Sunday, March 30, 2014

NYS DEC Hunting Down Orphaned Wells: Some Horse-Trading, Anyone?

Borrowed from the NYS DEC Minerals Division's 2010 annual report.
Well, now, this is interesting:  Minerals Division staffers with New York's DEC have spent the last year or so, delving into historical records and making on-the-ground visits — to see if they can locate hundreds of orphaned wells, most from very old, pre-regulatory oil and gas drilling.

So far, it looks like a struggle.

The original hit list would have totaled nearly 2,000 wells once coded on the state's computers as status "unknown" — essentially meaning there's a partial record of their existence, but nothing in the files showing they were ever appropriately plugged, and perhaps no reliable record of who originally drilled them, or who disappeared or went out of business technically owning them.  (And certainly no annual operator reports coming in — now, or if ever.)

As of March 30, 2014, the DEC's database shows they've so far found precise locations for only 93 of them ("unknown located"), but failed to find 449 ("unknown not found").  There are still currently records of 1,396 "unknown" wells left to go through.  And there are another 2,092 "inactive" wells, possibly with the potential to lapse over time into the "unknown" grouping.

The DEC's track record suggests they're only going to be successful about 20 percent of the time they go looking.  (Just an aside here:  It seems to me like this could be an interesting volunteer job for New York's overlapping communities of hikers or geocaching/GPS enthusiasts — especially out in Western New York, where the majority of these wells are undoubtedly situated.)

I first noticed some clues to this project back in February 2014 — but only because I happen to occasionally take a look at new records, or changes to old records, in the state's database of some 41,000 at least partly known oil and gas, storage, solution salt, geothermal, and other wells

There's been no press release.  But I did ask the DEC what was going on, and got back some confirmation in a recent email exchange with DEC spokesman Peter Constantakes.

The starting point for this well-finding project can be dated to about March 25, 2013, when the state's database started receiving re-coding changes to allow for these more finely distinguished categories of "unknown located," or "unknown not found."


Everything having to do with oil and gas in New York is inevitably going to be interpreted through the lens of the state's ongoing stalemate over fracking, which now dominates all popular understanding and misunderstanding of the business.  Tracking down lost wells is the regulatory equivalent of looking through stuff accumulating in a household attic.  And, as in domestic life, there's really only a few motivations which would trigger this sort of new activity.

First, New York's now 6-year-old flat-footedness with regard to the shale gas revolution (triggered by the technological advance of high-volume hydraulic fracturing, coupled with horizontal drilling) has had the unfortunate side effect of essentially also closing the state for much old-school oil and gas development activity.  You can't legitimately blame this downturn exclusively on New York's political incapacity to find a way to govern fracking; it's really more of an incapacity to govern coupled with fracking's changed economics for this branch of the resource extraction enterprise.  Drillers are still permitted to drill traditional, even horizontal, wells in New York, but the fact of the matter is they've largely responded to both economics and the state's permanently temporary shale gas moratorium by moving on to better prospects out of state.

New York's state of drilling decline, as illustrated by two charts from the DEC Minerals Division's most recent, 2012 annual report.
While New York has never ranked as a very big oil and gas player within the Appalachian basin, the state's traditional oil and gas permitting, completion, and production statistics since 2007 or so, without doubt, prove this decline — as illustrated by the charts I've inserted above.  All this has occurred contemporaneously — and, some might say, ironically or maddeningly — with boom times in PA, OH, and WV.  From a managerial perspective, this situation has also left New York's small group of publicly employed oil and gas patch specialists with much less work to do.  And so, now, they've got some time on their hands to tackle this back-burner job involving orphaned wells.

That's one interpretation.

Secondly — and I know this might seem unlikely to some — it's possible there are still some forward-thinking politicians and bureaucrats remaining in New York who can envision a future when the state does, in fact, slowly start permitting new shale gas wells, probably just in Southern Tier towns which can sustain political majorities that are willing to accept greater localized economic activity in exchange for greater localized impacts.  These new shale gas permits could be granted partially in exchange for a new requirement that non-mom-and-pop operators either plug, or pay to have plugged, one or more old orphaned wells, for every new one they want to drill.  This could be done, even if the new wells and the to-be-plugged old wells are situated counties apart.

That's another interpretation.

This is what I would call part of a horse-traded, compromise solution to the state's current political conflict over fracking.  And I admit there is some question as to whether compromise and horse-trading are still viable strategies in New York's new political environment, which has gotten very all-or-nothing.  As in days of old, under this scenario, neither side would get exactly what it wants.  The anti side wants a permanent drill ban (some even want to outlaw old-school wells, which have never before been the subject of much controversy).  And the pro side wants regulated drilling, but without too much added expense in the form of taxes based on production (New York already has this, collected by local governments), high permitting fees (New York already has proposed higher state fees to cover the higher costs of regulating shale gas), or over-the-top operational requirements (New York already has been touted as proposing the nation's toughest drilling regulations for these new kinds of wells).

Adding to such a compromise a long-sought solution to the orphaned wells problem seems like a slam-dunk idea that only extremists will inevitably argue against.  But first you would need to have a list of orphaned wells that are ready and waiting to get this work done.  The last time such a hit list was reported, in the Minerals Division's 2010 annual report, officials said they already had 500 priority plugging jobs in mind, waiting to turn up either a responsible party or sufficient public funding to get the work done.


Orphaned wells are a legacy problem going back all the way to the 1800's.  Like underground tanks at old gas stations, or industrial toxic waste sites now commonly re-branded as brownfields, orphaned wells are a made-for-crisis-journalism story, and the issue has been previously covered in unflattering detail (such as by Brian Nearing of the Albany Times-Union in a long report appearing Nov. 8, 2010, and also by Mary Esch of the Associated Press out of Albany, circa Sept. 26, 2012, in a story which appears to have been prepped by anti-frack activists, after having combed through the state's reports).

The orphaned wells break down into a hierarchy of trouble:

First, and hardest to deal with, are an unknown number of old wells that the department doesn't yet even know about, but which come to light by the handful each year — sometimes due to on-the-ground discoveries by landowners or developers, and other times possibly through newly turned up historic records.  The last time the DEC issued a guess on this was in its 2010 annual report, when they noted their database carries at least partial records for about 40,000 wells, but that the total universe of wells ever commercially drilled since the 1820's was estimated to be as high as 75,000 wells.  How they arrived at this larger number, they didn't leave a trail to.

Secondly, there are a number of old wells for which the department has only partial historical or locational clues, but no currently reliable info as to owner.  Again, most of these have been coded as "unknown" and are now being looked for.

Thirdly, there are old, presumably located wells for which the state may have a driller's name or the last known owner of record, but is no longer receiving annual status reports.  I believe most of these are coded "inactive," but I admit I didn't check out this distinction in detail while I had the DEC on the line.

There was a long time period when oil and gas operators didn't need drilling permits to spud a well in New York, or in most other fossil fuel-bearing states.  The private sector instead simply convinced landowners to sign leases, and then it was free to go to work (if it ever got that far).  In modern times, however, all state regulatory programs include record-keeping and financial security requirements so that there's always a responsible party kept on the hook for eventual plugging and abandonment.  As of the end of 2012, DEC was holding $23.88 million in collateral against this sort of work getting done on the relatively new wells, once these reached the end of their economic life.  To comply with the law, and to spring these funds from escrow, industry plugs between about 146 and 323 wells annually, judging from just the last three available annual reports.

But there's no obvious private sector entity on the hook for those old wells, a small proportion of which are found to be causing surface or groundwater pollution with either fossil fuels or brine.  (Or they could pollute the environment down the road.)  And there's little public or private funding available to plug them.  At the end of 2012, the DEC's plugging fund for orphaned wells had only $158,642 in it, sourced largely from a $100 fee paid by new drillers on every new well permit.  Estimates of plugging costs have ranged between $5,000 to $50,000 per well, so you can see this kitty won't get you very far.

Between 2010 and 2012 (the last year in which a Minerals Division annual report has been issued), DEC instead lined up federal funding from the U.S. EPA to plug between 22 and 43 wells each year, and to reclaim the surrounding sites.

The bottom line is that — at the rate the government is going — it's going to take nearly a century to get through this job.  And that's assuming no additional wells are orphaned, or turn up as orphans, down the road, which is not a good assumption.

So you can see where a resourceful environmental agency might plan to exploit industry's avowed interest in drilling for Marcellus, Utica, or Upper Devonian shale gas within New York in order to rectify the sloppiness of this same industry's past operations.


Here are the fruits of my query on this with the DEC, taken verbatim from a March 5 and March 25 email replies from spokesman Peter Constantakes:

What's all this about?

"DEC has been reviewing historical files and conducting inspections to identify the location and status of old wells.  This effort will help to quantify the scope of orphaned wells that potentially would be plugged. This is an ongoing project.  When we have significant information on these wells, we will make the information available to the public."

How is the DEC going about finding these wells?

"These inspections involve collection of field-instrument measurements, including latitude and longitude coordinates using handheld GPS units, and visual inspection, which complement GIS (desk-based) and other electronic information reviews.  Inspectors have spoken with landowners and some of these landowners have supplied information regarding the well location.  Staff may also use a metal detector to locate an unknown status well."

Do these wells have a paper record in the form of a filed well plat?

"The vast majority of these wells have no plats on file because they were drilled prior to the adoption the law regulating this activity.  Some wells were reported in old publications and were not in DEC well drilling records."

Which grouping is on the hit list?

"The DEC is working on the list of wells coded as "Unknown" in the database.  This is an ongoing effort that will likely take several years to complete."


Janice Lanphere Hancharick said...

Great article! Send it to Olean Times Herald and Bradford Era. Lots of cross stateline drilling along the Southern Tier.
Many old timer drillers know exactly where the orphaned wells are, but this source of knowledge is dying off fast ... many already gone. Mom & Pop drillers (multi-generational family drillers) may have records. Sometimes folks just have to be asked.

pCBB said...

Your reference to recent trends in NY drilling permits and completions is somewhat misleading. Typically they run 100+ annually. The graph you copy shows the boom and bust of the Trenton/BlackRiver play. The recent decline you cite is the result of the exhaustion of this reservoir and return to business as usual not "... the unfortunate side effect of essentially also closing the state for much old-school oil and gas development activity."