Even as Pennsylvania prepares to tap millions in federal money to plug roughly 300 of the state’s many abandoned oil and gas wells, drillers this year have already tried to walk away from another 354.
The abandonments are not a fluke of oil prices or market shifts.
From 2017 to 2021, state regulators sent more than 3,000 notices to companies for attempting to abandon oil and gas wells in Pennsylvania without plugging them.
This potential new wave of abandoned wells highlights the hydra-like nature of well abandonment in the state, and worries environmentalists about what they might eventually see throughout the Appalachian region. While Congress and the Biden administration committed $4.7 billion last year to clean up abandoned wells across the country, that significant influx of money could fall short in the mountainous region if states don’t stop drillers from walking away when wells reach the end of their lucrative lives (Energywire, Nov. 23, 2021).
“The federal money that is coming through the federal bipartisan infrastructure law is a godsend,” said explained David Hess, who worked in leadership at the Pennsylvania Department of Environmental Protection for a decade, including as secretary in 2001 and 2002. “But if we don’t stem this continuing flood of new well abandonment somehow, it’s going to be all for naught.”
Appalachia is home to roughly half of the country’s orphans, and a high number of aging wells are located in those states as well, signaling what could be the next chapter of well abandonment.
“Wells enter the orphan rolls all the time,” said Adam Peltz, a senior attorney for the Environmental Defense Fund who tracks orphan well issues. Peltz said that the most concrete evidence of the problem is in Pennsylvania, but he remains concerned about it happening in other states in the region.
But changing the way states manage oil and gas in Appalachia can be an uphill battle, with many lawmakers loyal to the long-standing industry and deeply opposed to federal intervention in how states manage oil companies.
In Pennsylvania, conservative lawmakers from the natural gas-rich western region pushed through a law earlier this year blocking the state bureaucracy for 10 years from increasing bonding on some wells. That bonding is the financial insurance drillers lay down to ensure cleanup doesn’t fall to the taxpayers when companies go bankrupt or refuse to plug wells.
Pennsylvania, where there are more than 8,000 known orphans, doesn’t require bonding on wells drilled before 1985, and critics of the new law say it sets bonding requirements that aren’t enough to cover cleanup costs.
The administration of Democratic Gov. Tom Wolf — which allowed the new restriction to become law — said that it is looking for other ways to ensure oil companies don’t abandon wells.
New orphans are not the norm in drilling across the U.S., where oil and gas companies plug or sell wells as they go, and so-called bad actor companies are blamed for the new wells that end up becoming the taxpayers’ problem.
Cole Ramsey, American Petroleum Institute’s vice president of upstream policy, defended industry’s commitment to responsible development, saying states have policies in place that make it difficult for companies to abandon wells. Those state approaches are often being updated to make abandonment less likely, and API recently updated its own decommissioning standards to help “ensure that American energy is produced responsibly from start to finish.”
“Our industry is taking action every day to address the permanent closure of natural gas and oil wells and the remediation of well sites in accordance with applicable federal and state laws,” Ramsey said in an email.
Still, the federal orphan well program designed by the infrastructure law doesn’t demand state regulator improvement as a condition for a majority of the funding, a reflection of work among many advocates to make the program as bipartisan as possible.
Even as Biden administration officials like Interior Secretary Deb Haaland tout the potential of this money to help revitalize oil communities littered with orphaned wells, the infrastructure law only gives her agency some authority to crack down on states.
“It’s a head-scratcher, the public funds going toward … what should be private costs ends up being a fossil fuel subsidy,” said Hollin Kretzmann, an attorney at the Center for Biological Diversity’s Climate Law Institute. “It comes at the public’s expense, and it comes without any assurances that this money is going to be used effectively and equitably.”
A lot of money
The federal orphan funding amounts to a flood of dollars for Appalachia and other oil states over a period of years that few are brushing off as anything less than historic.
The $560 million in initial grants Interior awarded this year — with $100 destined for the four Appalachian states of Kentucky, Ohio, Pennsylvania and West Virginia alone — is meant to go after the most high-risk wells and help states bolster their plugging programs to be ready for a spate of contracts to fill and seal wells.
Additionally, two later cash infusions are also significant. There is $2 billion available in “formula grants,” with some funding expected by mid-2023, that depend on the number of wells in a state, estimated costs to plug and the number of oil jobs lost in the state. An additional $1.5 billion is available in “performance grants.” That performance money will be contingent on changes to state laws, regulations and practices to reduce orphans in the future.
Peltz said in most of Appalachia, where funding streams to plug orphan wells were “radically insignificant,” the federal cash is a “game-changer.”
“In Pennsylvania, West Virginia, Kentucky, the money flowing through this grant represents like a five- or even tenfold increase in the amount of money available to plug the wells,” he said. “A lot of these wells are basically in people’s backyards, so it’s really going to make a difference.”
The proliferation of forgotten or left-behind wells across the country — which could number as many as 3 million, according to EPA — is a potential environmental hazard in many communities, where pollution can leak into groundwater and uncapped wells release the potent greenhouse gas methane into the atmosphere. Pumping in concrete and sealing off the abandoned holes in the ground can reduce that deadly climate threat.
Across the country, the orphan well lists have gotten longer since the passage of the bipartisan infrastructure law, with states now incentivized to account for their abandoned wells to secure federal funds.
The count of documented orphans climbed from just under 82,000 in September of last year to more than 123,000 in April, according to research published in Environmental Science and Technology by EDF and McGill University. That study estimated also that the number of undocumented orphans could be as high as 1 million.
Mitch Landrieu, White House senior adviser and infrastructure coordinator, said cleaning up legacy oil infrastructure would spur economic development in areas “left behind” by the industry, during a recent Instagram Live appearance with Haaland.
“One of the saddest things that’s happened in this country is that we turn communities into trash because these corporations went in there and they left all of this stuff behind and then everybody forgot, as though somehow there was no value left there,” he said (E&E News PM, Oct. 18).
But as the first plugging contracts are inked, states are also starting to attract criticism from environmental groups and other watchdogs about how they are spending this new flow of public monies, for their heavy reliance on oil and gas companies to do the plugging work, and for lax oversight to ensure wells are plugged to standard.
All told, the four Appalachian states could have as much as $1 billion at their disposal from the federal funding, according to a review by the Ohio River Valley Institute.
So far, each state has approached the federal dollars in a different way, and already sparked some pushback from environmental organizations for letting the money pass through to oil and gas companies.
Ohio is plugging up to 320 wells with initial funding, out of 20,000 known orphans. The Ohio Department of Natural Resources estimates the state could spend up to $634 million in combined federal and state funds over the next 13 years plugging wells.
Kentucky may be able to plug 1,200 wells with the first tranche of funds, due to cheaper costs. It’s also staffing up, adding up to 20 new positions. Pennsylvania is aiming at more than 300 wells plugged with the initial grant money, as well as hiring as many as 44 new people in the coming years. West Virginia says it will plug 160 wells.
The range in plugging expectations boils down to the average cost per well, which is shaped by the difficulty of the local geography and the complexity of the subsurface. Kentucky, for example, has said it anticipates the average well will cost $20,000 to plug and reclaim, while West Virginia expects averages as high as $157,000, according to an Ohio River Valley Institute analysis.
But as states begin to release funds in the weeks and months ahead, observers are flagging concerns about how much funding builds in-house staff and how much is passed through to contractors in the oil business.
Ohio, along with West Virginia, is planning to hire contractors to do much of the well planning and plugging, a detail that some advocates question, because it means oil and gas companies are making profits off historic — and sometimes recent — bad behavior by operators.
“It’s like the fox guarding the henhouse,” said Ted Boettner, a senior researcher at the Ohio River Valley Institute who tracks orphan wells. He said giving oil companies the planning and plugging responsibility will mean costs are higher and quality poorer.
“You can plug a hell of a lot more wells if you’re not padding profits,” he said.
Stephanie O’Grady, a spokesperson for the oil and gas division at the Ohio Department of Natural Resources, defended the state’s actions.
“The division’s model is to create a path for all business models and all sizes of companies to get involved with completing this work in an effort to get as much done as soon as possible,” she said.
Ohio is still doing some of the planning work for well plugging. But it has added an additional layer of firms to serve as construction managers and bidding out plugging contracts. It also relaunched its “pass through” program where private landowners with orphan wells can access state-certified contractors to have wells plugged, paid for by the state.
Ohio has a 26-person team for its orphan well program as a result of increasing staffing in recent years. It may hire additional employees with the federal funding, O’Grady said.
West Virginia is also relying on contractors, said Terry Fletcher, a spokesperson for the Department of Environmental Protection in West Virginia. Fletcher said state law requires use of contractors, alongside a competitive bidding process for abandoned well plugging. But the department’s staff — the state program employees five full-time employees, and Fletcher said it has no plans to hire more — “expect to inspect every site,” to ensure contractors have plugged the wells to standard, Fletcher said.
Boettner said there’s reason to raise questions about states’ approaches. Appalachia’s record on orphan well cleanup is poor, he said.
“We’ve always left it up to states,” he said of managing orphan wells. “The reason we have an orphan well crisis is precisely because of the states.”
Old wells, new orphans?
Critics of state management say Pennsylvania’s already given them reason to doubt.
The state’s regulators have sent more than 3,000 notices to companies for attempting to abandon “marginal” wells — those with low production that are often near the end of life — without plugging them since 2017, according to the Democratic governor’s office. These potential new abandonments are being flagged by environmental groups, worried they will flood orphan well counts.
“Marginal wells are the highest risk for becoming future orphans. It’s not just the next chapter. It’s happening right this instant,” said Peltz with EDF.
Pennsylvania’s recent actions on bonding laws show that even with millions of federal dollars on the line, states aren’t necessarily eager to change rules regulating oil and gas.
The state Legislature passed a law in July freezing bonding requirements for conventional oil and gas wells drilled after 1985 for 10 years. Those are the wells drilled vertically into the ground, while newer practices of horizontal drilling in Pennsylvania have different rules for development.
The Legislature’s move was seen as a firm rejection of environmental groups’ pitch to require drillers to put up more money to cover the eventual cleanup if they walk away at the end of the wells’ life.
The bill’s backer, Pennsylvania state Rep. Martin Causer, a Republican, was not available for an interview for this story. State Senate Majority Leader Kim Ward, a Republican representing a historic oil and gas region outside Pittsburgh, did not respond to multiple requests for comment.
All wells drilled in Pennsylvania prior to 1985 — which are most of the state’s orphans — require no bonding. Bonding rates for conventional wells were written into law in 1984, but environmental groups say those bonds fall short of covering cleanup costs when companies walk away or go defunct. Under the new law, bonding can’t be increased for 10 years, after which bonding can only be changed by lawmakers.
This state-level bonding fight — which played out amid an internal budgeting deal-making between Wolf, the Democratic governor, and Republican lawmakers who lead the Legislature — could pose a problem for the state’s future plans to update regulations, changes that may be needed to get performance grant money.
But while the bonding issue has environmental groups and government watchdogs concerned about being unable to prevent new well abandonment, it’s not the issue that has caught the notice of federal regulators at the Interior Department.
The law approved by the Republican-controlled state Legislature also included provisions to set aside part of the federal orphan well funding money for a plugging program with fewer restrictions
That’s a problem, because the federal orphan well funding requires strict provisions on workers’ wages and the sourcing of parts, which was an effort for the funds to guarantee prevailing wages for workers and American-made sourcing for various construction materials.
Interior warned Pennsylvaniain a letter Sept. 19that the new state law could make it difficult for Pennsylvania to meet federal standards, jeopardizing more than $100 million in funding that Pennsylvania is eligible for this year and into 2023.
“The consistent implementation of these provisions across states is vital to meeting Congress’ goals and to complying with the law’s text,” wrote Winnie Stachelberg, the department’s infrastructure coordinator, adding that Interior is “fully committed” to ensuring states comply with the law.
While the the state’s initial $25 million grant wasn’t blocked, it’s not clear what happens next.
The Interior Department declined to comment. Pennsylvania’s Department of Environmental Protection has not yet issued a reply to Interior, Jamar Thrasher, a DEP spokesperson, said in an email.
Thrasher said the Wolf administration is “committed to working with our partners in the General Assembly and the federal government to ensure that Pennsylvania will be in a position to receive the maximum possible funding under the [Infrastructure Investment and Jobs Act].”
But Wolf, who will leave office in January, remains at odds with state lawmakers over oil and gas regulations. The governor had refused to sign the bill restricting bonding changes but still allowed it to pass into law in a deal to advance the state’s budget and secure an education spending increase, according to Capital and Main, a website that often focuses on environmental issues and government.
But Wolf wrote in a July 30 note explaining his actions that now is an“an appropriate occasion” to assess whether Pennsylvania is doing enough to “ensure that this industry is being a good environmental steward by preventing the abandonment of wells and meeting its obligations as a prudent trustee of Pennsylvania’s public natural resources for current and future generations.”
The governor said Pennsylvania operators have failed to report production on 36,000 conventional oil wells — a sign that some of those wells are at risk of being orphaned.
With higher bonding off the table due to the new law, the Wolf administration is looking at other options to toughen oversight of conventional drilling companies, such as additional scrutiny when wells permits are passed from one company to another that may have less financial strength, according to the state Department of Environmental Protection.
The department is also able to deny new permits due to previous noncompliance and is looking closely at “inactive status” requests from drillers, which “operators sometimes use to cease producing wells without plugging them and reclaiming the well site,” Thrasher said in an email.
The Pennsylvania Independent Oil & Gas Association and the Pennsylvania Petroleum Association did not respond to requests for comment on this story.
Hess, the former Pennsylvania regulator who now runs a blog on state environmental issues, said a “bad boys’ mentality” pervades the state’s conventional oil and gas culture, and that the abandonment happening in recent years is going to continue without state action.
“It’s part of their business model,” he said. “They drill wells, produce for a couple years, and then many of those wells get abandoned.”