Will West Virginia have enough manpower and oversight to make the most of an unprecedented amount of federal funding to plug and reclaim orphaned gas and oil wells?
It’s a $25 million question.
July 15 will mark the beginning of bid openings to determine what contractors will handle cleaning up a tiny fraction of the state’s orphaned wells.
The bids will support the first phase of grant funding for which West Virginia is eligible under a federal infrastructure law enacted in November.
The state Department of Environmental Protection aims to ensure that 160 wells statewide are plugged at an estimated cost of $25 million in 12 months. The agency estimates that plugging costs will be roughly $125,000 per well, and added 25% overhead to arrive at its 160-well goal.
Since states must pay back whatever funds they have failed to obligate under a year, time is of the essence. The DEP expects the U.S. Department of the Interior to award the grants under the first phase this or next month.
“[W]e’ve got a plan. We hope it will work,” DEP Office of Oil and Gas director James Martin told the state Joint Natural Gas Development Committee during an interim legislative session meeting last month. “[W]e’re going to get as many plugged as we certainly can within the time period we have.”
The Interstate Oil and Gas Compact Commission, a multistate governmental entity that promotes what it calls efficient recovery of oil and gas resources and environmental health, estimated that West Virginia had 6,309 documented and 9,000 undocumented orphan wells in 2020. Orphaned wells generally are defined as wells with no solvent owner, making taxpayers liable for reclamation costs.
In 2020, Carbon Tracker, a London-based think tank researching climate change impacts on financial markets, estimated the costs of plugging gas and oil wells that ceased production in West Virginia exceeded $7.6 billion.
Orphaned wells leak oil and other harmful chemicals that contaminate groundwater, hurt wildlife, lower property values and emit methane, which has a 100-year global warming potential 28 to 36 times that of carbon dioxide, according to the U.S. Environmental Protection Agency.
West Virginia had the sixth-largest estimated number of orphaned wells in the country in 2020, heightening the stakes for the state to capitalize on the available Infrastructure Investment and Jobs Act funding for well reclamation.
But some well cleanup proponents fear the state is poorly positioned to implement the funding.
They fear the DEP’s shortage of inspectors and reliance on contractors to carry out the reclamation responsibilities and choose which wells are plugged will compromise the state’s cleanup oversight.
In recent years, the DEP has reported major manpower shortages in its Office of Oil and Gas, which manages the state’s abandoned well-plugging and reclamation program.
The state’s well inspection staff dwindling from 17 to nine in the past two years on the Legislature’s watch has concerned not just environmentalists but royalty owner advocates.
The office has faced a $1.3 million shortfall with its main revenue pipeline, permit fees, drying up amid oil and gas industry struggles.
In 2020, the office resolved to eliminate 14 of 39 positions, saving $1.1 million, according to agency officials. The ranks of inspectors have dwindled from 17 to nine.
“Now that there’s increased funding that’s coming into the state to do a good thing, to plug these old wells, it just underscores how important it is to have truly independent inspectors for the state,” Delegate Evan Hansen, D-Monongalia, said in a phone interview.
Hansen asked Martin during last month’s interim legislative session meeting whether his office has enough inspectors to oversee well plugging and reclamation enabled by the federal funding.
“[T]he answer is we are very much interested in increasing our inspection staff,” Martin replied. “There has been a lot of discussions over the last few weeks and few months that would help make that happen. I am cautiously optimistic with where that’s going. There’s been some good-faith efforts there to make that happen. So I’m optimistic that we’ll be able to get there with an increased field staff.”
Martin reported that the state’s abandoned well-plugging program recently added a third inspector specialist to oversee field operations and would add a permit reviewer to help state regulators adjust to a significant increase in plugging permits. The Office of Oil and Gas also would hire a procurement associate to assist state regulators in the contracting process, Martin said.
The West Virginia Surface Owners’ Rights Organization, the West Virginia Rivers Coalition and the West Virginia Royalty Owners Association have urged legislators to approve a sharp increase in Office of Oil and Gas inspectors to limit gas leaks that emit climate change-accelerating methane emissions and rob royalty owners of revenue.
Kentucky has a similar estimated number of orphaned wells as West Virginia, according to the Interstate Oil & Gas Compact Commission. The Kentucky Energy and Environment Cabinet’s Division of Oil and Gas is reviewing its staffing needs, but could potentially add between 10 and 20 people, Energy and Environment Cabinet spokesman John Mura said.
The DEP is requiring contractors to identify, inspect and prioritize what documented or undocumented wells to plug, in addition to plugging them and reclaiming the well sites. Under the terms of state-posted contracts, contractors will have the exclusive right to plugging orphaned, abandoned wells within the contract region.
The agency is awarding separate contracts for each of the state’s six geographic regions.
At least a quarter of all wells selected for plugging by the contractor in each region must be Class I wells — wells the agency has determined pose an immediate threat to human health or the environment, or impede mineral resource development enough to require immediate plugging.
The DEP usually selects what wells to plug.
Ted Boettner, senior researcher at the Ohio River Valley Institute, a pro-renewable energy research nonprofit, says it’s “disturbing” that the DEP is allowing contractors to choose wells to plug.
Boettner said contractors will be inclined to focus on wells that cost the least to plug beyond the 25% Class I requirement, noting it would be more ideal for all the wells slated for plugging to be Class I wells.
In Kentucky, Energy and Environment Cabinet field inspectors are prioritizing orphaned wells to be plugged with federal infrastructure funding, Mura said.
The DEP believes it is “impractical” to put together an estimated 160 projects in the funding phase’s one-year expenditure time frame, agency spokesman Terry Fletcher said in an email.
Fletcher said the usual procedure for state-funded well-plugging hinges on the DEP researching a selected well and its ownership history, developing an individualized plugging and reclamation plan, and acquiring all necessary permits within the project scope, with bids then solicited for each project.
The DEP is requiring contractors to hire compliance officers that must “maintain a regular presence” at well reclamation sites and ensure that contract requirements are met.
Boettner said he thinks the DEP subcontracting compliance officers to verify well cleanup isn’t a sound accountability strategy. Boettner said he believes that the DEP, at minimum, should have solicited separate bids for compliance officers.
“There’s a large incentive for that compliance officer, because they’re getting paid by the people doing the work, to ensure that they don’t find much and that they aren’t held accountable,” Boettner argued.
Project contract specifications say that compliance officers won’t replace oversight provided by the agency.
“[W]e’ll have our field staff that will still be part of [the] typical review on those sites, but there’s also going to be this additional component just because we’re going to have a lot of activity going on,” Martin said.
The DEP expects to inspect every well that is plugged during and after plugging operations, Fletcher said.
Contractors will have one year to finish the required workload. There are no milestone deadlines within that time frame, but program staff will maintain regular contact with vendors to ensure adequate progress is being made, according to Fletcher.
