Defining the Scope of the Legacy Well Problem in Pennsylvania and

Developing Collaborative Solutions

MCOR Orphan and Abandoned Well

Workshop

May 16, 2018

Defining the Scope of the Legacy Well Problem in Pennsylvania

GSA Poster Presentation

•Plugging Program Funding

•Purpose of Study

• Study Methods

•Results/Significance of Findings

•Conclusions/Future Work

Discussion Outline

DEP Plugging Program

• Between inception and the end of 2017, the DEP Plugging Program has decommissioned 3,072 wells

• Funding has primarily been generated through grants (Growing Greener) and surcharges on permits, and peaked in 2008 at $3.7 million

• During years when grant monies were not available, the number of wells decommissioned has been significantly reduced

• What is the scope of the legacy well problem in PA?

• Can we model what levels of funding might be necessary to “catch up” with the problem?

DEP Plugging Program

Improving DEP’s Ability to Address Legacy Wells

Study Methods – Well Selection

NW 378 38 378 24

SW 211 36 211 24

NW 1,267 40 1,267 32

SW 66 26 66 14

NW 189 35 189 34

SW 125 32 125 8

2,236 207 2,236 136

Industry Plugged

DEP Plugged

Total:

N nWell Status Region

Abandoned/Orphan

N n

Initial Study Design Field Located

• Study population and sample sizes were developed for well groupings

• Samples were randomly selected (α = 0.05, CI = ± 15%) • Because 72 wells could not be successfully identified in the

field, a second sample representing field located wells was determined to evaluate uncertainty for characteristics that require field observation

Study Methods – Field Inspections

• Methane concentrations measured using Altair 5 gas meters at well casing and near ground surface

• Flow rate measurements collected at locations where plumbing in to casing, tubing, or vents was possible

- Alicat Whisper or Dwyer digital manometers were used to estimate fugitive methane flux depending on rate

• FLIR cameras employed to provide qualitative visualizations of fugitive methane emissions at select well sites

• GPS units used to locate wells and assemble updated coordinate data for well locations

• General observations relating to site conditions, such as evidence of distressed vegetation, condition of well casing, and well status were also recorded

Study Results Summary of Field Observations • Observation frequencies and confidence intervals (α = 0.05) for final sample sizes (n)

depicted using data labels (%) and blue or orange-shaded bars, respectively

•Both environmental and safety risks may be better characterized as a result of this study

- Intersections between legacy and modern development

- Methane leaks to atmosphere – contribute to greenhouse gas concerns

- Methane leaks to subsurface – well integrity failure

Study Results – Implications

Study Results – Implications

• Area of intersection between legacy mining and oil and gas development, and shale gas development in Robinson Township, Washington County

• Significant network of mine voids (light gray) and vast numbers of legacy wells not captured in DEP’s database

• Historically, between 10% and 25% of the wells drilled in this municipality have penetrated within 1,500 feet of the Marcellus shale (second and third inset map in series)

Study Results – Methane Leaks

API No. Region Well Type Status % GasObserved Flow

Rate (cfpd)

Emisison

Factor1 (mg/hr)

Emissions Rate

(MTCE/yr)

123-04922 NW OIL Abandoned 13% 3.4 5.87E-01

003-01262 SW GAS Abandoned 25% NM 75,000 1.64E+01

003-22245 SW UNK Abandoned 10% 3.6 6.22E-01

063-22648 SW GAS Abandoned 100% 1456 2.52E+02

063-26443 SW GAS Abandoned 2% NM 75,000 1.64E+01

063-31452 SW GAS Abandoned 51% NM 75,000 1.64E+01

083-54112 NW GAS Industry Plugged 39% 2.2 3.80E-01

063-21615 SW GAS Industry Plugged 10% 1.8 3.11E-01

Atmospheric Flux • 8 out of 136 wells were found to be emitting methane • Flow rates between 1.8 cubic feet per day (cfpd) and 1,456 cfpd were observed at 5

of those wells – the 3 remaining wells were emitting measurable concentrations of methane; however, quantification of flow rate was not possible due to instrument sensitivity limitations or methane emanating from outside of the well casing or vent

“NM” indicates wells at which flow rates could not be measured. In these cases, emission rates were assumed to be equivalent to those reported by Kang, et al. (2016) for like well types. All flow rates have been converted to metric tonnes carbon equivalent per year (MTCE/yr).

Study Results – Methane Leaks

Subsurface

The well (location marked by white PVC riser vent pipe adjacent to driveway) had been previously vented by DEP under a Plugging Program contract and a passive mitigation system installed, but high levels of methane continue to manifest in the front yard of the residence, as indicated by dead vegetation in the image and also documented through field measurements

Study Results – Unfunded Liability

Forecasting Funding Needs Through Time-Series Modeling

• Using information gathered during the study and historical Plugging Program cost and administration data, it is possible to reasonably predict future funding needs

• A time-series model based on multiple input variables has been developed to explore different funding scenarios

• Being able credibly define the scope of a problem is the first important step in developing potential solutions

Study Results – Unfunded Liability

Forecasting Funding Needs Through Time-Series Modeling

Note that this model has been updated from GSA poster based on more recent regression modeling

Future Work

How Can DEP Solve this Problem? Explore alternative funding strategies Modernize well bonding levels Develop public outreach and educational tools

Implement updated risk-mitigation tools Develop studies to help identify areas with an increased

potential for stray gas migration Begin exploring improvements in plugging techniques Develop tools that ensure long-term data integrity

Establishment of appropriate monitoring protocols and long-term site management, i.e., deed notices and the placement of surveyed legacy well locations on deeds

Developing Collaborative Solutions to Address Legacy Wells

in Pennsylvania

Discussion Outline

• Oil and Gas Development Background and Plugging Program

• Dedication to Continual Improvement • The Big Picture

• DEP Scoring System

• Cost Analysis Tool

• Internal Process and Contractor Performance Audit

• Importance of Developing Partnerships

• Project Development • Ranking Wells Based on Public Safety and Environmental Quality

• Combining Nearby Wells to Improve Project Costs

• Moving Forward • Examples of Plugging Project Profiles

• Cooperative Partnerships with Industry

Oil and gas development in Pennsylvania is extensive and has been ongoing for over 150 years. Regulatory standards for the industry have evolved significantly during this time period as a function of both advances in technology and a more intense focus on environmental protection. Additionally, because oil and gas development had been taking place for nearly a century prior to permitting requirements enacted in 1955, it is estimated that many legacy wells are yet to be accounted for in the Commonwealth. If not addressed properly, wells have the potential to cause health, safety, or environmental concerns. Presently, the DEP Plugging Program assumes responsibility for addressing legacy wells that have no responsible party.

Oil and Gas Development Background

DEP Plugging Program

• Between inception and the end of 2017, the DEP Plugging Program has decommissioned 3,072 wells

• Funding has primarily been generated through grants (Growing Greener) and surcharges on permits, and peaked in 2008 at $3.7 million

• During years when grant monies were not available, the number of wells decommissioned has been significantly reduced

Dedication to Continual Improvement

The Big Picture

•Scoring system improvements

•Cost analysis tool development

•Contractor performance audit

Review of DEP Scoring System

Basis of Well Score/Rank

• General Hazards

• Environmental Hazards

• Visual Safety Assessment

• Fluid Discharges

• Adjacent Occupied Buildings

• Complaints

• Water Impacts

• Adjacent Surface Waters

• Relative Assessment

• Adjacent Mining

Review of DEP Scoring System

Scoring System Improvements

• The analysis revealed some QA/QC issues and several concepts for improving the scoring system

• It is believed these improvements would maintain the ability to compare to historical scores, while improving efficiency and consistency

Cost Analysis Tool Development

Using Analysis for Process Improvement

• Variables controlling costs have been identified using objective, statistical analysis: Rig time, trucking costs, and freshwater charges

• ArcGIS provides a useful tool for “truth checking” well estimates provided by contractors during competitive bidding process

• GIS was used to develop spatial models for total plugging costs and other key cost-control variables

Cost Analysis Tool Development

Total Cost Per Well

Cost Analysis Tool Development

Example Output Report

Internal Process and Contractor Performance Audit

• Efficient use of limited resources may be made by tailoring contracts based on historical information

• Contractor performance is generally comparable, although more competition might improve the state’s ability to extend resources and the Plugging Program is currently working with interested parties to expand the list of eligible contractors

• Process Improvement: - Tightening up contract language

- Communicate and enforce contractor expectations

- Streamline and improve process

Collaboration and Innovation are Essential for Addressing Funding Gaps and Protecting the Environment

• Over roughly the last year, the DEP Plugging Program has been able to generate or anticipates approximately $5.1 million in plugging funding from other sources through proactive coordination efforts

- Third Parties/Good Samaritan Law Plugging: $3,676,586

- Commonwealth Financing Authority Orphan and Abandoned Well Plugging Grant Program: $787,000

- Oil Spill Liability Trust Fund: $95,523

- Environmental Stewardship Fund: $460,000

- Dept. of Conservation and Natural Resources: $190,910

• This was accomplished through proactive coordination efforts and is $1.4 million more than the Plugging Program’s peak operating annual budget

• Over this same period, plugging revenues received were $716 thousand

The Importance of Partnerships

Through establishment of the Crude Development Advisory Council (CDAC), DEP and Industry have forged a partnership that has enabled the evaluation of over 8,000 abandoned and orphan wells. These wells potentially represent in excess of $218 million in economic opportunities statewide for companies who have the expertise to properly decommission legacy wells. As plugging projects are completed, the communities these wells are found in also stand to benefit through water quality and sensitive ecosystem protection, assurance that the Commonwealth’s valuable recreational areas remain pristine, and the establishment of high standards for public safety and health. A significant number of these wells are found on state-held lands.

The Importance of Partnerships

Conceptual Model for Promoting Partnerships

• Applying a new scoring methodology and ranking of plugging projects

• Clustering nearby wells to develop plugging projects consisting of critical (Priority) and relatively stable (Opportunity) wells

• Querying historic costs to assign project value • Using spatial data to characterize project features

Column1 Number of Projects Number of Wells in Project Sum of Low Cost 2017 Sum of High Cost 2017

Grand Total 85 1565 $20,281,920.20 $40,742,308.41

Well Scores Number of Wells Sum of Low Cost 2017 Sum of High Cost 2017

High (>66) 120 $2,664,157.00 $5,777,969.01

Intermediate (34 - 66) 509 $10,604,050.39 $19,758,784.01

Low (<34) 7540 $94,606,792.86 $192,934,105.08

Grand Total 8169 $107,875,000.25 $218,470,858.10

Managing “Priority” and “Opportunity” Wells

How can resources be extended most effectively?

• As the summary tables below indicate, it is estimated that plugging all 120 Priority Wells individually would cost approximately $5.7 million

• By grouping these wells with other nearby wells, 13x the number of wells could be plugged for only 7x the total cost

• The next three slides contain information on multi-well plugging projects that have at least one Priority Well associated with them

Example Partnership Projects

Example Partnership Projects

Moving Forward

Summary

• Plugging projects represent economic opportunities for conventional operators with the expertise and equipment to decommission legacy wells and a chance to proactively practice environmental stewardship

• DEP and industry resources can be effectively focused through CDAC Committee work to define the benefits associated with such projects and attract other partners

• DEP is dedicated to identifying tools and resources available for financing the delivery of these important environmental good-works projects

Thank You! Questions?

Seth Pelepko, P.G. Program Manager

Well Plugging and Subsurface Activities Division mipelepko@pa.gov

Bureau of Oil & Gas Planning & Program Mgmt 717.772.2199