VPaSEC Logo

Well Plugging:

In western Pennsylvania Oil wells are usually less than 1000 feet deep but newer Marcellus and Utica gas wells may reach a depth of 6000 feet or more. A properly plugged well requires that the gas, oil and coal strata be isolated from one another and from the fresh water aquifers. To accomplish this, the well casing must be removed and the well bore cleaned. The bottom of the well is then filled with a non-porous material. In crucial portions of the well (such as gas and oil formations, coal seams and fresh water aquifers) a cement plug is needed to seal off those zones from each other. Aggregate material is placed between the plugs. This process is expensive. The cost depends on the depth of well, its location and any problems associated with the well bore. Cost can range from two thousand to 20 thousand dollars for a shallow well and estimates are 100 thousand dollars or more for a shale gas well.

Plugging rig Rig in creek Well being filled Rig in creek

Click the image to see the larger view.

Who pays for plugging:

In theory the well owner is responsible for plugging the well when it is no longer productive. In reality most wells end up as abandoned or orphan wells. The boom and bust cycle of the oil industry typically results in something like the following.

During the boom period many wells are drilled. As the wells begin to lose their productivity, they are sold off to smaller companies with fewer resources who work on a lower profit margin. As the cycle continues toward bust the wells are owned by companies with so few assets that even if the state wants to it can't force the owner to plug the well. In the end the wells are abandoned and eventually become orphaned making it the state's (read that as the taxpayers') responsibility to plug the wells.

Part of the problem is that drilling laws require such a small bond be paid during the permitting process (Boom Stage) that owners are willing to just forfeit the bond during the Bust Stage. Large companies who want to stay on the good side of DEP do plug abandoned wells. But they a rare breed.

At the present time Act 13 of 2012 contains the following language (blue text below):

"Act 13 increases well bonding requirements, which are currently established at $2,500 per well or $25,000 for a blanket bond. Bond amounts shall be established based on well-bore length and number of wells operated, as follows:

For wells with total well bore lengths less than 6,000 feet:

    For up to 50 wells - $4,000/well not to exceed $35,000
    For 51-150 wells - $35,000 plus $4,000/well not to exceed $60,000
    For 151-250 wells - $60,000 plus $4,000/well not to exceed $100,000
    For more than 250 wells - $100,000 plus $4,000/well not to exceed $250,000

For wells with total well bore lengths 6,000 feet or greater:

    For up to 25 wells - $10,000/well not to exceed $140,000
    For 26-50 wells - $140,000 plus $10,000/well not to exceed $290,000
    For 51-150 wells - $290,000 plus $10,000/well not to exceed $430,000
    For more than 150 wells - $430,000 plus $10,000/well not to exceed $600,000"

If you do the math, assume that the driller will take the MOST expensive price model:

  • for wells less than 6000 feet that's $35,000 for 50 wells = $700 per well with the actual cost of plugging being $2000 - $20,000 per well.
  • for wells deeper than 6000 feet that's $140,000 for 25 wells = $5600 per well with the actual cost of plugging being $50,000 - $100,000 or more.

Good business economics dictate that the least expensive path is to just walk away from the bond. In effect the state is making it more profitable for the well owner to abandon the well.

The following information can be found on the internet from Anderson Environmental.

"In various regions throughout the United States, including Southern California, oil exploration was prevalent in the previous century, as well as today. Although existing oil wells are essentially the responsibility of the oil companies, some oil fields have long been abandoned by oil exploration companies, along with their history. In such cases developers and/or owners of said properties may be faced with uncertainties and adverse property conditions due to improper abandonment by the oil company based on current abandonment standards. Such adverse conditions may thwart development, create a hazardous situation, and ultimately adversely affect the monetary worth of the property."

Watch Anderson Environmental's well plugging video

Membership

We welcome new members and volunteers. Come to one of our meetings and meet the group.

Contact:John Kolojejchick
814-676-6435

Send us an email and we will add you to our email notification list.

Questions or Comments can be sent to comments@vpasec.org