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Marcellus Shale Coalition Challenges EQB Authority To Increase Bond Amounts For Conventional Oil & Gas Wells; DEP Has $15 Per Well Available In Bonds To Plug Conventional Wells

In a November 15 letter to members of the Environmental Quality Board, the Marcellus Shale Coalition challenged the statutory authority of the Board and the need to increase bond amounts for conventional and unconventional oil and gas wells.

The letter points out that several member companies of the Coalition own and operate conventional as well as unconventional oil and gas wells.

The letter was sent in relation to two rulemaking petitions the Board was considering accepting for study proposing to increase bonding amounts.  The Board voted 16 to 3 to accept the petitions for study on November 16.  [Read more here]

Laura Legere of the Pittsburgh Post-Gazette reported Thursday DEP has less than $15 per well available to plug active conventional oil and gas wells in Pennsylvania.  [Read more here]

Conventional Wells

The legal argument made by the Marcellus Shale Coalition said language slipped into a Fiscal Code bill adopted on July 2, 2012 as part of the state budget and made retroactive to April 16, 2012 prohibited the Environmental Quality Board from changing the bonding amounts for conventional wells referenced originally in Section 3225(a)(1) Act 13 of 2012.

The Coalition said Section 3225(a)(1) Act 13 of 2012 set bond amounts for oil and gas wells, but did not differentiate between conventional and unconventional wells.

In addition, Section 3225(a)(1) said, "The amount of the bond required shall be in the following amounts and may be adjusted by the Environmental Quality Board every two years to reflect the projected costs to the Commonwealth of plugging the well:”

This language is clear the Environmental Quality Board by law must review bond amounts for both conventional and unconventional wells making appropriate changes every two years.

The Coalition then pointed out a Fiscal Code bill signed into law on July 2, 2012 addressing only conventional oil and gas well bonding set bonding amounts for conventional wells retroactive to April 16, 2012. 

The operative language links these Fiscal Code provisions to Section 3225(a)(1) of Act 13 of 2012 and says--

“Section 1606-E. Conventional oil and gas well bonding. (a) Requirement. - - Notwithstanding 58 Pa.C.S. §3225(a)(1) (relating to bonding), the bond amount for conventional oil or gas wells shall be $2,500 per well or a blanket bond of $25,000.”

This Section then goes on to direct the Environmental Quality Board to undertake a review of the existing bonding amounts for conventional wells by saying--

“The Environmental Quality Board shall undertake a review of the existing bond requirements for conventional oil and gas wells.”

The Marcellus Shale Coalition says this language takes away the EQB’s authority to increase bonding amounts for conventional wells because Section 1606-E starts by saying “notwithstanding” Section 3225(a)(1). 

They say “notwithstanding” does not just apply to the actual bond amounts, but the entire section.

The other legitimate interpretation of the language in Section 1606-E is that it actually underlines the authority of the EQB and directs the Board for a second time in law to review the amounts of conventional well bonding as required in Section 3225(a)(1) of Act 13, which also includes changing the amounts.

You can easily hear someone during legislative negotiations on this provision explaining, “Hey look, this Fiscal Code language still requires review by the EQB like it requires in Act 13.”

In any case, at some point a court will figure this all out.

Section 1606-E of the Fiscal Code law then goes on to preserve the exemption from any bonding for conventional oil and gas wells, if the wells were drilled before April 18, 1985.

Unconventional Wells

As this section only addresses and is in fact entitled conventional oil and gas well bonding, it is clear it does not affect the authority of the Environmental Quality Board to adjust bond amounts for unconventional wells in Section 3225(a)(1) of Act 13 of 2012.

The Marcellus Shale Coalition letter agrees.

Section 3225(a)(1) clearly says, "The amount of the bond required shall be in the following amounts and may be adjusted by the Environmental Quality Board every two years to reflect the projected costs to the Commonwealth of plugging the well:”

It is also clear, the EQB has authority to determine the amount of the blanket bond outlined in Section 3225.

On The Petitions

While the Marcellus Shale Coalition says they respect “the prerogative of any Pennsylvanian to petition their state government,” they went on to say, “accepting these petitions is a drain on limited agency resources, is not supported by either the law (conventional wells) or the track record of operators (unconventional wells) and the relevant statutory authority and intent. They ought to be rejected.”

“Each time the Board accepts a petition – no matter its underlying merits – it is tantamount to prioritizing the time, resources, and attention of Department staff to the detriment of other agency priorities.”

In response to questions from Environmental Quality Board members, the Department of Environmental Protection said there are about 200,000 abandoned conventional oil and gas wells in Pennsylvania.

Only since 1985 did the state require oil and gas wells to be covered by some sort of bonding requirement, such as it is.

Scott Perry, DEP Deputy Secretary for Oil and Gas Management, said a majority of the 100,508 active conventional oil and gas wells are NOT covered by any bonding requirement.

Laura Legere of the Pittsburgh Post-Gazette reported Thursday DEP has less than $15 per well available to plug active conventional oil and gas wells in Pennsylvania.  [Read more here]

The rulemaking petition submitted to the Environmental Quality Board estimates it would cost $12.2 billion to plug all identified wells in Pennsylvania and the state has a total of $47.2 million in bonding available to plug these wells.  Read more here.

According to the Marcellus Shale Coalition there are no abandoned unconventional oil and gas wells in Pennsylvania so there is no problem with bonding amounts.

However, Act 13 says, “The amount of the bond required shall be in the following amounts and may be adjusted by the Environmental Quality Board every two years to reflect the projected costs to the Commonwealth of plugging the well:”

Act 13 generally caps bonding amounts at $10,000 per well.

The petition submitted to the EQB says average well plugging costs from 2011 through 2020 for unconventional wells was about $83,000.  Read more here.

Following the law, the EQB is directed to act to keep bond amounts at pace with well plugging costs.

Click Here for a copy of the Marcellus Shale Coalition letter.

Related Articles This Week:

-- EQB Accepts Petitions For Study To Increase Oil & Gas Well Bonding; DEP Has $15 Per Well Available In Bonds To Plug Conventional Wells

-- A First-Hand Account Of How Repeated, Unlimited Road Dumping Of Oil & Gas Drilling Wastewater Is Tearing Apart Dirt Roads And Creating Multiple Environmental Hazards - By Siri Lawson, Farmington Township, Warren County

-- Preliminary Results From New Penn State Study Find Increased Cancer, Health Risks From Road Dumping Conventional Drilling Wastewater, Especially For Children  [PaEN]

-- New Pitt-Duquesne Study Shows Higher Exposures To Radiation In Road Dumping Of Drilling Wastewater When Appropriate Exposure Scenarios Are Used

-- Fair Shake Environmental Legal Services, FracTracker Alliance Call On Citizens To Report Road Dumping Of Oil & Gas Drilling Wastewater

-- Trout Unlimited: What Do Pennsylvania's Dirt And Gravel Roads Have To Do With Trout? 

-- PUC Imposes $1 Million Penalty On Energy Transfer Company For 2018 Revolution Pipeline Explosion In Beaver County [PaEN]

-- PUC Orders More Than A Dozen Actions To Improve Safety In Construction, Operation Of Mariner East Pipelines; Sunoco Must Pay $2,000 Penalty [PaEN]

-- DRBC Extends Comment Period On Draft Regulations Covering Discharges Of Wastewater From Fracking Operations & Ban On Road Dumping Of Wastewater & Co-Products

[Posted: November 17, 2021]


11/22/2021

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