator, such as ones that are most likely in this room, where we are doing the mechanical integrity assessment four times a year, or reporting into DEP.

“I guess my point, my other half of that point is, ones that currently aren't submitting MIA [mechanical integrity report] and production reports, are they going to comply with this program?”

Another operator made the point, “Why would we agree to pay [to inspect] wells when they already inspect them, and we inspect them? That's just another cost.

“So, I'll give you an example. I understand when you're coming, you'll get to all the wells and all that. But it's not like we're making a killing here.

“Every additional cost gets $70 a barrel. I believe you're right. What happens when oil goes to $30 a barrel? $40 a barrel? That's the one burden we have, and that's a lot.”

In response, Shifter said, "I understand your point. I'm just trying to figure out ways to do this, without further burdening a marginally economic business that we're in already."

Kurt Klapkowski interrupted to say, “Six people were killed in [an explosion in Plum Borough] Allegheny County in August.

“The first question that was asked, of the oil and gas facilities that were around that tragic location, was, "DEP, you haven't inspected these wells since 2015. Where the hell have you been?" There are dead people here, because you're not out here checking these wells.”

One conventional operator responded, “Well, there's people dying every day from smoking. It's still the same perspective. There's a real question there.”

Arthur Stewart, Cameron Energy, added, “We have to be sensitive to that kind of criticism that we legitimately received in that circumstance. We can't just blow that off. I hear you loud and clear on that.”

He added, “I think at some point, we have to agree that it's going to take a DEP person in a DEP uniform to kick their butts. And help us make the industry better. You don't have the authority to do that.

“Private inspectors are never going to get out there, because nobody's paying them to get out.”

When asked if conventional operators could become certified inspectors, Shiffer said there would be conflict of interest provisions in the program where operators could not inspect their own wells.

The Committee and DEP agreed to keep talking about the proposal.

Public Comment Period

Barbara Laxon and Laurie Barr provided comments to the Committee during the open Public Comment Period on a situation involving leaking production wastewater tanks in Bradford, McKean County and a concern about DEP not using federal well plugging funds to plug wells causing health and environmental problems.

Laxon described an incident that started on August 22, 2023 when she noticed what appeared to be wastewater running from a hose attached to a tank battery on Leigh Street in Bradford operated by Willard M. Cline. [Read more here.]

She and Laurie developed a report on the incident and sent it to DEP expressing their concern about the spill, the odor of oil in the area and the methods used to attempt to remediate the spill area.

Laurie Barr, from Save Our Streams PA, said DEP should be spending the new federal well plugging funds to plug wells that are causing problems

She pointed out that 96% of the wells being plugged with the first round of federal funding did not have any environmental impacts and 89% did not have any human impacts, according to DEP’s federal Well Plugging Program Well Tracking webpage.

For more available information, visit DCED’s Grade Crude [Oil] Development Advisory Council webpage. Questions should be directed to Adam Walters 717-214-6548, adwalters@pa.gov.

Articles Related To Agenda Items:

-- Gov. Wolf Vetoes Republican Bill Rolling Back Environmental Protection Standards For Conventional Oil & Gas Drilling [11.30.20]

-- DEP Report Finds: Conventional Oil & Gas Drillers Routinely Abandon Wells; Fail To Report How Millions Of Gallons Of Waste Is Disposed; And Non-Compliance Is An ‘Acceptable Norm’ [12.29.22]

-- Conventional Oil & Gas Well Owners Failed To File Annual Production/Waste Generation Reports For 61,655 Wells; Attorney General Continues Investigation Of Road Dumping Wastewater [2.22.23]

-- University Of Pittsburgh School Of Public Health Studies Find Shale Gas Wells Can Make Asthma Worse; Children Have An Increased Chance Of Developing Lymphoma Cancer; Slightly Lower Birth Weights [8.15.23]

-- New Penn State Study: Brine Water Pumped From Played-Out Conventional Oil & Gas Wells And Used As Dust Suppressants, Winter Road Treatments Exceed Environmental, Health Standards, Just Like Conventional Oil & Gas Brine Water [8.2.23]

-- Independent Regulatory Review Commission Approves Final Emergency Regs Setting VOC/Methane Emission Limits On Conventional Oil/Gas Operations [4.20.23]

-- Marcellus Drilling News: 3 Conventional Oil & Gas Industry Groups File Lawsuit To Block Rule Limiting VOC/Methane Emissions From Conventional Oil & Gas Facilities [12.6.22]

-- Lawsuit Filed Against General Assembly, Governor Challenges Constitutionality Of Law Preventing DEP From Protecting Public Health, Environment From Harm Caused By Abandoning Conventional Oil & Gas Wells [8.24.23]

PA Oil & Gas Industry Public Notice Dashboards:

-- Pennsylvania Oil & Gas Weekly Compliance Dashboard - October 7 to 13 - More Abandoned Conventional Wells; Spills; Venting Gas; Emergency Well Plugging [PaEN]

-- PA Oil & Gas Industrial Facilities: Permit Notices/Opportunities To Comment - October 14 [PaEN]