Who will pay for plugging and abandonment of PA’s shale gas wells?

Austin Mitchell 2 August 2013

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Plugging and abandonment at the end of a well’s life…

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1) Permanently isolate groundwater: pull production casing, insert cement plugs

2) Restoration of well pad: remove equipment and gravel, replace topsoil, re-vegetate land

Source: propublica.org source: statoil.com

Producing Marcellus Shale gas well

source: propublica.org

What are the risks of orphan shale gas well sites?

Stray gas / methane emissions

Allegheny National Forest, Pennsylvania

Habitat loss and fragmentation

source: PADEP

Land degradationsource: Ohio DNR

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source: witf.org

-

500,000.0

1,000,000.0

1,500,000.0

2,000,000.0

2,500,000.0

Net production revenue ($ millions)

Plugging and abandonment ($100-700,000 today)

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An

nu

al p

rod

uct

ion

(B

cf)

time

… and discounted plugging and abandonment costs have a small effect on near-term accounting.

Shale gas wells can be very profitable in the initial years of production…

Pennsylvania's oil and gas bonds:$10,000 per well,

capped at $600,000 per operator

Managing the risks of orphan shale gas well sites…

Creating individual well trusts funded by a pre-drilling fee or tax on initial production would have a small impact on profitability

(Mitchell & Casman, 2011)

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trust deficit

Who will pay for plugging and abandonment of PA’s

shale gas wells?

6 Plugging and abandonment

1859 1940’s Today

source: NETL

Future

source: wired.com

PA oil & gas production

Acknowledgements• We are grateful to W. Michael Griffin and Joel Tarr

from Carnegie Mellon, and Roma Sidortsov from Vermont Law School.

• This work was funded by the Climate Decision Making Center (SES-3045798) and by the Center for Climate and Energy Decision Making (SES-0949710), both through cooperative agreements between the National Science Foundation and Carnegie Mellon University; and by the Gordon and Betty Moore Foundation (Award Number 1625) in support of the Carnegie Energy Research Initiative.

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