PITTSBURGH (TNS) — State and national environmental groups are petitioning Pennsylvania’s environmental rule-making board to start requiring oil and gas companies to set aside enough money to plug their wells when they are tapped out.
The Sierra Club, joined by five other organizations, is prompting the Environmental Quality Board to make oil and gas companies pay bonds equal to the full cost of decommissioning their wells.
”Current bond amounts are so low companies are incentivized to go out of business instead of cleaning up,” said Kelsey Krepps, a senior campaign representative with the Sierra Club.
”This is a very commonsense fix to an issue that is proliferating within Pennsylvania — and it’s taxpayers who are dealing with it.”
Pennsylvania is already facing a potential $6.6 billion cleanup cost for an estimated 200,000 oil and gas wells that were drilled over a century and left behind, unsealed.
Raising bonds is meant to keep that from happening again as active wells age or as financially precarious operators go bankrupt.
Bonds act as a form of insurance by requiring oil and gas companies to demonstrate that they can afford to plug their wells before they start drilling and by protecting the state from cleanup costs if they fail.
For unconventional wells tapping into the Marcellus and other deep shale formations, the groups are seeking to raise bonds from $10,000 or less per well to $83,000 per well.
For conventional oil and gas wells, which are generally shallower and older, the groups are asking that bonds be raised to $38,000 per well. The current rate is $2,500 per well or a blanket bond of $25,000 to cover all of a company’s wells.
The higher bonds would apply to future wells and about 66,000 existing wells that were drilled beginning in 1985. About 12,000 of those are shale wells, and the rest are conventional wells.
Wells are considered abandoned under state law and should be plugged if they have not produced oil or gas for a year.
So far, abandonments have not been an issue with shale companies, whose wells are relatively new. But conventional well operators have abandoned thousands of wells to the state in just the past five years.
State law allows the environmental rule-making board to adjust bonding levels every two years to reflect current plugging costs, but rates have remained the same since they were established for conventional wells in 1985 and for shale wells in 2012.
Even modest efforts to change the low bonding amounts in Pennsylvania have been rolled back by the state Legislature.
The 1980s-era law that required oil and gas operators to start posting bonds when they drilled new wells initially required companies to secure bonds or make phased payments to cover all of their existing wells. But in the 1990s, the Legislature scrapped that part of the program and regulators had to give the money back to companies for wells drilled before 1985.
{p class=”krtText”}A 2012 law written to strengthen standards for shale gas wells raised bond amounts for all well types. But a budget amendment signed into law months later reversed course and exempted conventional wells from the higher bonds.
{p class=”krtText”}Fearing a wave of abandonments of conventional wells, regulators have vowed to evaluate raising the required bond payments, but they have not yet taken action.
{p class=”krtText”}Jamar Thrasher, a spokesman for the state Department of Environmental Protection, said the agency is not formally developing its own proposal for changing bonding levels at this time.
{p class=”krtText”}He said it “would be premature to comment on the merits of these petitions.”
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