Study: Well fees still aren't enough
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Plugging an abandoned Marcellus Shale gas well in Pennsylvania could cost $100,000 or more, and well bonding changes proposed by the Corbett administration could stick taxpayers with almost all of that bill, according to a study from Carnegie Mellon University.
The CMU study found that the new Marcellus gas well bonding fees, recommended by Mr. Corbett's Marcellus Shale Advisory Commission and now under consideration in the Republican-controlled Legislature, would require drilling companies to cover only a fraction of the costs of plugging and decommissioning old, nonproducing and abandoned gas wells.
The proposed new bonding requirements, while higher than those now in place, would eventually have dire economic and environmental consequences for the state, similar to those caused by the inadequate bonds required of the early coal, oil and shallow gas industries, the study said. It will appear in the journal Environmental Science & Technology and has been published online.
Neither the existing $2,500 per well bonding requirement nor the proposed increase to $10,000 per well are high enough to make gas drilling companies clean up after themselves or cover the costs of plugging and decommissioning a well, said Austin Mitchell, a doctoral student in the Department of Engineering and Public Policy at Carnegie Mellon University, who co-authored the study with Elizabeth Casman, an associate research professor in that department..
Well reclamation is important because unplugged wells allow drilling wastewater and well gases to come to the surface and cause surface and groundwater contamination, property damage and ecological harm. The state Department of Environmental Protection estimated in 2007 it would take 160 years to plug all of the already existing orphaned wells in the commonwealth.
Mr. Mitchell said continuation of the state's "blanket bonding fee," which allows a drilling company to cover all the wells they drill in the state for a bond of $25,000, isn't wise either, given that in the next 20 years, tens of thousands of new gas wells will be drilled into the Marcellus, Utica and Upper Devonian shale formations of Pennsylvania. Such blanket bonds are a bargain for companies drilling hundreds of wells but leave the possibility of taxpayers holding the liability bag.
Proposals under consideration by the Legislature could increase the blanket bonds to as much as $625,000, but Mr. Mitchell said "there's still no real attempt to make the bond match the actual cost of plugging a well" on private property.
First Published November 10, 2011 12:00 am
