The state Department of Environmental Protection reached a settlement with two oil and gas companies over plugging abandoned wells, including hundreds around Southwestern Pennsylvania.
The consent order and agreement with Diversified Gas & Oil Corp. of Birmingham, Ala., and Alliance Petroleum Co. — an Ohio company Diversified bought last year — addresses well-plugging violations in 23 counties overall.
“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,” DEP Secretary Patrick McDonnell said.
In July 2018, DEP issued orders to Alliance, XTO Energy Inc. and CNX Gas Company to plug 1,058 abandoned oil and gas wells across the state — based on required self-reporting of well production data. Those wells, along with wells that Diversified reported as non-producing, make up the approximately 1,400 wells addressed in the consent order, DEP said.
Alliance, XTO and CNX appealed DEP’s orders to the Pennsylvania Environmental Hearing Board, which triggered settlement negotiations. Diversified officials could not be reached for comment.
The Pennsylvania Oil and Gas Act requires owners and operators to plug wells upon abandonment, which it defines as a well that “has not been used to produce, extract or inject any gas, petroleum or other liquid within the preceding 12 months.”
Alliance, XTO and CNX self-reported conventional wells that did not produce oil or gas during the 2017 calendar year, DEP said.
“We noticed that some of these companies were transferring large numbers of conventional wells and … that in these transfers there are a lot of non-producing wells, which we would consider abandoned,” said DEP spokeswoman Lauren Fraley. “This agreement allows those transfers to move forward but makes sure that Diversified and Alliance are properly inventorying what they have and are on a schedule to plug or produce the wells that they have.”
Diversified and Alliance have agreed to a $7 million surety bond for the wells covered by the settlement, plus an additional $20,000-$30,000 bond for each abandoned or non-producing oil and gas well acquired in the future, DEP said.
Under current law, conventional oil and gas operators are 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, DEP said.
The performance bonding negotiated in Monday’s settlement is closer to actual plugging costs, which can begin at $20,000 per well and go much higher depending on well and site conditions, the DEP said.
Such bonding ensures that Pennsylvania is not adding to its already large inventory of orphaned and abandoned wells, Fraley said. As of the end of 2017, there were more than 8,000 of such wells in the state. Most are in Western Pennsylvania.