Pennsylvania oil lobby keeps abandoned wells unplugged | Environment | Pittsburgh | Pittsburgh City Paper

Pennsylvania oil lobby keeps abandoned wells unplugged

The oil and gas industry could jeopardize federal funding to clean up the state’s thousands of abandoned and leaking wells

click to enlarge Pennsylvania oil lobby keeps abandoned wells unplugged
Photo: Chris Goodney/Bloomberg via Getty Images
An abandoned oil well pipe stands in the Allegheny National Forest near Marienville, Pa.
This story was first published on May 6 in Capital & Main.

Fluorescent lights beaming down on his head, Arthur Stewart took a seat at a table facing a panel of legislators in a nondescript room in the Pennsylvania State Capitol in Harrisburg. On a Monday morning in early February, he was there to meet with the Pennsylvania House Environmental Resources & Energy Committee to provide evidence of one of the state’s major environmental hazards. He guided lawmakers through a series of slides, eventually reaching one with a jarring photo: a piece of rusted pipe jutting out of the frost-covered forest floor, tucked between barren branches. Flames pour out of the top of the pipe: It’s an abandoned gas well, one of hundreds of thousands in the state that is emitting methane, which Stewart has lit on fire to demonstrate the danger.

“I lit this well so that you could get a visual image of what’s happening every minute of every hour of every day of every month that that well has been sitting there,” he told the meeting of legislators, who’d gathered to discuss the disbursement of the influx of $104 million in federal funding to address the state’s orphaned and abandoned oil and gas well crisis.

Stewart is no starry-eyed environmentalist. He’s the president of Cameron Energy Company and the founder of the Pennsylvania Grade Crude Oil Coalition, an industry lobbying group. And despite the dramatic evidence he provided of the hazards of abandoned wells, he was there in part to oppose proposals to increase the rates that oil and gas companies have to set aside for plugging such wells.

That resistance could potentially endanger the state’s ability to get even more federal money to plug the wells through a round of performance grants earmarked for states that tighten their regulations. (Pennsylvania could receive up to $411 million over 10 years under the federal legislation.) The industry has long had a powerful influence on lawmakers in the state, where the country’s first successful oil well was drilled back in 1859, and has helped shape legislation that affects oil and gas companies.
click to enlarge Pennsylvania oil lobby keeps abandoned wells unplugged
This 1865 engraving depicts a party of senators, bankers, prospectors, and journalists visiting Pithole City, an oil boomtown in Pennsylvania’s Venango County.
At the meeting, Stewart described what it takes to plug wells like these, of which there are an estimated 300,000 to 500,000 in Pennsylvania, which have been left inactive and unplugged by companies that deem them no longer lucrative. As Capital & Main reported in December, only around 13,000 (2-4%) of them are included on the government’s plugging list. Safely capping them off, and halting their emissions, requires scraping the innards from the well with a rig, filling it with a cement plug, and topping it off with a case, Stewart told the committee. It’s a process that can run companies like his thousands of dollars.

Raising plugging rates, like the Biden administration is currently encouraging with a provision of the $1.2 trillion bipartisan infrastructure bill that allocates more funding to states that tighten their regulations, could be devastating for companies like Cameron Energy, Stewart argues. In the wake of COVID-19, the conventional oil industry has been “facing difficult times,” he told the committee. Raising fees for the industry would lead to more abandonment, which would only heighten the state’s orphaned well crisis, he argued.

“Let’s be careful to not squeeze the conventional industry out of business,” Stewart warned the committee. “You’re going to need a robust industry, because even when this federal program is done, when the many abandoned wells remaining — and remember, we have 100,000-plus wells that we currently operate — we don’t want to see those go into the abandoned category and make the situation worse.”

In January, the state learned it would receive millions of dollars for plugging orphaned and abandoned wells, the second-largest allocation in the country behind Texas, with the potential of receiving two $20 million performance grants should it raise its plugging rates. Soon thereafter, state environmental groups crafted two petitions to accelerate the process, one for abandoned conventional oil wells, which are older, shallower, and comprise an estimated 89% of the state total, and one for unconventional wells, which are newer and drill deeper into the earth, such as fracking wells.

Abandoned oil and gas wells constitute the 10th largest source of human-caused methane emissions in the U.S.

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The petitions, drafted by Sierra Club Pennsylvania and five other environmental advocacy groups, call on the state to raise bonds for well cleanup from $2,500 to $38,000 per well for conventional wells, and from $10,000 to $83,000 per well for unconventional wells — rates derived from an analysis out of the University of Pittsburgh. The petitions, which currently sit with the state Department of Environmental Protection’s (DEP) Environmental Quality Board (EQB), would help Pennsylvania secure up to $40 million in additional federal funding if passed.

“The current system does not work,” the petitions say, resolutely. “Failing to set bond amounts equal to the cost of plugging wells results in the state allowing the environment to be degraded without ensuring that wells are plugged and land is remediated after drilling ceases … The EQB must use its delegated power to prevent this looming environmental and financial catastrophe.”

The environmentalists’ push to tighten regulations represents an attempt to make up for years of extremely low fees collected from the industry that have been wholly inadequate to solve the scope of the mess created. This imbalance is due to a legacy of industry influence over the crafting of legislation, Capital & Main has learned after dozens of interviews and months of poring over campaign finance, lobbying, and legislative records.

Many of these wells were drilled more than a century ago, when regulations and record-keeping were lacking — as a result, the state often can’t determine who should be held accountable. But even when a responsible party can be named, industry groups like the one Stewart leads are working hard to ensure that cleanup costs remain as low as possible, even amid growing recognition of their contribution to the climate crisis.

Abandoned oil and gas wells are a leading source of emissions of methane — a greenhouse gas widely understood to be 84-86 times more potent than carbon dioxide in its atmospheric warming potential over a 20 year period — and abandoned wells constitute the 10th largest source of methane in the U.S., a 2021 analysis out of McGill University found.

Major statewide industry lobbying groups have strongly opposed the legislation. In November, the Marcellus Shale Coalition sent a letter to the Pennsylvania EQB urging the agency to reject the petitions, arguing that the body doesn’t have the legal power to approve them — a claim that is highly contested, sources tell Capital & Main — and that there is “no demonstrated need” to raise the bonds. (One staff member of the Marcellus Shale Coalition sits on the EQB.) The Pennsylvania Independent Oil & Gas Association (PIOGA), another industry group, made the same arguments in a public statement in December.

“PIOGA contends that the bonding proposals would financially harm operators, with the potential to put some out of business,” the statement reads. “Full cost bonding for conventional wells that are likely to continue to produce for 30-60 years would do nothing to solve the Commonwealth’s existing orphan and abandoned well problem.”

“Environmental regulation and enforcement in Pennsylvania are obviously politicized. That corrupts the process and puts people and the environment at risk.”

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Both the Marcellus Shale Coalition and PIOGA declined Capital & Main’s request for comment.

The industry push to quash regulations intended to help address the climate crisis is nothing new in Pennsylvania, the birthplace of the U.S. oil and gas business. The fossil fuel industry has for decades been donating to politicians who support lax regulations — those the Biden administration and environmental advocates are seeking to overhaul — according to a review of state Senate and House records and campaign finance data. What’s resulted is a landscape dotted with polluting, methane-emitting abandoned wells, and an underfunded regulatory agency with few resources to meaningfully tackle the problem.

“When it comes to plugging, Pennsylvania’s law is a joke,” says John Quigley, former secretary of the Pennsylvania DEP and now a director of a research center at the Harrisburg University of Science and Technology. Quigley’s year-and-a-half-long tenure as DEP secretary came to an abrupt end on a quiet Friday afternoon in May of 2016. Known as an outspoken critic of the oil and gas industry, Quigley had a tendency to speak his mind in the workplace, sometimes with profanities. It was the use of the “f word” in an email to environmental groups over their lack of support for pending gas regulations that ostensibly led to his firing that day.

But what happened leading up to Quigley’s departure matters less than what happened afterward. The day after he was let go, Quigley read in the newspaper that a $9 million fine he had issued to fossil fuel company Range Resources – Appalachia had been quietly rescinded. It was the largest fine assessed to an oil and gas company in the agency’s history — over a faulty oil well that leaked methane into a nearby stream and drinking water supplies — and as the head of the regulatory body, Quigley was the only one with the power to drop it.

The DEP told Capital & Main that the well has yet to be plugged, and Range Resources has repeatedly appealed the agency’s orders that it clean the well. The experience left a bad taste in Quigley’s mouth — one that clearly remains almost six years later. He says it was far from a unique experience in his time at the DEP.

“Environmental regulation and enforcement in Pennsylvania are obviously politicized. That corrupts the process and puts people and the environment at risk,” Quigley says, citing a laundry list of examples including receiving complaints from legislators when the department inspected or fined certain companies, and frequent requests to expedite permitting for other favored companies.

Pennsylvania’s bonding scheme makes it more financially lucrative to orphan a well and forfeit a bond than it is to properly plug it.

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The legislation that governs abandoned well plugging fees, though set by state legislators outside the DEP, offers a strong example of how this plays out.

When an oil company applies for a permit to drill a well in Pennsylvania, as in many other states, it is required to put forth a bond: Should the company decide to forgo plugging the well itself once it’s no longer lucrative, regulators can use the amount they’ve collected from the company upfront to safely seal it off on its behalf.

But the state’s required bond amounts are a fraction of the price of plugging. The average oil well costs between $20,000 and $40,000 to clean and cap, but companies are only charged between $2,500 and $10,000 for individual bonds upfront, depending on the depth of the well and the type of bond. (Capital & Main covered this discrepancy, and its implications for Pennsylvanians, extensively, in part one of this series.)

Pennsylvania’s bonding scheme — though far from an outlier among oil-producing states — makes it more financially lucrative to orphan a well and forfeit a bond than it is to properly plug it, leading to a plethora of old, polluting wells across the state.

These rates were set in 2012 by Act 13, an amendment to the 1984 Oil and Gas Act that was debated over the course of a few weeks in state committees and rushed through to approval, critics say. Though still inadequate to cover the cost of plugging, the bonding amounts laid out in Act 13 were an improvement over the $2,500 per well or $25,000 blanket fees that operators had been charged since 1984 (while statutory provisions allowed the state to raise bonding amounts every two years to reflect the updated cost of plugging, it did not).

Lawmakers were well aware of the true cost of plugging wells. In committee debate over Act 13, a number of state assembly members opposed to the proposed legislative amendment referenced a 2011 Carnegie Mellon study that found that the average well-plugging cost in the commonwealth was “in the vicinity of $100,000” per well, far below the amounts set out in the legislation.

The staunchest supporters of the bonding rates in Act 13 (deemed “woefully inadequate” by current DEP Secretary Patrick McDonnell) received thousands of dollars in campaign contributions from the oil and gas industry while the legislation was being debated, according to an analysis of Senate and House journal records and political donation data from the Pennsylvania League of Conservation Voters.

Among them were Republican Sen. Joseph Scarnati and Rep. Mike Turzai, who accepted $153,874 and $94,800, respectively, in political donations from the oil and gas industry between 2011 and 2012, receiving far more money from the industry than any other members of the state Legislature over the course of at least half their 20-year careers in office. Both men served in oil-rich western Pennsylvania, and both were, for the latter half of their tenures, among the most powerful men in state government — power they wielded to serve the interests of an industry by which they were being paid off.

Scarnati, who represented northwestern district 25, spent 13 years as president pro tempore of the state Senate, two of them, from 2008 to 2010, as lieutenant governor. As president pro tem, he appointed senators to committees, including Eugene Yaw (R-23) to the position of chair of the Environmental Resources and Energy Committee, which oversees the state’s energy resource development and conservation efforts. (Yaw personally leases his own land for fracking.) In 2013, Scarnati defended a nominee for DEP secretary who publicly dismissed the impact of global warming on humans and ecosystems.

For his part, Turzai, who represented southwestern district 28, served as Republican House majority leader from 2011 to 2014 before being elected speaker in 2015. Turzai, too, was embroiled in claims of supporting climate denialism when in 2019 he appointed Daryl Metcalfe, a Republican state representative who once said reducing atmospheric CO2 would kill his vegetables, to the House Environmental Resources and Energy Committee. Turzai also appointed Metcalfe to the Climate Change Advisory Council.

Scarnati and Turzai both pushed to keep bonds for well cleanup low. Scarnati, who has since gone on to work for Allegheny Strategy Partners, a lobbying firm for the resource extraction industry, called the proposed bonding amounts the “toughest in the nation” in a February 2012 committee meeting. (As Capital & Main reported in December, Pennsylvania’s bonding rates are, in fact, among the lowest in the nation.)

In total, fossil fuel interests have donated over $11 million to Pennsylvania political candidates on both sides of the aisle between 2007 and 2018.

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Turzai, who now works as general counsel for Peoples Gas, advocated for Act 13 during a November 2011 House meeting, citing bonding amounts as evidence that the act “actually increases safety requirements throughout the State of Pennsylvania, for all of its citizens and environments.” Neither Turzai nor Scarnati responded to a request for comment from Capital & Main. Those claims were contested by Democratic lawmakers, like then Sen. Jim Ferlo, who told the Senate the bonding requirements were “as good as not having any.”

The pair’s ties with the oil and gas industry don’t stop at campaign donations. According to political disclosure forms submitted during their time in office, Scarnati accepted $1,612 in “hospitality” from Joseph Dawley, former attorney for natural gas producer EQT, in 2016, while Turzai accepted a private plane ride worth $11,000 from Stephen Frobouck, who was president and CEO of American GTL (a natural gas refining company) in 2019.

In total, fossil fuel interests have donated over $11 million to Pennsylvania political candidates on both sides of the aisle between 2007 and 2018 to influence policies such as Act 13 ($2 million was donated between 2011 and 2012), per campaign finance data from the Conservation Voters of Pennsylvania. The industry also spent $69 million on lobbying in the same period, with spikes in 2011 and 2012.

Albeit meager, the increases in bonding rates that Act 13 accomplished didn’t last long.

Passed in February 2012, the legislation increased fees for conventional wells (or older, shallower wells) to $4,000 per well. By July of that year, this amount had been lowered to $2,500 — the original fee set in 1984 — via an amendment to the state fiscal code. A legislative aide who was present for a discussion at the time said this reversal was the result of lobbying from industry groups like the Marcellus Shale Coalition. State lobbying records show that the group nearly doubled its spending between the last quarter of 2011 and the first of 2012, when Act 13 was being debated in the Legislature. Its spend then remained steady at nearly $1 million per quarter throughout the year while the fiscal code amendments were up for debate. By the next year, its expenditures had dropped again.

“I find it reprehensible that we had agreement on Act 13 on the obligations, and I do note that the bonding requirements for conventional oil and gas wells have now been lowered,” Ferlo said in a hearing for the bill that amended the tax code at the time, per Senate journal records. “I want to state for the record, I think this is absolutely undemocratic.”

The Pennsylvania oil and gas industry has long played an outsized role in processes for setting fees — back in 1984, the legislation that first set bonding requirements on orphaned and abandoned wells was carefully crafted to apply only to any active wells that were drilled beyond that point. That left existing orphaned and abandoned wells fiscally unaccounted for; it’s a gaping hole, and one left by design, says Dave Hess, who served as secretary of the DEP in the early 2000s after a long career in state government. He now spends the bulk of his time in citizen journalism, penning the Pennsylvania Environmental Digest, a daily newsletter that’s often critical of the state’s oil and gas industry and its regulators.

The omission of bonding requirements for wells drilled before 1984 is one that neither environmental group petition currently on the table addresses, Hess says.

“Those active pre-1985 wells, which are the majority of [wells that remain active today,] don’t have any bonding right now,” Hess says. “Nobody's addressing that huge piece of the pot.”

Stewart, of Cameron Energy, told Capital & Main that he’s also opposed to any regulation that might keep today’s industry players on the hook for wells that were orphaned centuries ago. His company voluntarily plugs a handful every year as an act of service, he says, and he encourages others to do so, but believes it’s only fair for the government to handle the cleanup of legacy wells.

He also reiterated his view that excessive regulation in the form of bonding would put mom-and-pop oil drillers out of business; many oil companies are barely getting by as it is, he says, and thus cannot afford additional fees in the form of bonds, especially in the tens of thousands. “When we die, I guess these wells are going to be your problem,” he cautioned.

This legacy of lobbying to keep oil producers’ costs down has long deprived the state government of the funds to properly plug its abandoned wells.

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“They've been saying since 1983 and ’84 that they're going out of business and yet, they're still here,” Hess says of the state’s oil and gas industry. “Conventional oil and gas drillers continue to try to abandon wells without plugging. The conventional side of things is one continuous history of trying to avoid regulations.”

“The extraction industry, they run the show, they set the agenda,” says Rabbi Michael Pollack, executive director of March on Harrisburg, a grassroots anti-corruption organization based in Pennsylvania that’s currently advocating for the implementation of a gift ban for politicians in the commonwealth. “They're there in every room, they're in every meeting. You see them all over the capital, the natural gas lobbyists. You're in a hearing room, and there's 15 of them on the back wall.”

This legacy of lobbying to keep oil producers’ costs down has long deprived the state government of the funds to properly plug its abandoned wells, despite evidence that it’s known the scope of the problem for decades. The state launched its plugging program in 1984 and plugged its first well in 1989, two years before an active well explosion under a Pittsburgh subdivision leveled a home, injured four, and cost the state $273,600 to plug, according to the Pittsburgh Post-Gazette.

By 2000, the DEP got a boost in the form of the “Growing Greener” initiative, which created a $4 million statewide fund slated to plug 55 wells, and motivated the state to plug several hundred wells in the following years. Pennsylvania’s plugging rate peaked at around 450 in 2002, but declined from there except for another peak in 2007.

Over the years, as incidents surrounding abandoned wells and knowledge of their harms mounted, plugging rates continued to decline. They hit their lowest ever rate, 4 wells, in 2018, the same number that was plugged in 2021. Quigley attributes this decline to the anemic funding level for plugging activities provided in state law.

The agency is currently revamping its plugging efforts as it gears up for a new stream of funding from the federal infrastructure bill. On the DEP’s Office of Oil and Gas Management website is a prominent notice calling for “plugging” and “plugging support” contractors to apply for funds.

To date, 133 companies have responded to the call, Scott Perry, former deputy secretary for oil and gas management at the DEP, said in testimony in early February. The agency has issued a ruling prohibiting companies with unresolved environmental violations from receiving well-plugging contracts.

With $104 million, at around $68,000 per well, the average per-well cost that the agency is budgeting for, it can plug around 1,530 wells initially, though that number is likely lower when one factors in the cost of labor, leaks, and occasional replugging. The funding will take a slice out of the problem, but it won’t solve it.

In a testimony at the same House Environmental Resources and Energy Committee meeting at which Stewart spoke in February, Perry estimated that plugging the 26,908 wells that the state has documented would cost $1.8 billion; the DEP estimates that there are an additional 200,000 wells in the state, including those that haven’t been located, while independent experts estimate there are 300,000 to 500,000 abandoned and orphaned wells in Pennsylvania.

Laurie Barr, a citizen scientist who’s spent the bulk of the last 10 years hunting for Pennsylvania’s lost wells on her own, says she did the math one time.

“By the time you get to the end of the list, you would’ve had to have replugged those wells many times over,” she said.

“There's no fiscal mechanism in place to take care of these long-term,” she added. “Nobody's thinking like that.”

She’s located hundreds of leaking wells, like the one Stewart presented to the House Environmental Resources and Energy Committee in February, purely of her own volition — including one in her own backyard. After reporting many of them to the agency, only to be met by inaction, Barr remains skeptical. Even with a surge in federal funding to solve a problem she’s obsessed over for years, Barr isn’t sure that state regulators will be able to withstand industry pressure and use the money the right way.

Meanwhile, thousands of wells continue to emit planet-warming methane and leach oil and gas into nearby soil and waterways. The link to the power that the fossil fuel industry holds in the state is not lost on Quigley.

“I know all about extractive industries that leave scars,” Quigley, who served two terms as mayor in Pennsylvania’s still-depressed anthracite coal region, continues. “Pennsylvania’s history shows that extractive industries have been allowed to privatize the profit but socialize the cost.”
This story first appeared in Capital & Main, an award-winning nonprofit publication that reports on pressing economic, environmental, and social issues. Copyright 2022 Capital & Main

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