Connect with us

Environment

Orphan Wells: States Wrestle With Soaring Costs For Oil & Gas Industry Mess

Published

on

A crew plugs an abandoned well in Ohio. Photo: Brittany Patterson/Ohio Valley ReSource

William Suan is no stranger to the problems abandoned oil and gas wells can cause.

“It’s just an eyesore,” he said, standing inside a barn on his cattle ranch near Lost Creek, West Virginia. “I had to fence one off because it’s leaking now.”

There are five inactive wells on his land, most installed in the ’60s and ’70s, and the companies that owned the wells have long since gone out of business.

On a recent rainy Monday, Suan treks down a muddy hill on the backside of his property. Hidden in the wooded thicket is a three-foot-tall rusted tube jutting out of the ground.

A soft bubbling sound emanates from the well.

An “orphan” well on William Suan’s property leaks decades after being abandoned. Photo: Brittany Patterson/Ohio Valley ReSource

“See the gas bubbling out of it?” he said. “Sometimes there’s oil. There’s where they had one of those pads to soak up the oil last time I complained about it.”

In 2012, Suan won a case against the West Virginia of Environmental Protection to get one of the wells on his property plugged. Since then, he says he has been unsuccessful in getting environmental regulators to take additional action.

Having enough resources to plug old, inactive wells is a challenge not unique to West Virginia. Across the country, many state regulators have few resources to deal with an ever expanding list of abandoned wells.

Abandoned gas works on William Suan’s property in West Virginia. Photo: Brittany Patterson/Ohio Valley ReSource

“The states are pretty good at regulating wells that are being explored, are being fracked, are in production, but they kind of lose interest once that happens,” said Alan Krupnick, a senior fellow with the nonpartisan environmental think tank, Resources For the Future. “There’s not enough attention being paid to reducing the risk from these abandoned wells.”

Across the Ohio Valley, thousands of oil and gas wells sit idle. An analysis of state data by the Ohio Valley ReSource estimates more than 8,000 oil and gas wells are considered “orphan.” Definitions of orphan and abandoned wells vary by state, but in general, orphan wells lack an operator or company that can pay to plug them. That responsibility then falls to state regulators who are frequently struggling to keep up with demand and scrambling to find money to clean up the mess.

But there are steps states can take to help. Recent legislation passed in Ohio and West Virginia funnels more money toward plugging orphan wells. The new laws address the problem in two very different ways.

 

 

Graphic: Alexandra Konik/Ohio Valley ReSource

Inadequate Bonds

In Kentucky and West Virginia, agencies tasked with plugging those wells rely on forfeited bonds. That money is collected in a fund and used to plug the highest priority wells.

Well plugging can be an expensive undertaking. Across the Ohio Valley, regulators reported figures as low as a few thousand to upwards of $200,000 to plug a single well.

Abandoned wells, like this one in Kentucky, can pollute for years. Photo: Kentucky Division of Oil and Gas

“We may have an emergency repair on a big well and we may have had bonds forfeited on several small wells and those funds just don’t add up,” said Lanny Brannock, a spokesperson with the Kentucky Energy and Environment Cabinet. “So, we’re constantly behind on funding for orphan wells.”

Since 2012, Kentucky has plugged 33 wells and has about $950,000 in an orphan well fund.

West Virginia’s funding situation is similar. Since 2012, the state has plugged seven wells. The West Virginia Department of Environmental Protection can use a portion of each $150 well work permit application fee as well as any forfeited bonds to plug orphan wells. Currently, the fund holds approximately $385,000.

Recent legislation passed in Ohio and West Virginia funnels more money toward orphan wells. The new laws address the problem in two very different ways.

Graphic: Alexandra Konik/Ohio Valley ReSource

West Virginia’s Fix

In West Virginia, the 2018 “co-tenancy” law, which governs oil and drilling on properties owned by multiple people, includes a provision with the potential to funnel millions of dollars into the state’s orphan well fund.

The law states that if at least 75 percent of landowners agree to lease a tract of land for oil and drilling, a company can drill. Any royalties earned by mineral owners who cannot be located will be set aside for 7 years. If unclaimed, those funds are transferred to the orphan well fund.

“We’ve been looking for years for a way to find the money or require the industry to pay better bonds in order get these wells plugged and keep more wells from being orphaned,” said Dave McMahon, a lawyer and co-founder of the West Virginia Surface Owners Rights Organization, which proposed the idea to lawmakers.

A portion of the money is currently slated to fund West Virginia’s struggling Public Employee Insurance Agency, or PEIA.

“Hopefully, we can use this source of money as one way to try and plug as many of these orphan wells as we can,” McMahon said, but added, “It’s hard to know if we’ll ever get the job done because there are so many of them and there are going to be so many more of them and it costs so much to plug them.”

The West Virginia Department of Environmental Protection declined to make someone available to talk about its orphan well program.

In an email, spokesperson Jake Glance said, “Our understanding is that certain provisions in the co-tenancy bill will eventually direct additional funds into this account.”

While the new legislative fix is helpful, experts say the orphan problem will only get worse because West Virginia and other states do not require drillers to pay adequate bonds.

Deep Problems

A 2016 study of inactive well regulations in 22 states by Resources for the Future, a nonprofit advocacy group, found the majority lack policies to deal with legacy wells drilled decades ago and the means to collect sufficient funds to plug wells currently being drilled.

“We want good policy to make sure that these wells when they’re eventually abandoned do not present environmental risk” Krupnick said. “One thing is they could raise the bonding amounts to the point where they’re covering the costs of these wells, of decommissioning the wells.”

He said another challenge is that many states allow wells to remain in “idle status” for years. These wells aren’t producing, but operators aren’t being required to plug them.

Unplugged wells can leak oil and other pollutants into water or the ground and inactive wells can emit methane, a powerful greenhouse gas many times more potent than carbon dioxide.

Graphic: Alexandra Konik/Ohio Valley ReSource

A 2016 study of abandoned wells in Pennsylvania found the state’s 475,000 to 700,000 abandoned wells are leaking an estimated 50,000 metric tons of methane per year, or about 5 to 8 percent of the state’s annual greenhouse gas emissions.

Experts say the problem will only get worse. The region’s fracking boom is adding many more wells that tap the gas deep in the Marcellus shale. The lifespan of a fracking well is shorter than a conventional well. According to McMahon, pressure from Marcellus drilling is also likely to force some conventional drillers out of business.

“Their bonds aren’t going to be enough and the number of orphan wells is going to go up and up as time goes on,” he said.

In 2011, West Virginia overhauled its bonding requirements for horizontal wells. The 2011 Horizontal Well Act requires drillers to pay $50,000 for single well bonds and $250,000 for blanket bonds.

Companies in good standing can get blanket bonds to cover all wells they own. McMahon argues that even that level of bonding may not be enough to prevent orphan wells.

“That blanket bond is enough to plug five wells and some of these drillers own hundreds of wells,” he said.

Ohio’s Approach

On a forested knoll in Carroll County, Ohio, backhoes and bobcats zip around. Nearby, a crew of three men is running 2-inch metal pipe hundreds of feet down into an old well that was built before World War II.

Gene Chini manages the orphan well program for the Ohio Department of Natural Resources division of oil and gas resources. The wells being plugged here have been on the agency’s radar for awhile.

“The records that we had said this well was the best in Carroll County,” he said

Ohio has taken a different approach to plugging orphan wells. In 1977, the state created an orphan well plugging program. From the beginning it has been funded with 14 percent of the oil and gas fund, which is supported by a modest severance tax on natural gas extraction.

Gene Chini says there may be thousands of abandoned wells in his state. Photo: Brittany Patterson/Ohio Valley ReSource

Later this month, a new law will raise the percentage of the fund that must be directed toward orphan wells to 30 percent.

Soon, the Ohio Department of Natural Resources Division of Oil and Gas Resourceshopes to be plugging many more wells.

“Four to five years ago the budget was less than a million dollars,” said Steve Irwin, spokesperson for the division. “This past fiscal year we spent $6 million and we will have over $20 million to spend this year to plug orphan wells.”

In addition to the percentage boost, severance taxes are up significantly because of the fracking boom in Ohio.

The division is facing some challenges ramping up the program. There are just 737 orphan wells on the agency’s list, but officials said an estimated 250,000 wells have been drilled in Ohio. They expect the true count of orphan wells to be much higher.

It can also be a time-intensive process to plug old wells. In the case of the five wells being plugged in Carroll County, Chini said none had gone according to plan.

“It’s not just pull in, pump some stuff down a hole and then leave, it just doesn’t work that way,” he said.

The standard way of plugging a well involves first clearing out all of the tubing and casing inside. Then cement or another strong substance is poured in to create a combination of deep and shallow plugs to ensure oil and gas cannot escape or travel into the groundwater.

The state is also struggling to find companies to plug wells. Chini said when conventional oil and gas business dropped off in the 1990s, many companies left Ohio.

Still, he recognizes with a boost in funding tied to severance taxes, Ohio is in a better place than some.

“It really is a win win for everybody,” he said. “The money’s coming back to them in the form of work. It’s the operators that pay the severance tax and so it’s the operators that are plugging the wells.”

On The Horizon

Back in West Virginia, Suan said he was glad to hear about the new provision that puts more money toward plugging orphan wells. But he fears without higher bond amounts, or enforcing the laws to make oil and gas operators plug wells in a timely manner, the problem may never go away.

The region’s fracking boom is adding many more wells that tap the gas deep in the Marcellus shale.

“I can’t imagine if they can’t even plug these little wells what they’re going to do with the Marcellus wells that needs plugging,” he said.

This story was originally published by the Ohio Valley ReSource.

Environment

Large Natural Gas Producer to Pay West Virginia Plaintiffs $53.5 Million to Settle Royalty Dispute

Published

on

An EQT Corp. natural gas production facility. Photo: Raymond Thompson, special to ProPublica

This article was produced in partnership with the Charleston Gazette-Mail, which is a member of the ProPublica Local Reporting Network.

As ProPublica’s investigation detailed, EQT Corp. had been accused of deducting a variety of unacceptable charges from natural gas royalty checks. The company says it wants to “turn over a new leaf” in its relationship with the state’s residents.

The second-largest natural gas producer in West Virginia will pay $53.5 million to settle a lawsuit that alleged the company was cheating thousands of state residents and businesses by shorting them on gas royalty payments, according to terms of the deal unsealed in court this week.

Pittsburgh-based EQT Corp. agreed to pay the money to end a federal class-action lawsuit, brought on behalf of about 9,000 people, which alleged that EQT wrongly deducted a variety of unacceptable charges from peoples’ royalty checks.

The deal is the latest in a series of settlements in cases that accused natural gas companies of engaging in such maneuvers to pocket a larger share of the profits from the boom in natural gas production in West Virginia.

This lawsuit was among the royalty cases highlighted last year in a joint examination by the Charleston Gazette-Mail and ProPublica that showed how West Virginia’s natural gas producers avoid paying royalties promised to thousands of residents and businesses. The plaintiffs said EQT was improperly deducting transporting and processing costs from their royalty payments. EQT said its royalty payment calculations were correct and fair.

A trial was scheduled to begin in November but was canceled after the parties reached the tentative settlement. Details of the settlement were unsealed Wednesday.

Under the settlement agreement, EQT Production Co. will pay the $53.5 million into a settlement fund. The company will also stop deducting those post-production costs from royalty payments.

“This was an opportunity to turn over a new leaf in our relationship with our West Virginia leaseholders and this mutually beneficial agreement demonstrates our renewed commitment to the state of West Virginia,” EQT’s CEO, Robert McNally, said in a prepared statement.

EQT is working to earn the trust of West Virginians and community leaders, he said.

Marvin Masters, the lead lawyer for the plaintiffs, called the settlement “encouraging” after six years of litigation. (Masters is among a group of investors who bought the Charleston Gazette-Mail last year.)

Funds will be distributed to people who leased the rights to natural gas beneath their land in West Virginia to EQT between Dec. 8, 2009, and Dec. 31, 2017. EQT will also pay up to $2 million in administrative fees to distribute the settlement.

Settlement payments will be calculated based on such factors as the amount of gas produced and sold from each well, as well as how much was deducted from royalty payments. The number of people who submit claims could also affect settlement payments. Each member of the class that submits a claim will receive a minimum payment of at least $200. The settlement allows lawyers to collect up to one-third of the settlement, or roughly $18 million, subject to approval from the court.

The settlement is pending before U.S. District Judge John Preston Bailey in the Northern District of West Virginia. The judge gave it preliminary approval on Monday, which begins a process for public notice of the terms and a fairness hearing July 11 in Wheeling, West Virginia. Payments would not be made until that process is complete.

The Charleston Gazette-Mail and ProPublica want to tell the story of the changing landscape in West Virginia, and how coal and natural gas are impacting it. West Virginians: Tell us how your community is changing. Call or text us at 347-244-2134, or email us: changingwv@wvgazettemail.com.

Kate Mishkin and Ken Ward Jr. cover the environment, workplace safety and energy, with a focus on coal and natural gas for the Charleston Gazette-Mail. Email Kate at kate.mishkin@wvgazettemail.com and follow her on Twitter at @katemishkin; email Ken at kward@wvgazettemail.com and follow him on Twitter at @kenwardjr.

This article was originally published by ProPublica.

Continue Reading

Environment

As Top Dem on Senate Energy Committee, Manchin Prepares to Tout Region’s Resources

Published

on

Sen. Joe Manchin, D-W.Va.Photo: Jesse Wright, West Virginia Public Broadcasting.

The Senate Energy and Natural Resources Committee will begin holding full hearings this week with a new top Democrat: West Virginia Sen. Joe Manchin.

Manchin’s ascension to lead the Senate committee devoted to energy issues drew concern from environmental groups and more left-leaning members of his own party who fear the centrist Democrat may not be a strong climate advocate.

At a recent meeting of West Virginia oil and gas producers, the senator from coal country said he hoped to address climate change in this role, but would also use his newfound post to better promote the Ohio Valley’s energy resources.

Manchin, who said he will have a staff of about 17, will work closely with Sen. Lisa Murkowski (R-AK), who chairs the committee.

“The beauty about it is this: Lisa comes from Alaska, I come from West Virginia. Two heavy-lifting states, two heavy-producing states for the energy this country needs,” he told attendees of the West Virginia Independent Oil and Gas Association winter meeting last month in Charleston. “With that being said, we can set an agenda that basically shows them what we’re doing.”

Manchin said he hopes to highlight the energy contributions made by West Virginia and other states in the region from both the coal and growing natural gas industries.

“We haven’t been able to tell our story,” he said. “We’re just not telling it because there’s a strong wind blowing that doesn’t want that to get out. They want to believe there’s something utopian in a perfect world. Well, I’m hoping we get there in our lifetime. I don’t think so. Maybe our children or grandchildren, whatever. But until that happens I want to make sure they understand the ships from Russia are bringing natural gas in to the northeast. I want them to see that picture.”

‘All-In Energy Policy’

Environmental groups have expressed concern about Manchin taking the top spot on the Senate Energy and Natural Resources Committee in large part over fears the coal country Democrat will not be a strong voice for climate action.

In recent years, Democrats on the committee have used their positions to rail against Trump administration efforts to backtrack on climate policies and science.

Manchin has been steadfast in his position that while he believes climate change is real and that the country needs to prepare for its impacts, he will advocate for energy policy that contains a mixture of emissions-free electricity including renewables, but that also includes the use of fossil fuels for the foreseeable future. That is a break from some in the Democratic party who are seeking the immediate phase-out of fossil fuels in order to prevent the worst impacts from climate change.

“I’ve got a far left agenda coming from the people in my caucus, and I tell them basically that we’re looking for an all-in energy policy,” Manchin told the crowd.  

Speaking after the meeting, Manchin also noted both he and Murkowski are pragmatic about the threat of a changing climate.

“We understand energy, we understand climate,” he said. “We understand that we have to live in this wonderful, beautiful world of ours, make it cleaner and better, but use all the energy we have in a much cleaner fashion.”

Manchin declined to provide examples of specific legislative proposals he might champion, but said investing in technology and research would be a top priority.

In preparing to take his post as second in command, Manchin said he had spent some time chatting with Microsoft founder and philanthropist Bill Gates. The billionaire has invested significantly in clean energy, including nuclear power. Manchin characterized Gates as pragmatic about the need to balancing clean energy and fossil fuels, and said he hoped to bring him to the committee.

Storage Hub Major Priority

The lawmaker also stressed his commitment to building more natural gas liquids storage capacity in the Ohio Valley. Specifically, Manchin noted his continued support for the Appalachian Storage and Trading Hub.

Manchin has long been a proponent of the project, now almost a decade in the making. It would be built with a combination of private investment and a $1.9 billion loan guarantee from the Department of Energy, which is being applied for by the project’s developer, the Appalachia Development Group, LLC.

A year ago, the project got approval for the first of two application phases for a $1.9 billion U.S. Department of Energy loan. Last summer, ADG announced it was hiring an outside firm, Parsons Corporation, to help with the second phase and data collection.

“It’s like the field of dreams, build it and they’ll come,” he said of the hub. “I think everything leads from that if people know we have available, dependable and affordable energy there to be accessed for the development that we need for our state, our region and our country, defense of our country, that’s a no-brainer.”

The full committee kicks off hearings this week. On Tuesday, it will hear testimony about the state of the country’s energy and mineral markets. On Thursday, it will hold a hearing on energy innovation in the United States.

This article was originally published by WV Public Broadcasting.

Continue Reading

Environment

Unpacking The Ways Climate Change is Affecting West Virginia

Published

on

Photo: Robert Madison, courtesy photo

Last week, the Intergovernmental Panel on Climate Change, or IPCC, the U.N. body that provides objective, scientific reports on climate change issued a grave warning: Humans are running out of time if we are to prevent the worst impacts of global warming.

While the report took a global view, here in the Mountain State, scientists can already document the impacts of climate change. Many parts of the world are bracing for more extremes including and higher temperatures and more severe droughts, while the prognosis in West Virginia is more of a mixed bag.

“West Virginia’s climate has become milder with warmer winters, cooler summers and generally more humid conditions year-round,” said Evan Kutta, the climate sciences program manager for West Virginia University’s Institute of Water Security and Science.

Data show that between 1906 and 2016 maximum temperatures decreased 5.3 percent, while minimum temperatures increased 7.7 percent. Over the last century, precipitation has increased 2.2 percent.

While some aspects of West Virginia’s economy may benefit from the milder winters as a result of a changing climate – including agriculture and some outdoor recreation industries – expected increases in rainfall could pose challenges to human-constructed infrastructure.

“The flooding that happened two summers ago in 2016 was truly severe and that could be something that we see more often,” Kutta said.

West Virginia is one of the most flash-flood prone states in the country, and maybe even the world. The stacked ridgelines of the Appalachian Mountains and deep hollows are really good at shaking moisture out of storms, and channelling it quickly downstream to larger rivers.

He added that more research and planning is needed to tap into the opportunities that could be wrought from climate change as well as challenges.

Agriculture and Forests

When it comes to West Virginia agriculture, climate change has mixed implications.

Unlike in places like California, where climate models predict warmer, drier conditions, in Appalachia, milder conditions could result in a longer growing season that could support a more diverse variety of crops, Kutta said.

However, with more moisture also comes more cloud cover.

“That reduces sunlight available for crop growth,” he said.

In fact, the impacts of a wetter West Virginia are already being observed across the state’s forests. Scientists see changes in the types of tree species putting down roots in West Virginia. Oaks are being replaced by maples, which prefer shadier and wetter conditions.

“Maples are more vulnerable to droughts, but the increasing number of maple trees in the state indicates that droughts are becoming less severe and water resources are becoming more abundant,” he said.

West Virginia’s Role

The IPCC report stresses that to prevent 2.7 degrees of warming, greenhouse gas pollution must drop significantly. Burning coal for electricity, which is the most carbon-intensive source of fuel, would have to decrease from almost 40 percent today to between one and seven percent by 2050.

That could greatly impact West Virginia, which is the second largest producer of coal in the United States and in 2017 sourced 93 percent of its own electricity from coal-fired power plants, according to the U.S. Energy Information Administration.

The state could also play a significant role in mitigating climate change, according to Kutta.

“The ongoing transition away from coal has been difficult, but West Virginia is rich in other natural resources that could represent a boon for the state’s economy,” he said. “The Marcellus and Utica Shale formations represent sources of natural gas, a cleaner fossil fuel that may ease the crucially needed transition to renewable energies.”

Furthermore, the rugged terrain of the Mountain State offers many opportunities for renewable energy.

The ridges of the Allegheny Mountains could be prime wind turbine real estate. Abundant water resources could support hydroelectric generation and Kutta said West Virginia is even rich in geothermal energy.

“It’s actually from all of the wells that have been drilled in the state,” he said. “They’ve found temperatures in excess of 150 degrees Celsius just a couple of kilometers below the surface, which would be suitable for commercial scale energy production if the funds are available.”

Overall, the new IPCC report paints a rather grim picture. The scientists who put it together looked at more than 6,000 published studies and found that over the next two decades the planet is on track to see global temperatures rise nearly 3 degrees above where they were prior to the industrial revolution.

The authors note the impacts of continued warming include food shortages, wildfires, severe droughts. Coral reefs will experience mass die-offs and millions of people living on the coasts will need to relocate.

The report estimates the cost of not preventing global temperatures from rising above 2.7 degrees will cost some $54 trillion in damages.

The authors also note that doesn’t have to be our future, but the world needs to act fast to prevent it from happening. Kutta agrees.

“It’s a problem that is bigger than each individual, so we need to be working together as a group to solve this truly enormous challenge,” he said.

This article was originally published by West Virginia Public Broadcasting

Continue Reading

Trending

100 Days

FREE
VIEW