Published: November 30, 2021

Surge in funds gives hope for plugging wells

How to distribute money next challenge for state

BY LAURA LEGERE AND ANYA LITVAK PITTSBURGH POST-GAZETTE

State environmental regulators have spent years ringing alarms about the scourge of abandoned oil and gas wells littering Pennsylvania’s landscape. The biggest hurdle has been getting funding to find and plug them before they fall into unmanageable decay.

With the new federal infrastructure law, Pennsylvania will have more money for well plugging than the state has ever seen. The next challenge is sorting out how to spend it.

The state Department of Environmental Protection estimates Pennsylvania could be eligible for as much as $395 million for finding and plugging abandoned wells over the next decade — or 10 times as much money as the state has spent on orphan-well plugging over the past 30 years.

That much money could pay to seal off as many as 16,000 open ownerless wells that pose environmental and public safety risks, according to the agency’s projections.

The operating budget for DEP’s plugging program has never exceeded $3.5 million in a year. In the peak year of this funding surge, its annual plugging budget could reach almost $80 million.

Kurt Klapkowski, a bureau director in DEP’s oil and gas office, called it “once-in-a-lifetime-type funding.”

“I’ve probably had five or six moments in my career where I really felt like I made a huge difference, and I’ve been doing this since 1994,” he told the state’s oil and gas technical advisory board in September. “I feel like this will definitely be another one of those situations where we leave Pennsylvania better than we found it.”

But scaling up a plugging program that has languished for lack of funds will bring fresh complications — from administering a vastly larger initiative to finding workers ready for the jobs.

New era, with money

The law contains several types of grants that will be administered by the U.S. Department of the Interior and dispersed to states. The clock is already ticking on some of them.

Pennsylvania is expected to receive $25 million in an initial grant that requires states to apply for the money within the next six months and spend it within a year of getting the funds.

“Remember, we spent $40 million over 30 years. We’re talking about $25 million in 365 days,” said Seth Pelepko, environmental program manager at the oil and gas bureau, during a presentation earlier this month for Washington & Jefferson College.

DEP has been readying for months for the initial funding round. Inspectors have been in the field verifying the location and conditions of about 500 orphan wells that the agency can group into contracts and quickly put out for bid. It has digitized historical records to make everything that is known about the old wells accessible to inspectors in an app. It has published guidelines for navigating the state contracting process for companies that have never plugged wells for the government before.

The next stage of funding will be much larger — and trickier to manage.

Formula grants — which are based on a state’s inventory of orphan wells and its recent oil and gas job losses — are expected to bring about $300 million to Pennsylvania. There is no immediate deadline to begin drawing on that pot of money, so regulators will have time to design strategies for how best to use it.

But once they receive the money, they have to spend it within five years.

There are also other types of grants — worth up to $70 million combined — if Pennsylvania dedicates more state money to plugging and takes steps to strengthen its rules to prevent more wells from being abandoned.

At its peak, DEP could be running more than 300 multi-well plugging contracts in a year, according to the agency’s projections. Between 2018 and 2020, the department had the funds to execute just nine contracts total.

“It’s something to be positive about, absolutely,” Mr. Pelepko said. “It’s something to be excited about. But it is something to really focus on — how we can do everything possible to prepare for a smooth transition into this era of greater funding. We’re really in uncharted waters.”

One way the agency is preparing is by querying contractors about their capacity to plug wells under government contracts, which can be cumbersome.

Through Nov. 10, the agency had received responses from almost 80 companies, and all of them said they were interested in plugging wells in Pennsylvania, Mr. Pelepko said.

About half of the companies that responded had plugged wells under a state-issued contract in the past. Two-thirds said they anticipate hiring additional staff if they are awarded contracts.

Hard to master

Plugging contractors with a long history in the state are well aware of how difficult it will be to turn a flood of money into thousands of cemented holes in the earth.

“I think it’s going to be a real challenge for the states to put together a program that spends the money wisely but still gets it spent,” said Steve Plants, president of Bradford-based Plants and Goodwin Inc., a well service and plugging firm that has been operating for half a century.

“I’ve always said I think people handle adversity better than they handle prosperity.”

Mr. Plants has been getting a lot of calls lately, he said, from “people who know nothing about plugging wells but who want to figure out how they can get attached to our wagon.”

Recently he talked to a financial firm that wants to procure carbon credits for its clients through plugging orphan wells that leak methane, a potent greenhouse gas.

The influx of federal money will be competing for scarce plugging resources.

A certain portion of Plants and Goodwin’s work, for example, is plugging orphaned or abandoned wells through contracts with state environmental agencies.

But another portion is the often-more-lucrative and stable work of plugging older shale gas wells — those that were drilled in the beginning of the shale rush or those that have run into problems with leaks or been stranded by a lack of pipelines.

The same kinds of environmental concerns over leaking methane that animated the federal legislation are also causing major oil and gas firms, under pressure to show greenhouse gas reductions, to accelerate their plugging programs.

“There’s going to be a real shortage of contractors, a lack of equipment, a lack of people and certainly a lack of skill,” Mr. Plants said.

“Well plugging, although it’s not sexy, it’s an art,” he said. “There are a lot of things you can do [wrong] that doubles and triples the cost of a project.”

Jason Nicholas, a managing member of Ohio-based Nick’s Well Plugging, said the labor shortage has been severe over the past year.

“They’re gonna have a lot of money they can’t get rid of,” predicted Mr. Nicholas, who started the company with his father just over a decade ago.

Nick’s Well Plugging has one crew of half a dozen workers. The company would like to add more, but “we can’t even get anybody in the door.”

Mr. Nicholas assumes the deterrent is the nature of the work itself: “It’s dirty, cold, and a lot of people don’t like to do that.”

There’s no formal training program for plugging professionals, Mr. Plants said, and training newbies is expensive and time consuming. They require constant supervision, and it could take months to determine if the worker is suited for the job or wants to stay in it.

Of Plants and Goodwin’s 55 employees, about 10 now live in other states like Texas, Oklahoma and Michigan. The company flies them in for jobs, pays for their lodging and gives them a per diem, then flies them home.

It’s expensive and “certainly nothing that I would have envisioned” in prior years, Mr. Plants said, or without the prodding of his son, whose idea it was to recruit experienced professionals across the country.

Many holes to find

Regulators say they know they will need an array of strategies for using the windfall.

They are hoping the $4.7 billion in new plugging funding nationally might entice large oil and gas firms to take on plugging projects that were too paltry to be worth their effort before, while also enticing small conventional oil and gas companies to pivot their focus to plugging.

With over a century and a half of drilling history, Pennsylvania has an estimated 200,000 more wells to locate, assess and research beyond the 8,900 that have been verified and put on the official list of abandoned and orphan wells.

Not all of the federal money has to be spent on cleaning out old wells and cementing them shut. It also can be used to find and characterize abandoned wells and remediate contamination they have caused.

The discussion at DEP’s oil and gas advisory board in September touched on ways to empower municipalities or nonprofits to locate abandoned wells, and whether some of the funds could be used for methane mitigation systems in neighborhoods that were built over buried old oil and gas wells that are unlikely ever to be uncovered and plugged.

Mr. Klapkowski said the law gives state oil and gas programs a lot of flexibility to tackle the abandoned oil and gas problems they face.

“The message we’re getting is this is money that is really intended to get this work done,” he said.

Laura Legere: llegere@ post-gazette.com; Anya Litvak: alitvak@post-gazette.com.