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

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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

House Dems Looking to Restore Obama-era Policies on Public Land Oil & Gas Leases

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Rep. Alan Lowenthal of California chairing an earlier meeting of the House Subcommittee on Energy and Mineral Resources. Photo: Courtesy House Committee on Natural Resources

The Democratically controlled House of Representatives is continuing its push to essentially reverse the Trump administration’s rollback of environmental regulations, this time focusing on a policy that has largely impacted rural and native populations in the U.S.

The House Subcommittee on Energy and Mineral Resources held its third hearing last week on a bill to change the policies that govern leasing for oil and gas development on public lands through a bill to restore community input in the leasing process. H.R 3225, Restoring Community Input and Public Protections in Oil and Gas Leasing Act of 2019, is sponsored by Democratic Rep. Mike Levin of California.

The process of granting leases for development on public lands falls under the purview of the Bureau of Land Management (BLM) in the federal Department of Interior (DOI). In a January 2018 policy, the BLM shortened the protest period for lease sales from 30 to 10 days, removed the requirement for the public to be involved during the lease nominations, and removed the 30-day review and comment period for environmental reviews. H.R. 3225 would reverse the shortened time periods to previous standards and also increase royalty and rental rates for leases on public lands.

Subcommittee chairman Rep. Alan Lowenthal of California opened Thursday’s hearing by saying that the government’s responsibility to balance access to natural resources on public lands with protective measures to secure it for future generations cannot be accomplished without input from local public and tribal communities. He accused the BLM of instead prioritizing the size and frequency of lease sales in the last couple years.

But the BLM’s Deputy Director of Operations Michael Nedd defended the current policy and reminded the committee nearly half of the generated revenue goes back to the lease host states. Nedd said that in 2018 the federal lands produced over $3 billion in federal revenue and added 2018 was a record year for lease sales revenue.

He was supported by a number of GOP members of the committee who pointed to the National Environmental Policy Act as already providing a space for community input on such leases. The NEPA is administered by the Environmental Protection Agency, requiring the EPA to review and comment on the environmental impact statements of all other federal agencies under the Clean Air Act.  

The 2018 policy changes were also meant to remove redundancy in oversight of these leases and reduce the unnecessary burden on businesses created by the previous presidential administration, according to ranking minority member Paul Gosar. 

Gosar pointed to a number of Obama-era policies he said are the reason the U.S. had seen drastic declines in the number of leases managed by the BLM. According to Gosar, by the end of Obama’s administration, the number was the lowest since 1985. 

The current policy, however, has led to a score of ongoing lawsuits attempting to block the leases, which Lowenthal said were a direct result of excluding tribal and other communities from the consultation process. Among them are proposed lease sales in Nevada’s Ruby Mountain, Chaco Canyon in New Mexico, Bears Ears National Monument in Utah and efforts to hold a lease sale in the Arctic National Wildlife Refuge in Alaska.

And during previous subcommittee hearings, members were presented with evidence that despite increasing revenues, there have been negative impacts to the health of both the people and the environment of the communities experiencing what Gosar called an “energy renaissance.” 

Emily Collins, who testified at a subcommittee meeting earlier this year, represents rural residents in the Pittsburgh and Akron areas through the non-profit Fair Shake Environmental Legal Services. Since 2014, Collins testified, 33 to 42 percent of the cases she’s taken on have involved oil and gas extraction, and 45 individual cases related specifically to water contamination.

Collins said the vast majority of her clients’ environmental problems were caused by a “lack of governmental investigation of the site-specific geological characteristics of the areas being developed and under resourced local jurisdictions.”

Len Necefer, a professor of both American Indian Studies and Public Policy at the  University of Arizona, recalled a long and personal history of health impacts among his Navajo community from unchecked, or under-regulated energy development during his testimony last week. 

The bill was introduced on June 12 and is now on course for a full committee hearing before it can make its way to the House chamber. The date for the full House Natural Resources Committee hearing hasn’t been set yet.

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Environment

Trump Administration Replaces Obama-Era Climate Change Rule on Power Plants

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Mt. Storm Power Plant in West Virginia. Photo: Cecilia Mason/West Virginia Public Broadcasting

This article was originally published by the Ohio Valley ReSource.

The U.S. Environmental Protection Agency Wednesday released its long-awaited final replacement for the Obama administration’s signature climate change regulation, which sought to limit greenhouse gas emissions from power plants by one-third by 2025.

The Trump administration’s Affordable Clean Energy rule, or ACE, tasks states with developing plans that rely on the use of efficiency technologies to reduce carbon emissions at existing power plants.

That stands in contrast to its predecessor, the Clean Power Plan, which was never fully-implemented. The controversial rule, which was challenged in court by 27 states including West Virginia, Ohio, and Kentucky, took a broad approach to reducing emissions throughout the power sector.

At a press conference, EPA Administrator Andrew Wheeler said the final ACE rule ensures a future for coal-fired power plants.

“ACE will continue our nation’s environmental progress and it will do so legally and with proper respect to our states,” he said. “We are leveling the playing field and encouraging innovation and technology across the sector.”

Many of the Ohio Valley’s Republican lawmakers attended the EPA press conference and expressed gratitude toward the agency for the ACE rule.

“I am so excited about what it will do for West Virginia and our surrounding states,” said Rep. Carol Miller, a Republican representing West Virginia’s third district. “The Affordable Clean Energy rule takes great steps in ensuring that mines will stay open by giving the power back to the states, restoring the rule of law and supporting America’s energy diversity and affordability.”

Bill Bissett, president and CEO of the Huntington Regional Chamber of Commerce told the crowd the ACE rule provides optimism to coal-producing regions.

“It provides the security that we’re going to power West Virginia and power this country with coal and natural gas,” he said.

However, industry analysts and experts have said the replacement regulation has very little chance of bringing the coal industry back across the Ohio Valley. They say the new rule does not change the larger economic trends affecting the power industry. Low natural gas prices and the rapidly falling costs for renewable energy generation are the primary challenges for coal.

ACE Analysis

The rule also does not address the challenges associated with mining thermal coal in the region: it costs more to extract coal in Appalachia, partly because the region’s coal seams have been mined for generations.

A 2018 report by West Virginia University’s Bureau of Business and Economic Research  predicted the recent uptick in West Virginia coal production — about 27 percent since mid-2016 driven largely by exports of metallurgical coal — will level out in the next two years.

In the agency’s own in-depth analysis of the final ACE rule, EPA predicts the amount of coal produced in the U.S. is expected to decrease across the board. In Appalachia, coal mines would produce at least 80 percent less coal in 2035 than they did in 2017.

Some utilities in the region said they do not expect to keep their coal plants running longer because of the ACE rule.

Melissa McHenry, a spokesperson for American Electric Power, which operates in 11 states including Kentucky, Ohio, and West Virginia, said it will be several years before the impact of the ACE rule can be determined. In an email, she said AEP continues to diversify its fuel mix and invest in cleaner forms of energy, including renewables, and the company expects that the proportion of coal in its fuel mix will continue to decline.

“We don’t expect to keep our coal plants running longer due to this rule,” she stated. “The coal plants will run as long as the overall economics make sense. Ultimately, we have to continue to make the case to state utility commissions that continuing to operate these plants is in the best interest of our customers.”

A spokesperson for FirstEnergy Corp.’s Fort Martin and Harrison coal-fired power plants in West Virginia said it is “not making any immediate changes” to operations as a result of the new rule.

Chris Perry, president and CEO of Kentucky Electric Cooperatives was more optimistic about the rule’s impact. In a statement, he said the ACE rule “provides a more flexible path forward, which will minimize the cost to members and preserve the reliability of the electric grid as our co-ops work to promote a healthy environment and vibrant rural communities.”

Legal Challenge

Hours after EPA announced it had finalized the rule, some environmental groups and the New York Attorney General announced they intend to sue the agency for failing to protect both public health and the climate under the Clean Air Act.

David Doniger, a lawyer and senior strategic director of the Natural Resources Defense Council’s climate and clean energy program, said in the intervening years since the Clean Power Plan was announced, the energy sector has achieved emissions reductions in line with that rule, despite it never being fully implemented, solely because of market forces.

“The right thing to do would be to strengthen the Clean Power Plan and not kill it,” he said. “The right thing to do would be to take care of coal miners and coal communities in the transition to a clean energy economy. This administration isn’t do either of those things.”

West Virginia Sierra Club Conservation Committee Chair Jim Kotcon said the final ACE rule is a step backward for both the climate and for those who live near the region’s many coal-fired power plants.

“We will have a disproportionate impact of those health risks from this rule change,” he said.

He added that if EPA wanted to extend a lifeline to the coal industry, the agency should seriously invest and incentivize the use of carbon capture and sequestration technology.

“But they have not done that, and without that, I don’t believe that the current market trends for coal will get much better,” Kotcon said. “So, we’re not really saving coal-fired power plants. We’re not using this technology. We are impacting the health of our residents, and we are increasing the overall greenhouse gas emissions that would otherwise have been eliminated.”

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Environment

As Appalachia Ponders Plastics Growth, Report Warns Of Threat to Climate

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Photo: Courtesy PTTGCA

This article was originally published by the Ohio Valley ReSource.

As a new plastics industry emerges in the Ohio Valley, a report by environmental groups warns that the expansion of plastics threatens the world’s ability to keep climate change at bay.

The report released Wednesday by the Center for International Environmental Law, Environmental Integrity Project, FracTracker Alliance, and others used publicly available emissions data and original research to measure greenhouse gas emissions throughout the entire life cycle of plastics. That includes the extraction of natural gas, used as a feedstock for plastic production, to the incineration of plastic products or their final resting place in the world’s oceans.

“Ninety-nine percent of what goes into plastics is fossil fuels and their climate impacts actually start at the wellhead and the drill pad,” said Carroll Muffett, president of the nonprofit Center for International Environmental Law and one of the authors of the report. “In light of the fact that the build-out of plastics infrastructure is ongoing and accelerating, we wanted to better understand the implications of that massive new build out of plastics infrastructure for the global climate.”

Fossil-Fueled Plastics

The report estimates production and incineration of plastic this year will add more than 850 million metric tons of greenhouse gases to the atmosphere, or equal to the pollution of building 189 new coal-fired power plants.

That figure will rise substantially over the next few decades as the demand for single-use plastic continues to grow, the report finds. By 2050, emissions from the entire plastics life cycle could account for as much as 14 percent of the earth’s entire remaining carbon budget.

Plastics manufacturers are investing millions into new petrochemical plants, including in the Ohio Valley, driven by demand and cheap natural gas from the fracking boom.

For example, the report cites Shell’s Monaca ethane cracker plant currently under construction in Beaver County, Pennsylvania. It’s permitted to release up to 2.25 million tons of greenhouse gas pollution annually. Similarly, Thailand-based PTT Global Chemical is seeking permits for a cracker plant in Belmont County, Ohio, across the Ohio River from West Virginia.

A cracker plant converts natural gas constituents into manufacturing products. Graphic: Alexandra Kanik/Ohio Valley ReSource

The plant would be permitted to release the equivalent carbon dioxide emissions of putting about 365,000 cars on the road. Muffett said that sort of increased investment in plastics manufacturing was one of the main reasons the groups decided to highlight the climate implications associated with plastics.

“This petrochemical build-out is a key driver of plastics contribution to climate impacts now and in the future,” he said. “This build-out is going to lead to the production of massive quantities of new plastics. It’s also going to lead to the incineration and disposal of massive amounts of new plastics.”

Industry Response

In a statement, the trade group the American Chemistry Council said the report missed the mark because it failed to take into account that plastics are increasingly replacing heavier, more energy-intensive materials, which can reduce emissions during both the manufacturing process and during transportation.

“Because plastics are strong and lightweight, they help us do more with less,” stated Steve Russell, vice president of the group’s plastics division. “Plastics help us ship more product with less packaging, which means fewer trucks on the road; plastics help make our vehicles lighter and more fuel efficient, so we go further on a gallon of gas; and plastic insulation and sealants help make our homes and buildings significantly more energy efficient by sealing off outdoor temperatures.”

The report also outlined a gap in emissions data for the plastics life cycle, particularly in its infancy, when natural gas is being extracted and transported to refineries and other manufacturing facilities.

“Throughout that process, there are significant emissions, and many of them remain unquantified,” Muffett said. “Even many of the sources of emissions, like compressor stations, or the miles of pipelines involved, official estimates of how many compressor stations there are can vary by an order of magnitude, and that means that there are really fundamental senses in which the data for understanding the scale of this problem just isn’t there. And it needs to be there.”

The report also called for additional research into the impacts of microplastic pollution in the world’s oceans, including more study of the ways in which microplastics may be negatively impacting the ability of oceans to take up carbon emissions.

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