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Friday, October 11, 2019

DEP Reaches Settlement with CNX on Abandoned Wells

Pittsburgh, PA – The Pennsylvania Department of Environmental Protection (DEP) has issued a Consent Order and Agreement (COA) with CNX Gas Company, LLC (CNX) for well plugging violations in four southwestern Pennsylvania counties.

The settlement requires CNX to post a $1.48 million performance bond and provides an extended schedule for CNX to plug the wells and restore the well sites. The 141 conventional coalbed methane and gas wells and five unconventional gas wells included in the settlement are located in Allegheny, Greene, Washington, and Westmoreland counties.

“These settlements represent a major victory for Pennsylvania’s citizens and our environment, today and into the future,” said DEP Secretary Patrick McDonnell.

The Oil and Gas Act requires owners and operators to plug wells upon abandonment. A well is considered abandoned if it “has not been used to produce, extract or inject any gas, petroleum or other liquid within the preceding 12 months.” In July 2018, DEP issued orders to oil and gas operators to plug over 1,000 abandoned oil and gas wells across the state — based on required self-reporting of well production data for 2017 — and held pending transfers of said wells. The order to CNX covered 327 wells.

Alliance, XTO, and CNX appealed DEP’s orders to the Pennsylvania Environmental Hearing Board (EHB). Alliance, its parent company Diversified Gas & Oil Corporation, and Diversified Oil & Gas, LLC were issued a separate COA in March 2019. Diversified withdrew its appeal of the order upon execution of the March 2019 COA, which included all wells on the XTO order. As a result, XTO withdrew its appeal.

The wells included in the 2018 order to CNX but not in this COA are no longer owned or operated by CNX; they are now owned by Alliance/Diversified and covered under the March 2019 COA. With this settlement, CNX has agreed to withdraw its appeal to the EHB.

“Unfortunately, bonding — in particular, blanket bonding — amounts prescribed under state law are woefully inadequate to actually plug an abandoned oil or gas well,” explained McDonnell. “If a conventional well owner walks away, they’ve put up just pennies on the dollar and the commonwealth is forced to cover the rest. DEP’s compliance and legal staff were diligent in preventing that shift of liability and securing safeguards more reflective of true costs.”

In 2012, the Pennsylvania General Assembly set bonding amounts for conventional wells at $2,500 per well or a blanket bond of $25,000 for all wells owned by an operator. However, plugging abandoned wells typically cost many times more than the statutory bond amount of $2,500 per well, and that figure can balloon to well over $100,000 depending on several factors including the condition of the well and well site.

Pennsylvania has over 9,000 confirmed orphan and abandoned oil and gas wells in its inventory and estimates hundreds of thousands of legacy wells may be unaccounted for, posing a major financial liability and environmental, public health, and safety risk.

The signed COA and list of wells to be plugged as a result of this settlement can be viewed at http://files.dep.state.pa.us/Newsroom/NewsroomPortalFiles/COA-2019-10-02-CNX-3793011.pdf.

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