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Post-Gazette Editorial: Oil & Gas Companies Need Greater Incentives To Plug Their Old Wells - Raise Bond Rates Upfront For Plugging

This editorial first appeared in the Pittsburgh Post-Gazette January 17, 2025--

A legal quagmire between West Virginia landowners and Diversified Energy Corp., a company focused on buying up and profiting from old oil and gas wells, reveals a much larger problem for Pennsylvania and beyond.

Pennsylvania must get serious about addressing existing uncapped wells, and preventing new ones from appearing.

In order to keep from leaking environmental hazards into the air and groundwater, old oil and gas wells must be properly capped, a process whose costs vary widely depending on the age, depth and condition of the well.

An expert witness in the West Virginia lawsuit tacked his firm’s average at $80,000 per well.

Yet current bond rates — or the upfront deposit drillers forfeit if they abandon their well without capping them — are only $2,500.

In other words, drillers have no incentive to clean up after themselves.

Unfortunately, Harrisburg tied its own hands on this issue in 2022, when a budget compromise item insisted on by legislative Republicans locked in these bond prices for the next decade.

This rule must be revisited before Pennsylvania’s already-massive abandoned well problem spirals even further out of control.

Before its passage, bonding levels could be adjusted every two years — but even then, bonds weren’t raised once since they were established in 1985.

The state is also on the hook for capping hundreds of thousands of orphaned wells across the state — that is, disused wells where ownership cannot be conclusively established.

Oil and gas companies, meanwhile, are going further and further to offload their liabilities, and therefore responsibilities, according to plaintiffs in the lawsuit.

The defendant, Diversified Energy Corp., collects mature wells across Pennsylvania, West Virginia, and other states from operators like Pittsburgh-based EQT with the intent to squeeze the last remaining fuels out of them, then decommission them over long time horizons.

This provides an advantage for both companies: EQT benefits from the wells’ front-loaded production peaks and then sheds the responsibility of capping them, while Diversified gets to profit from wells without spending the capital to drill them.

But the West Virginia landowners who sued Diversified have argued that the company never had enough money to properly and safely decommission the wells they acquired.

State governments, along with Washington, have negotiated with Diversified to set a required capping schedule, but the company has a tricky piece of leverage:

If the governments require them to do too much, the company could go bankrupt, leaving the rest of its assets in the hands of — you guessed it — state governments to clean up.

The lawsuit is complex, and the details showing whether Diversified actually intended to fulfill its capping promises are hard to parse.

But the larger issue remains: What can regulators do to ensure companies don’t abandon their wells, especially with bonds locked into unreasonable prices for years?

The obvious thing to do is to unlock them.

Yes, higher bond prices would add to the upfront cost of drilling in the Commonwealth, but it’s not a frivolous fee:

It’s an assurance that the companies that profit from Pennsylvania fossil fuels won’t leave the state (or some third-party company equally incentivized to shirk its duties) with the expensive task of remediating thousands upon thousands of environmental hazards.

It’s already all but impossible to catch up with existing uncapped wells — the state has every reason to ensure that number doesn’t keep rising.

(Photos: Diversified Production LLC abandoned shale gas wells.)

What The Oil & Gas Leaves Behind In PA:

-- What The Shale Gas Industry Is Leaving Behind: Diversified Production LLC Starts 2025 With 11 Violations For Abandoning, Not Plugging Shale Gas Wells [PaEN]

-- What The Conventional Oil & Gas Industry Is Leaving Behind: Abandoned Conventional Oil & Gas Wells On Federal Lands - Shenango River Lake, Allegheny National Forest [PaEN]

-- The Energy Age Blog: What The Shale Gas Industry Is Leaving Behind In Pennsylvania

-- PA Oil & Gas Weekly Compliance Dashboard - Jan. 11 to 17 - More Abandoned Shale Gas, Than Conventional Wells So Far In 2025; Failed Act 2 Cleanup; Acid Forming Rock; Expired Permits [PaEN]

-- What The Shale Gas Industry Is Leaving Behind: DEP: Diversified Production LLC Failed To Plug 2 Abandoned Shale Gas Wells For 42 Months + At Least 9 Other Shale Gas Wells Abandoned [PaEN]

-- What The Shale Gas Industry Is Leaving Behind: DEP: Nucomer Energy LLC Fails To Restore Shale Gas Well Pad, Water Impoundment In Forest County For More Than 12 Years After Drilling Was Completed [PaEN]

-- What The Shale Gas Industry Is Leaving Behind: DEP Issues 10 Violations To Big Dog Energy, LLC, Diversified Production LLC For Abandoning Shale Gas Wells; Violations For Shale Gas Abandonments More Than Doubled In 2024 [PaEN]

-- DEP: Oil & Gas Wells Plugged In Last 6 Years: 2,941 Conventional Wells, 325 Paid By Taxpayers; 460 Shale Gas Wells Were Plugged By Well Owners [PaEN]

PA Oil & Gas Industry Public Notice Dashboards: