PA DEP to Study Petitions Seeking to Raise Oil and Gas Bonds

The state of Pennsylvania has been a leader in the production of oil and natural gas, dating back to 1859. This not only led to the start of the petroleum age for America but has vastly increased the popularity and usage of oil, which has remained consistent to this day. Although oil production remains high, the world has put forth significant resources into finding different types of renewable energy that can be used in the future. Coinciding with that, environmental organizations have also increased in popularity, to help preserve Earth’s landscape before it is too late.

As a result, the continuance of drilling oil has led to more questions being asked, which includes petitions being brought forth to address these issues. The Pennsylvania Department of Environmental Protection is set to study petitions that seek to raise the oil and gas bonds, which would require the gas well owners to plug their respective wells with no outside financial assistance.  Environmental groups that initially introduced the petitions argue that increases should not only occur but are necessary to protect both the state and its taxpayers from having to pay additional costs that companies did not account for; this is especially a problem for abandoned wells, which could involve even greater cleanup costs and environmental damages. 

If the petitions are successful, they would raise bond rates for traditional and shale wells that were drilled since 1985, to the full costs of plugging the well. Wells drilled beforehand would remain unaffected, as they don’t require a bond. According to the environmental groups, the cost of plugging a conventional oil and gas well is $38,000, while a Marcellus shale well can be significantly more expensive, at $83,000. 

As it stands today, Pennsylvania’s current bond rate for conventional wells is $2,500 per well, or a blanket bond of $25,000 to cover all of a company’s wells that were extracted. The current bond rates for shale wells depend on the length of the well, as well as the number of wells covered under a blanket bond, but usually amount to $10,000 or less per well.

All in all, it remains to be seen what will come out of these petitions; whatever the result, the topic of environmental conservation will continue to be discussed for years to come, as the world continues to assess available energy resources.

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Pa. DEP to study petitions seeking to raise oil and gas bonds to cover the full cost of plugging wells - Shale Gas Reporter