Legislative update: Well bonding, plugging funds allocation and energy choice bills on the move

The following article will appear in the July 2022 issue of The PIOGA Press.

Legislation has been on the move directing how the Department of Environmental Protection can spend federal funds for plugging orphan wells and also provide consistency and predictability for conventional oil and gas well operators by fixing the bond amounts as determined by the General Assembly rather than allowing the Environmental Quality Board (EQB) to implement bonding increases via regulation.

The measure—House Bill 2644, sponsored by Representative Martin Causer (R-McKean)—has won the approval of the House of Representatives and was up for consideration by the full Senate as of early July.

Meanwhile, with House approval on July 6, the General Assembly has sent Governor Tom Wolf a bill that ensures consumers are not restricted in their choice of energy sources by municipalities.

Under HB 2644, 80 percent of the funds to be received by Pennsylvania for orphan well plugging under the federal Infrastructure Investment and Jobs Act would go to the Department of Environmental Protection’s existing orphan well plugging program and 20 percent to a new oil and gas well plugging grant program within DEP. Under the new program a qualified contractor could receive a grant of $10,000 or $20,000 to plug a well, depending on the depth. DEP may increase the grant amounts if it finds it is not receiving an adequate number of applications.

The bill also defines who is a “qualified well plugger” eligible for grants and specifies that those who plug wells under the provisions of the legislation are immune from civil liability except for damages resulting from gross negligence or willful misconduct.

Well bonding

HB 2644 designates the power to set oil and gas well bonds to the legislature, which, Representative Causer said in his sponsorship memo, “would provide consistency and predictability for conventional oil and gas well operators by fixing the bond amounts as determined by the General Assembly, rather than allowing the Environmental Quality Board to implement bonding increases via regulation.”

He continued: “Regulatory certainty is critical to ensuring that currently producing wells do not become orphan wells due to small, local operators going bankrupt. Further, many of the conventional oil and gas operators are well-positioned to use their expertise to assist the Commonwealth by participating in the new plugging grant program.”

Last November, the EQB accepted a pair of rulemaking petitions filed by activist groups calling for conventional well bonds to be increased from $2,500 per well, or a blanket bond of $25,000 for 10 or more wells, to $38,000 per well—supposedly to reflect the actual cost of plugging abandoned wells (December 2021 PIOGA Press, page 1). A second petition seeks to increase the bond for an unconventional well to $83,000 from the current tiered system that ranges from $4,000 to $10,000 per well. The EQB directed DEP to study the rulemaking petitions and make recommendations. No action by DEP has been forthcoming.

Under the Causer bill, the per-well bond for wells that are not unconventional wells would be set at $2,500, and the EQB would not have any authority to adjust the amount. An operator may file a blanket bond of $25,000 for all of its wells. Starting six months after the effective date of the legislation, for each conventional well drilled by an operator, the bond amount for the operator would increase by $1,000, with the total blanket bond not to exceed $100,000.

Additionally, the blanket bond increase of $1,000 is to be waived by DEP if the operator provides evidence that within the previous 365 days the operator plugged an orphan well at its own expense for which the operator was not the responsible party.

HB 2644 moved quickly through the legislature after its introduction on June 2. It passed the House by a vote of 109-91 on June 20 and was approved by the Senate Environmental Resources and Energy Committee on June 30, and then by the Appropriations Committee on July 6.

Another related bill, HB 2578 sponsored by Representative James Struzzi (R-Indiana), would require DEP to award contracts for oil and gas well plugging to Pennsylvania companies before considering out-of-state firms. The measure passed the House by a 122-78 margin on June 20 and was referred to the Senate Environmental Resources and Energy Committee.

Protecting energy choices

Legislation has been sent to Governor Tom Wolf that protects consumers’ energy choices. SB 275, sponsored by Senator Gene Yaw (R-Lycoming), prevents Pennsylvania’s 2,500-plus municipalities from banning access to certain utilities such as natural gas. The “fuel neutral” proposal ensures no choice, including renewable energy, is discriminated against.

“This will preserve access to reliable (utility service), no matter where residents live, and prevent a chaotic patchwork of regulations that ultimately undermine statewide environmental and energy policies,” Yaw said. “It also reaffirms what many local and statewide officials, including the Pennsylvania Public Utility Commission, already understand to be true: municipalities do not have the authority to restrict energy sources.”

Cities across the nation have already taken steps to ban natural gas in newly constructed buildings. The short-sighted climate policy prioritizes ideological purity over sound energy policy that’s inclusive of all energy options residents may want—or need—to access, Yaw said.

Specifically, SB 275 directs that a municipality may not:

Adopt a policy that restricts or prohibits—or has the effect of restricting or prohibiting—the connection or reconnection of a utility service based on the type of source of energy to be delivered to an individual consumer within the municipality.
Discriminate against a utility service provider based on the nature or source of the utility service provided for an individual consumer.

The legislation passed the Senate by a 35-15 vote last October and won House approval 117-83 on July 6. As of July 7, the governor had not indicated his intentions to sign or veto the bill.

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