Dec. 03–The Ohio Department of Natural Resources is revving up its program to plug oil and gas wells that were left behind by their owners.
State lawmakers more than doubled the plugging program’s budget earlier this year to $15 million.
ODNR plans to plug 173 wells this fiscal year, and has entered contracts to plug 55 of those wells at a cost of $3.6 million since July 1.
ODNR spent $6 million to plug 83 wells last fiscal year, a price tag and number of wells that were records for the plugging program, which has been around since the mid-1970s.
The new funding has allowed the program to put together a robust plugging plan, said Steve Irwin, spokesman for ODNR’s Division of Oil and Gas Resources Management.
“It’s exponential growth headed in the right direction,” Irwin said.
Orphan wells are oil and gas wells that haven’t been plugged properly and don’t have an owner who could pay to do that work. Orphan wells leak oil, natural gas and brine into surrounding water and soil and can cause explosions when natural gas collects in any nearby buildings.
ODNR has identified nearly 750 orphan wells in 61 counties across the state, but the true number is unknown. Some 250,000 wells have been drilled in the state since 1860 and just 61,000 are producing. The rest are potential orphans depending on if and how they were plugged, and whether the owners are still around.
The cost to plug a well can range from $20,000 to nearly $200,000, depending on the well’s depth, location and the difficulty of the job.
State lawmakers passed House Bill 225 earlier this year to beef up ODNR’s plugging program and the law took effect in late September.
Ohio already earmarked a percentage of the Oil and Gas Well Fund, which collects a tax on oil and gas production and fees paid by drillers, for the plugging program. Shale drilling ballooned the fund from $8.2 million in 2013 to $75.7 million last fiscal year.
The final version of House Bill 225 increased the plugging program’s share of the fund from 14 percent to 30 percent of the previous fiscal year’s collection.
The bill also streamlined the steps ODNR must take to locate well owners before plugging a well and allows landowners to hire contractors who are then paid directly by ODNR. Previously, ODNR reimbursed landowners who hired contractors, creating a tax liability for the landowners.
Irwin said ODNR has adopted changes to the scope of well-owner searches and notifications and in how it prioritizes which wells get plugged. ODNR also is working on a new contract for the landowner grant program.
ODNR also will have to give quarterly and annual reports on the plugging program, but those deadlines have not yet been reached, Irwin said.
Groups representing landowners, environmentalists and the oil and gas industry supported the reforms.
“All Ohioans, especially those with orphan wells on their property, stand to benefit greatly from this bill,” Sarah Spence, government affairs director for the Ohio Environmental Council and the Ohio Environmental Council Action Fund, wrote in an email.
Matthew Hammond, executive vice president of the Ohio Oil and Gas Association, said Ohio has a unique opportunity to eradicate orphan wells. More well plugging also should help the state’s conventional drillers, who often work as plugging contractors, and have not necessarily benefited from the boom in shale drilling.
“I think it’s going to take some time for this program to really take off, I think we recognize that, but the framework is there that this program could be up and running at a pretty aggressive level and spending that statutory requirement,” Hammond said.
Passage of the new law has raised awareness about orphan wells, and Irwin said he recently spoke to a Farm Bureau group in Guernsey County and plans to do another event in Cuyahoga County.
“Interest in the topic is bringing in new wells and so we’re certainly seeing more referrals,” he said.
Some of new plugging projects are tied to the shale drilling that boosted the plugging fund, Irwin said. ODNR recently entered a contract to plug two wells that are under a new power line in Noble County. The new power line was there because of grid adjustments to accommodate new natural gas-burning power plants that have been built in Ohio to take advantage of abundant Utica Shale natural gas.
“We’re kind of going full circle all in one little example,” Irwin said.
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