HARRISBURG — As Pennsylvania manages the complexities of plugging hundreds of thousands of orphaned and abandoned oil and gas wells, the president of a drilling company warned that raising the bond costs on permits would devastate small businesses in the industry.
Bonds for conventional wells cost $2,500 each. A blanket bond starts at $25,000 to cover an operation’s well fleet. The costs are frozen for 10 years by a law adopted in 2022. There is pending legislation that could override that change, allowing the bond limits to be revised every two years.
The intent of the bond is to hold drillers accountable to fill and seal wells before they’re abandoned. (Orphaned is the term used to describe wells abandoned before 1985 when old wells were legally required to be registered.)
However, the current bond cost doesn’t approach the varied averages to plug wells cited at a hearing held Monday by the House Environmental Resources & Energy Committee — $33,000 is a historical average provided by Department of Environmental Protection, $68,000 is a revised average calculated in 2021 by the department, $100,000 is the cost paid on average for the work to plug wells using funding through the federal Infrastructure Investment and Jobs Act (IIJA).
Arthur Stewart, president of Cameron Energy Co. in Warren County, estimated that if a bond were to increase to $30,000 it would cost his company $60 million in cash plus 20%.
“I don’t have $60 million in cash. You’ll end up with a laptop full of abandoned wells,” Stewart said.
Pennsylvania trails only Texas in supplying energy to other states, according to the U.S. Energy Information Administration, largely through the extraction of the enormous natural gas reserves below ground.
The commonwealth has the dubious distinction of being a leader in orphaned and abandoned wells. More than 30,000 are documented by the Department of Environmental Protection with 27,000 unplugged and potentially leaking dangerous gasses into the environment.
The total count is believed to be far higher with the vast majority drilled in the 100 years before modern regulations arrived in the 1950s.
The Shapiro administration estimates there are 350,000 orphaned and abandoned wells and some environmentalists estimate the figure to be twice as large. DEP has plugged 200 wells since Josh Shapiro took office as governor, more than the total plugged in the prior nine years combined.
However, critics cited prevailing wage and other requirements related to the IIJA that’s funding the process for ballooning the cost far beyond what’s required. Orphaned wells are acknowledged as being more costly and complex to plug; however, Stewart said more modern wells aren’t. He said his company plugged 230 wells across the past decade including 100 that were orphaned.
Before the federal funding — up to $400 million could come to the commonwealth — and accompanying regulations were involved, Stewart cited DEP data showing the average cost to plug a well was $17,584. For a modern well, he said the cost is $1,000 to $2,000.
“I can have the guts out of that well on day one, I can have the cement poured on day two and I’m done and gone,” Stewart said.
There was shared criticism by the committee’s majority chairman Rep. Greg Vitali, D-Delaware, and minority chairman Rep. Martin Causer, R-McKean/Cameron/Potter, about the accuracy of DEP data concerning abandonment.
Vitali said the data was “cleaned up” and he presented figures intended to underscore the seriousness of the problem.
Citing DEP, Vitali said 1,230 wells were abandoned within three years beginning in January 2017. He pointed to a report by the PA Environment Digest Blog from former DEP Secretary David Hess that so far in 2024, the department issued 392 violations for conventional well abandonment.
“This is not a legacy problem,” Vitali said.
Causer called for a follow-up hearing specific to questioning DEP.
“If there’s flawed data, everything we’re talking about here today can be off base,” Causer said.