Pa. limited a board’s power to regulate abandoned oil and gas wells; Democrats want to restore it. | Spotlight Pa

Now, with Democrats in charge of the state House, there’s an effort to reverse that decision.

The state House Environmental Resources and Energy Committee passed a bill Tuesday along party lines that would restore the Environmental Quality Board’s ability to raise bond prices on conventional drillers.

The legislation is part of a continued effort to plug hundreds of thousands of abandoned and orphaned conventional oil and gas wells in Pennsylvania. The state expects to receive hundreds of millions of dollars in federal funding over the next five years to seal those wells, though that money can cover only a fraction of the need.

The measure faces a long, likely rocky path to becoming law — and some environmental advocates and lawmakers say it won’t solve the commonwealth’s underlying regulatory shortcomings.

At the center of the proposed law are bonds, which are meant to prevent developers from leaving wells unplugged after they stop using them.

Individuals or companies that want to dig new wells in Pennsylvania have to post a bond, a practice similar to a renter putting down a security deposit. If a well has been inactive for at least a year, the state declares it abandoned and requires the operator or owner to plug it.

If the driller fails to do that, the state Department of Environmental Protection can seize the bond and plug the well itself. But in practice, the agency rarely does that.

The DEP said in a recent report it seized two bonds worth about $50,000 in total from uncooperative well operators between 2017 and 2021, a number that has been cited by at least one Republican lawmaker as evidence that forfeiture is not an effective tool. An agency spokesperson told Spotlight PA the number is higher when 2022 is factored in —11 bonds, worth roughly $423,000.

There have historically been discrepancies between the costs of a bond and plugging a well, and the bill the legislature approved last year entrenched that gap.

The law, which was enacted last July without then-Gov. Tom Wolf’s signature, froze the bond cost for a single conventional well at $2,500 for the next decade. In comparison, the DEP estimates the current average cost of plugging a single well is $33,000 and can get as high as $800,000.

Prior to the law, the Environmental Quality Board, an independent panel that oversees the regulations set by the DEP, had the power to adjust the costs of bonds every two years.

Lawmakers on both sides of the aisle acknowledge the DEP’s limited success in plugging the state’s hundreds of thousands of abandoned wells. But there is a deep partisan divide over what to do about it.

In the past five years, the DEP seized only two bonds worth about $50,000 in total from uncooperative well operators — a number dwarfed by the amount of abandoned wells the state estimates it has.

In total, the department collected less than $1.4 million from drillers over that period, most of which came from civil penalties awarded by courts.

Lawmakers on both sides of the aisle acknowledge the DEP’s limited success in plugging the state’s hundreds of thousands abandoned wells. But there is a deep partisan divide over what to do about it.

Many Democrats argue that the state needs more power to set higher bond prices to deter drillers from simply eating the cost of forfeiting bonds and abandoning their wells, and to make it worthwhile for the DEP to actually put in the logistical and legal work necessary to seize bonds.

Many Republicans, meanwhile, argue there are too few conventional wells being drilled to justify putting higher bond prices on those drillers’ shoulders. Conventional drilling, an old extraction method that involves relatively shallow wells, has been practiced in Pennsylvania for over a century. But in the past 15 years, unconventional drilling, which involves deeper wells that are used for fracking, has come to dominate the commonwealth’s oil and gas industry.

For unconventional wells, bonds are priced significantly higher and include an initial fee ranging from $35,000 to nearly half a million dollars depending on the number and depth of the wells drilled.

State Rep. Greg Vitali (D., Delaware) is one of the lawmakers leading the charge to put some power back into the hands of the state. He introduced the bill that would allow the Environmental Quality Board to once again adjust the price of bonds, which he hopes would further deter individuals and businesses from abandoning wells without plugging them. He chairs the committee out of which the bill passed on Tuesday.

“In the end, if these wells continue to be abandoned, the public pays for it. The consequences of unplugged wells are many, including leakages, greenhouse gasses, and explosions,” Vitali said in the meeting prior to voting on the bill.

Vitali said he would prefer to go even further and advance a bill that would increase the bond cost for conventional drillers. But he settled for giving the board pricing flexibility, he said, to increase the bill’s odds of passing.

“The reality is we’re dealing with a very conservative Senate,” Vitali said. “In a perfect world … I would have stuck with the original bill. But the reality is that that would have been dead on arrival.”

State Rep. Martin Causer (R., McKean), the committee’s minority chair, voted against the bill, and highlighted the DEP’s lack of bond seizures.

“Why only two bonds if this is a massive problem?” Causer asked at an environmental committee meeting in April, referencing the DEP’s bond seizure rate over the past five years. “You already have the tools, and an increased bonding amount has an impact on the industry.”

Causer said that the focus needs to be on plugging orphan wells (ones that were abandoned before April 1985) rather than all abandoned conventional oil wells.

DEP’s Acting Deputy Secretary Kurt Klapkowski has said the lack of seizures reflects the department’s sparse resources, and argued that the department often loses time and money when it claims a bond with a low price. Kaplowski said the cost and resources that go into forfeiting a bond are often worth more than what the department recoups.

“We’ve been making decisions about where we employ our enforcement resources, and we decided that they’re better spent in other areas,” Klapkowski said at the same April meeting.

Many environmental advocates have long argued the DEP is underfunded, and therefore unable to fully do its job. However, a coming influx of funds from the federal Infrastructure Investment and Jobs Act has given some of them hope. The DEP is in the process of using some of those funds to hire more than 40 additional staff members, primarily to speed up the well plugging process.

Other environmentalists, like Laurie Barr, co-founder of the well-plugging advocacy group Save Our Streams PA, are skeptical that the DEP will be able to regulate the oil and gas industry even with the ability to change bond prices.

“Even if they had the ability to raise bond prices … I’m not so sure they would,” Barr said, adding that even when the Environmental Quality Board had that power, it did not raise the cost of bonds.

Barr claimed that there is a culture of deference to the oil and gas industry within the state legislature overall, and that the DEP follows lawmakers’ lead. She pointed to Wolf’s refusal to veto the bill that stripped the board of its bond pricing powers. Instead, he let it become law without his signature.

But Barr also said that part of the blame rests on the department’s staff and what she describes as a lack of commitment to oversight.

“They’re not doing their job. They have the tools and the ability. They fail to do so because they just don’t have the will,” Barr said. “It’s the fox guarding the henhouse.”

A report released by the department last December showed that nearly two-thirds of well developers failed to submit annual production reports between 2017 and 2021, and its authors echoed Barr’s sentiment that the DEP has the legal authority and tools necessary to oversee the oil and gas industry.

The report added that the department requires more resources, particularly more awyers, field inspectors, and geologists, but did not call for the legislature to increase funding.

Oil and gas drillers, who hold considerable sway in Harrisburg lobbying circles, have opposed regulatory overhauls such as increasing bond prices.

Arthur Stewart, president of Cameron Energy Company, said that not enough conventional wells are currently being dug to justify bond price hikes, and that such hikes would make drilling too expensive for the waning number of conventional drillers in the commonwealth.

“We understand the concept of why bonds are used in different business practices. But that then should lead to the next question, which is, ‘Are bonds useful here?’” Stewart said. “It means that money is not available to buy a piece of equipment or to pay a wage.”

According to the most recent annual report from the DEP’s Office of Oil and Gas Management, 130 conventional wells were drilled in 2021.

Stewart’s opinion holds weight and can shape policy. Along with being a driller, he sits on the state’s Grade Crude Development Advisory Council, which works with the DEP to examine and recommend policies related to the conventional oil and gas industry.

Vitali’s bill still has an uncertain path through the legislative process. To reach Democratic Gov. Josh Shapiro for consideration, it first must pass both the state House and Senate.

A spokesperson for state House Majority Leader Matt Bradford (D., Montgomery) said the chamber’s Democratic leaders will review the bill once it passes through the committee. A spokesperson for state Senate Majority Leader Joe Pittman (R., Indiana) declined to comment on whether the bill will be considered in the GOP-controlled chamber.

A spokesperson for Shapiro said that the administration broadly supports the legislation but noted that the bill is still in its early stages.

“The Shapiro Administration supports restoring the Environmental Quality Board’s authority to adjust bonding amounts,” the spokesperson said, “and we look forward to continuing to work with our partners in the General Assembly as this bill moves through the legislative process.”

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