Dear RDA Members and Friends,
The website address link posted for the organization Clean Streams PA in last week's newsletter was outdated. The current address is:
Please explore the site and the excellent information on orphan and abandoned wells from our friends at this Potter County based group. Sorry for the mistake.
On another note, the Governor's Energy Executive, Patrick Henderson sent the following e-mail in response to the newsletter. As he requested, we are publishing it to you in its entirety.
Dear Mr. Kisberg,
I hope this email finds you well. I am addressing this email to you since we have met and chatted on occasion.
First, I am pleased to hear that my letter to the Williamsport Guardian will be published in the upcoming edition. Given the blatant misrepresentations, false accusations and outright distortions contained in the article, it is good to know that the paper's readers will receive some accurate information.
In addition, while I came across the email by happenstance, if you should have questions for me, please do not hesitate to contact me directly. It seems plausible that if questions are being posed to me in an email widely circulated to your members, your organizations would make some effort to actually contact me. I am easily accessible.
With respect to your questions, let me offer the following information:
� There is no current requirement that an operator must plug specific wells for which they have no legal or other responsibility for; that is, they did not drill, have ownership or lease of, participate in the construction of or derive any economic benefit from these particular wells. I am hard pressed to think of another business which is required to pay the costs of another's responsibilities. I am unaware of New York or any other state requiring an entity to assume financial responsibility for an activity for which they bear no responsibility for. Should NY do so, I would of course be interested in how they do so and structure it. We can always learn from other states, just as many states are now learning about the tremendous positive regulatory standards now in place in PA, both through Act 13 under Governor Corbett's leadership and through amendments to DEP's Chapter 78 drilling and plugging requirements.
� That said, oil and gas operators in PA do contribute to the plugging of abandoned and orphan oil and gas wells for which they have no responsibility for. They do this through the following:
o Under the Oil and Gas Act, now codified in Act 13, every oil and gas permit applicant pays an additional $50 to plug abandoned oil and gas wells. DEP pools this money and uses it to plug high-priority, abandoned wells which pose a safety threat or a threat to the waters of the Commonwealth
o In addition to the $50 surcharge above, every applicant for an oil permit must pay $100, and every applicant for a natural gas permit must pay $200, into the orphan well plugging account. DEP uses the money for the same purposes as identified above.
o The Impact Fee authorized under Act 13, and paid by the natural gas operators, provides revenue for a host of uses, including the Environmental Stewardship Fund. DEP receives a portion of money from the Environmental Stewardship for a variety of uses, including supplementing efforts to plug high priority abandoned and orphan wells.
� The focus on the bonding amounts in the article too easily simplifies the issue, presenting the issue as if the amounts of the bonds are the maximum financial exposure of a company to plug a well. That is simply not true. Bonds act as a hedge, to ensure some amount of money is set aside should an operator fail to meet its statutory obligations to properly plug a well, and all of its other assets have been exhausted or seized. Act 13 continues the Oil and Gas Act's requirement that - whatever the cost - an oil and gas operator is required to plug a well to DEP specifications (updated in Feb. 2011) at the operator's own expense. As you know, the vast majority of Marcellus operators are publicly traded companies, which significantly enhances both their assets available to ensure all wells are plugged properly, but also the public and shareholder's attention to ensure that they both meet and exceed their statutory obligation.
� As you know, the Marcellus Shale industry has seen a consolidation of the number of operators in recent years, as well as the entry into Pennsylvania of large, world-class, publicly held companies. From a well-plugging perspective, the advent of the Marcellus Shale is most likely the biggest and most beneficial event in decades. As smaller, legacy operators have been acquired, so too have their liabilities. To protect themselves and to ensure that any inherited environmental liability is addressed, we have seen several large operators (Shell, for example, but not limited to them) acquire literally thousands of smaller, shallow wells and announce that they will plug all of them - including those they have direct responsibility for, and those they may not, but which happen to be located within the same oil or gas fields. All of this at significant private expense, with no taxpayer dollars involved, plugging wells at a rate that the Commonwealth would never be able to achieve by itself.
Thank you for reading my email. I trust that I have responded to the questions raised, and would appreciate your sharing this email with your members, unedited, since these questions were posed to me. I would not wish your dedicated readers to think I was unresponsive.
Thank you again
Patrick Henderson, Energy Executive
Office of Governor Tom Corbett
238 Main Capitol Building
Harrisburg, PA 17120
(717) 772-3820
www.governor.state.pa.us
In our response to Mr. Henderson, to be formulated after the holiday weekend, we will mention a study by Carnegie Mellon University Department of Engineering and Public Policy Professors, Austin L.Mitchell and Elizabeth Casman, tilted, "Economic Incentives and Regulatory Framework for Shale Gas Well Site Reclamation in Pennsylvania", as well links to stronger regulations in Alaska listed below:
http://www.legis.state.ak.us/basis/folioproxy.asp?url=http://wwwjnu01.legis.state.ak.us/cgi-bin/folioisa.dll/aac/query=%5bJUMP:'20+aac+25!2E025'%5d/doc/%7b@1%7d?firsthit
Also we will point out that Texas allows individual municipalities to set their own bonding amounts.
Best wishes for a Happy Mother's Day to all,
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