Abandoned oil well bills on the move

Jeremy Harpter  Correspondent  houmatoday.com

Published: Thursday, April 14, 2016 at 6:58 p.m.  Last Modified: Thursday, April 14, 2016 at 6:58 p.m.

BATON ROUGE – A set of bills designed to reform how the state cleans up the thousands of abandoned oil wells are making its way through the Legislature, despite opposition to some of the proposals from the oil and gas industry.

State Sen. Bret Allain

Sen. Bret Allain, R-Franklin, spearheaded the effort last year by creating a task force of oil and gas industry leaders, state government officials and business leaders to recommended steps to tackle the so-called orphaned oil wells. Allain has argued that abandoned wells are a safety hazard and a potentially large legal problem for the oil and gas industry.

“I think it’s past time that we start addressing the population of orphaned wells in this state to get them down as low as we can,” Allain said Thursday.

A report released in 2014 by the legislative auditor found that the Department of Natural Resources' Office of Conservation was not properly regulating and inspecting the state’s 57,819 oil and gas wells and was not effectively managing those wells that were long-abandoned by operators. As of July 2013, there were 2,846 orphaned wells that have not been plugged, the report found.

The state did not issue orders to plug more than 85 percent of inactive wells reported by operators as having no future use, even though they pose environmental and safety risks, the report found.

The report included 21 recommendations for how the Office of Conservation deals with orphaned wells, and Allain said the agency has taken steps to address those issues. The report contained three additional recommendations for the Legislature to consider to help address the oil well issue.

On Thursday the Senate Natural Resources Committee approved Allain’s Senate Bill 371, which allows the state to more easily collect cleanup costs for plugging abandoned wells from past operators.

Currently the Department of Natural Resources can only try to recover cleanup costs from past operators once the tab exceeds $250,000. SB 371 would lower the bar to $50,000 for a land-based cleanup and $100,000 for a water-based cleanup. The changes would not become active until the price of oil goes above $60 a barrel under an amendment added to the bill before it was approved.

“We’re not wanting to add to the burden of the oil and gas industry,” Allain said.

Tyler Gray, an attorney for the Louisiana Mid-Continent Oil and Gas Association, said lowering the threshold could create difficulties for an industry that is already ailing from the low price of oil.

“There are a lot of alternative and creative ideas by which we can reduce the number of orphaned wells in the state and we just don’t believe that this is one of them,” Gray said.

The committee voted 5-1 to send the bill to the Senate floor.

The Senate panel also approved Senate Bill 427, a less-controversial measure that would allow private companies to plug abandoned oil wells in exchange for a financial credits from the state. The credits could be used in place of the financial security pledges that companies now have to put up before drilling new wells.

The legislation says the Office of Conservation would develop the rules for the credits, which could also be sold or transferred to other companies.

Allain said idea is that private companies could clean up the abandoned wells more cheaply and quickly than state government, which must go through a lengthy process before plugging a well. The credit would be an incentive to spur more private firms to tackle the abandoned wells.

“It’s an idea worth exploring,” Allain said.

The Senate this week also passed Senate Bill 425, which dedicates a $250 annual fee some companies pay to keep old wells in the “future utility” category in the eyes of the state. The bill says half of the fees would be dedicated to the state’s oilfield site restoration fund and the other 50 percent would be deposited into the state’s oil and gas regulatory fund.

Wells that have no future utility must be plugged and abandoned in 90 days. Operators who want to keep a well closed but in the “future utility” category must pay $250 a year to the state. Allain said there are roughly 1,000 Louisiana wells that have been on future utility for more than 50 years.

SB 425 now heads to the House for further debate.