File photo of a fracking rig in a cornfield. (Getty Images.)
Ohio state senators are trying to overhaul the program plugging orphaned oil and gas wells. A new measure, Ohio Senate Bill 219, proposes a dedicated fund for the effort, and streamlines notice requirements before work begins.
The bill also makes a handful of industry friendly changes. The bill makes it easier for drillers to get expedited review of projects, limits liability after a well owner sells one of their wells and nixes a requirement for drillers to make road-use agreements with local governments.
The bill’s sponsor, state Sen. Al Landis, R-Dover, explained the industry has changed “vastly” since the last substantial rewrite of oil and gas regulations during the Kasich administration.
“I hope this bill is the first step in updating Ohio’s occasionally outdated laws when it comes to realities of the oil and gas industry,” he said. “Once again, energy is national security. In Ohio, our state plays a pivotal role in supporting it.”
Plugging wells
The Ohio Department of Natural Resources has been managing the state’s orphan well program since the late 1970s. One of the largest sources of funding is the state’s severance taxes — fees imposed on the volume of gas or oil a company extracts.
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State law directs a share of that money toward the orphan well program, but Landis said, in the past, the oil and gas fund has been “fair pickings” for lawmakers looking for cash.
“When the state has a situation or something come up and they feel they need, some extra money, or some money that maybe not really available, they look to this fund,” he said.
Landis used to represent Harrison and Belmont Counties, two places he described as hot spots for drilling in the past. Up until the 1960s, there was little in state law governing who could drill and where. As a result, there are now thousands of abandoned wells throughout Ohio.
To speed up well plugging efforts, the bill eliminates most of the notice requirements when a landowner finds an abandoned well on their property.
Under current law, state officials have to inform prior owners by mail and offer them a chance to remove equipment. Landis’ bill only requires they publish notice in a newspaper or on the ODNR website.
“Right now, we’re plugging at a rate of about 500 per year with ODNR, they’re working very diligently,” Landis said. “And they would certainly like to increase that up to 1,000 wells a year and pick up the pace. Protecting the fund is the first step.”
To protect the orphan well program, Landis’ bill creates a dedicated fund called the Oil and Gas Resolution and Remediation Fund.
The bill earmarks certain filing fees and money from penalties; the fund will keep any interest it generates as well. The measure makes no change to the share of severance taxes dedicated to orphan wells.
State Sen. Kent Smith, D-Euclid, asked if they should consider raising severance taxes to speed up the effort. Landis sidestepped.
“My opinion is volume, volume, volume,” Landis said.
Instead of increasing taxes to grow the orphan well fund, Landis argued the measure would grow it by increasing production.
“We’re solidifying the oil and gas industry in Ohio,” he said, “so that we’re not losing any opportunity to increase production.”
Promoting the industry
At the same time Landis is working to plug old wells, his measure makes a handful of changes that could make it easier to drill new ones.
Most notable, the legislation eliminates ODNR’s ability to turn down requests for expedited review.
Under the bill, a well owner can only submit 10 such requests in a calendar year, but state officials have to get the ball rolling.
The measure also drops existing requirements for horizontal drilling operations to make a good faith effort reach a road maintenance and use agreement with local governments.
The proposal makes those agreements voluntary and caps their duration at three years. Drillers and local officials can renew agreements, though.
Additionally, Landis’ bill would simplify the liabilities and obligations a well owner faces when they sell or transfer a well, potentially making it a bit easier to walk away.
Under current law, the seller maintains full responsibility over the well until the buyer files information about ownership, purchases liability insurance and posts a surety bond or proof of financial responsibility.
The new proposal would allow either party to file information about the new owners and purchase the liability insurance.
The buyer is still required to prove their financial responsibility, but so long as the other boxes are checked, the seller is in the clear.
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