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Rep. Vitali Introduces Bill To Restore DEP Authority To Increase Conventional Oil & Gas Well Plugging Bonds To Prevent Hundreds Of New Well Abandonments A Year

On January 27, Rep. Greg Vitali (D-Delaware) introduced House Bill 364 which would restore the Environmental Quality Board’s authority to increase conventional oil and gas well plugging bonds to help prevent hundreds of new well abandonments a year.

The bill, however, does not repeal the provision in existing law that exempts wells drilled before April 18, 1985 (which is most conventional wells) from having to submit any plugging bonds.

The bill includes a provision directing DEP to study conventional well abandonment and its costs and make recommendations on alternative financial assurance mechanisms and their applicability to pre April 18, 1985 conventional wells.

he ability to increase bonding amounts, along with aggressive use of administrative and enforcement tools, could help stem the tide of the now routine conventional well abandonment.

In fact, a spokesperson for the conventional operators-- Arthur Stewart, head of Cameron Energy and representing the PA Grade Crude Oil Coalition-- told the House Environmental Committee at an April 24 hearing--

“If I were in the shoes of the head of the DEP, I would go after the scofflaws, and I would take their money.” Read more here.

In 2024, DEP issued 860 new or continued violations to conventional oil and gas well owners for abandoning and not plugging their wells. [Read more here] In 2023, DEP issued 512 violations to conventional well owners for abandonment.

[There were also a record number of shale gas well abandonment violations in 2024-- 47 violations were issued or continued to 12 shale gas well owners. [Read more here] In 2023, DEP issued or continued 20 violations to 10 shale gas well owners for abandoning and not plugging their wells. Read more here.

[But, that isn’t the submit of this legislation and the Environmental Quality Board has the authority to increase bond amounts for shale gas wells, but so far has not.]

In April 2023, the House Environmental Committee held a hearing on conventional oil and gas well abandonment and the need to find ways to address this growing problem.

The conventional industry opposed any reinstatement of the Environmental Quality Board’s authority to increase bond amounts. Read more here.

Similar legislation was introduced in 2023-- House Bill 962-- and was reported out of Committee, but saw no further action in the House.

Rep. Greg Vitali (D-Delaware) serves as Majority Chair of the House Environmental and Natural Resource Protection Committee and can be contacted by calling 717-787-7647 or sending email to: gvitali@pahouse.net.

Background

As part of the July 2022 budget settlement, the General Assembly passed and Gov. Wolf signed into law legislation that took away the authority of DEP to review the adequacy of conventional oil and gas well plugging bonding amounts for 10 years. Read more here.

The legislation was designed to head off a rulemaking petition from the Sierra Club, Clean Air Council and other groups accepted for study by the Environmental Quality Board in November 2021 to increase the well plugging bonding amounts for both conventional oil and gas and unconventional shale gas drillers to what it now costs taxpayers to plug a well when operators walk away from their obligations. Read more here.

The Post-Gazette calculated DEP has about $15 per well on hand in well plugging bonds to plug all the active conventional wells-- somewhere over 90,545.

DEP reported in December that between 2017 and 2021, conventional operators abandoned without plugging 2,246 wells-- 561 a year, on average. Read more here.

Under the new federally-funded conventional well plugging program, Pennsylvania is set to receive nearly $400 million over the next 15 years. DEP said it would plug about 249 wells the first year. Read more here.

You can do the math, we’ll never catch up, unless changes are made in the practices used by conventional oil and gas operators.

On April 24, the Environmental Defense Fund announced the results of a new study that found 55,000 oil and gas wells owned by operators in Pennsylvania are at high risk of becoming abandoned leaving state taxpayers holding the bag for $3.7 billion in well plugging and cleanup costs.

The overwhelming majority of these wells are conventional oil and gas wells.

“There's all the incentive in the world for those operators to walk away,” said Adam Peltz, EDF Senior Attorney for Energy Transition. “If they're bankruptcy-proof, then the state can't get them and they save all the money unplugging.”

The study also found another 51,000 wells owned by solvent operators are at risk of being transferred to new financially unhealthy companies because the net present value of the wells is negative. The state taxpayer liability for these wells is an estimated $3.5 billion.

“Solvent operators are not going to orphan [abandon] the wells because they're solvent. And if you abandon a well and you're solvent, someone's going to come get you,” said Peltz. “But what those operators are incentivized to do is transfer the wells down the value chain until they get to a low solvency entity that might then go bankrupt.”

Only 11,500 wells were determined to be of no risk of being abandoned in Pennsylvania, according to the EDF study.

There are a total of 117,500 active or idle [inactive] conventional and unconventional oil and gas wells in the state, according to EDF.

The study was based on a review of the net present value of the wells and the relative insolvency and fiscal health of the operators.

Resource Links:

-- House Hearing: Let’s Work Together To Make Conventional Oil & Gas Industry Practices Cleaner, Respect Property Rights, Protect Taxpayers And Prevent New Abandoned Wells [PaEN]

-- EDF: Pennsylvania Has 55,000 Oil/Gas Wells At High Risk Of Being Abandoned; 51,000 Wells At Risk Of Being Transferred To Low Solvency Owners; Current Conventional Well Owners Abandon 561 Wells A Year, On Average [PaEN]

-- Rep. Vitali Introduces Bill To Ban Road Dumping Millions Of Gallons Of Conventional Oil & Gas Wastewater, Supported By The Shapiro Administration [PaEN]

PA Oil & Gas Industry Public Notice Dashboards:

-- PA Oil & Gas Industrial Facilities: Permit Notices, Opportunities To Comment - February 1 [PaEN]

-- DEP Posted 89 Pages Of Permit-Related Notices In February 1 PA Bulletin [PaEN]

Related Articles This Week - Natural Gas:

-- PUC: Calendar Year 2024 Act 13 Drilling Impact Fees To Remain Same As 2023; Dramatic Decline In Financial Support From Shale Gas Industry Continues [PaEN]

-- Range Resources And MarkWest Liberty Midstream File Legal Challenges To The 2,500 Foot Shale Gas Facility Setback Ordinance Adopted By Cecil Township, Washington County [PaEN]

-- Conventional Oil & Gas Industry Compliance With 2022 DEP Methane Reduction Regulation Put On Hold Pending Outcome Of Litigation [PaEN]

-- DEP Releases 2 Contracts For Bidding In Next Round Of Conventional Oil & Gas Well Plugging: 12 Wells In Kinzua State Park, McKean County, 18 Wells In Warren County [PaEN]

-- Rep. Vitali Introduces Bill To Restore DEP Authority To Increase Conventional Oil & Gas Well Plugging Bonds To Prevent Hundreds Of New Well Abandonments A Year [PaEN]

-- PA Republican Senator To Introduce Bill Suspending State Taxes On Natural Gas Producers; Cut DEP Permit Fees; End Drilling Moratorium On DCNR Lands; Exempt Coal-Fired Power Plants From EPA Regulations [PaEN]

-- DEP Invites Comments At March 5 Hearing On Title V RACT 3 Air Quality Permit For Hazleton Generation Natural Gas Power Plant In Luzerne County [PaEN]

-- Gov. Shapiro Proposes ‘Lightning’ Energy Plan To Increase & Diversify Energy Generation; Reduce Climate Changing Pollution; Lower Energy Costs; Create Jobs [PaEN]

-- Gov. Shapiro Reaches Agreement With PJM To Prevent Unnecessary Price Hikes And Save Consumers Over $21 Billion On Utility Bills [PaEN]

-- PA Senate Republican Leader: ‘Every Consumer Of Electricity In This Commonwealth Is Going To Pay More;’ ‘What You’re Going To Face Is Going To Be Really Unpleasant’ [PaEN]

-- Republicans On PA Senate Environmental Committee Report Out Bills To Eliminate Carbon Pollution Reduction Program Covering Power Plants, Establish Independent Energy Office [PaEN]

-- Inquirer: President Wants US To Be ‘Leading’ Producer Of Non-Fuel Minerals; Here’s How PA Could Help; Rare Earth Elements Could Be More Important Than Expansion Of Fracking [PDF of Article]

NewsClips:

-- The Energy Age Blog: Range Resources & MarkWest Liberty Midstream File Legal Challenges Against 2,500 Foot Shale Gas Setback Ordinance In Cecil Twp., Washington County

-- The Energy Age Blog: EQT Should Plug These Abandoned Conventional Wells In Peters Twp., Washington County Before Fracking From Mingo Well Pad

-- PennLive Guest Essay: Natural Gas Industry Operations [Wastewater Pipelines] Are Strongly Regulated In PA - By Marcellus Shale Gas Coalition [Shale Gas Wastewater Pipelines are NOT regulated by the PUC for construction, operations and safety. Read more here. ]

-- Inquirer: President Wants US To Be ‘Leading’ Producer Of Non-Fuel Minerals; Here’s How PA Could Help; Rare Earth Elements Could Be More Important Than Expansion Of Fracking [PDF of Article]

-- NYT: Oil, Gas Companies Embrace New President, But Not ‘Drill, Baby, Drill’ [No Plans To Increase Production Unless Prices Rise Significantly]

-- US EIA: Electric Power Sector Has Driven Rising PA Natural Gas Consumption Since 2013

-- UGI Gas Division Filed A Request With PUC To Increase Residential Gas Rates By 10.8%

-- Scranton Times: UGI Seeking To Raise Natural Gas Rates 10.8% For Residential Customers

-- Utility Dive: Calpine To Sell 2 PA Gas Power Plants To Avoid Market Power Concerns From Constellation Merger

-- Reuters: Diversified Energy To Buy Permian Basin Oil & Gas Producer Maverick In $1.3 Billion Deal [Diversified Specializes In Buying Old Wells]

-- Bloomberg: US Natural Gas Producers Likely To Gain Asian Market Share [China Buying 50% More US LNG, Cap Price At $10 - Currently $3.89]

-- Bloomberg: Europe’s Gas Traders Now Fear Summer More Than Winter

-- Reuters: Venture Global Given FERC OK To Start Up Another Louisiana LNG Gas Export Plant

-- Reuters: US EIA Sees 7% Higher US Wholesale Power Prices In 2025; Residential Increase Of 2%

-- Wall Street Journal: New Federal Administration Memo Orders Agencies To Broadly Pause All Federal Grants, Loans, Financial Assistance Programs Pending Review [PDF of Article]