Agreement secures historic bonding for abandoned oil and gas wells
DEP Newsroom
3/11/2019
“This agreement is a win for the commonwealth because it ensures
that over 1,400 oil and gas wells are properly maintained or plugged and
that these operators, not Pennsylvania citizens, bear the full cost of
operating or plugging them,” said DEP Secretary Patrick McDonnell.
Diversified and Alliance have agreed to a $7 million surety bond
for the wells covered by this settlement, plus an additional $20,000 to
$30,000 bond for each abandoned or nonproducing oil and gas well
acquired in the future. Under current law, adopted in 2012 as an
amendment to Pennsylvania's Fiscal Code, conventional oil and gas
operators such as Diversified and Alliance are only required to secure
$25,000 of blanket bonding to cover all of their wells, which in the
case of the two companies, amounts to bonding of approximately $2 per
well. The performance bonding negotiated in this settlement is closer to
actual plugging costs that can begin around $20,000 per well and go
much higher depending on well and site conditions.
With this Consent Order and Agreement (COA) in place, DEP has
approved pending transfers of non-producing mostly conventional oil and
gas wells to Alliance and Diversified. The COA allows some wells to be
put back into production, so long as minimum production levels are
maintained, and sets a plugging and restoration schedule for
non-producing wells of 15 years while prioritizing the plugging of wells
that pose health, safety, and/or environmental threats. The COA may be
extended for an additional 5 years subject to additional bonding of
$30,000 per well for wells to be plugged during the extension.
The Oil and Gas Act requires owners and operators to plug wells upon abandonment. In July 2018, DEP issued orders
to Alliance, XTO Energy Inc. (XTO), and CNX Gas Company LLC (CNX) to
plug 1,058 abandoned oil and gas wells across the state—based on
required self-reporting of well production data—and held pending
transfers of said wells. Those wells, along with wells that Diversified
also reported as non-producing, make up the approximately 1400 wells
specifically addressed in in the COA. Alliance, XTO, and CNX appealed
DEP’s orders to the Pennsylvania Environmental Hearing Board.
Pennsylvania has over 8,000 orphaned and abandoned oil and gas wells
on its inventory and hundreds of thousands of legacy wells may be
unaccounted for, posing a major financial liability and environmental,
public health, and safety risk.
The signed COA document can be viewed at http://files.dep.state.pa.us/Newsroom/NewsroomPortalFiles/DiversifiedCOA.PDF.
