What’s going on with the DeSoto Parish gas emergency?
Officially? Nothing.
The fund used for investigating and remediating problems like this is tapped out. Empty.
Actually, it’s less than empty. It’s overdrawn by 1.2 million dollars.
You see, a new emergency came up this fall: EMER 19-003. This one, in Lafourche Parish, involved out-of-control gas and flames and ended up requiring the services of wild well experts, at a total cost in excess of $3-million. That well, #213022, originally drilled in 1991 in the Lafourche Parish Valentine Field, has now been certified as “plugged and abandoned”, effective January 24.
It’s good to have that problem resolved, although it’s just one well of the nearly 3900 “orphan” wellsites currently awaiting state action. That’s a total that grows monthly, even as total funding for the remediation program has remained relatively stagnant.
The Oilfield Site Restoration Program was created in 1993, in response to the late 1980s oil bust, and was one of the first programs in the nation to address the problem of derelict wellsites. Officially, it charges the Department of Natural Resources, through its Office of Conservation, with the task of “properly plugging and abandoning wells for which no viable responsible party can be located” or for which “such party has failed to maintain the wellsite in accordance with state rules and regulations.”
Early on in the program, many of the wellsites ended up in state hands due to drillers’ business reversals or failures, cloudy record-keeping or cloudy inheritances. Some have been taken by the state – confiscated as punishment – for failure to follow the rules. And while the OSR program has steadily cleaned up and rendered oil and gas wellsites “safe” again year after year, the numbers of new leaking, spilling, and emitting wells annually being added to the state list is about double the number of sites that are getting cleaned up.
As noted in a 2014 Louisiana Legislative Auditor’s report, that’s because “Financial security amounts outlined in regulations are not sufficient to cover the cost of plugging most wells. Not requiring sufficient financial security amounts may provide an incentive for operators to abandon their wells since forfeiting the financial security may be more economical than paying plugging costs.”
Despite being one of the first states to establish an oil and gas wellsite remediation program, Louisiana as one of the last fossil-fuel extracting states to establish financial security requirements for drillers. While other states put those types of rules in place in the
1940s and 1950s, Louisiana didn’t set up financial security requirements until 2000, and those only applied to select categories of drillers. If they were a new company (less than 4 years old), or had a recent history (within the previous 4 years) of violations or giving over wellsites for state remediation, they had to put up security.
In response to the 2014 audit, state lawmakers instituted new security requirements in 2015, mandating a bond be posted for each and every well that changes hands. Small operators pitched a hissy fit, and in August 2015 DNR’s Office of Conservation Attorney John Adams told a Shreveport meeting of drillers and operators he agreed with their concerns.
“Because the restoration program already pays for the state’s abandoned wells, there should be no need for financial security requirements to ease the financial burden for Louisiana to do so,” Adams stated then.
In other words, well operators should not have to put up money to guarantee they won’t leave the environment a mess, since the state has a program that will ultimately clean up any mess they leave behind.
In 2016, the Legislature rolled back those requirements, changing the law to place the requiring of financial security at “the discretion of the Commissioner of the Office of Conservation.” In that same session, though, lawmakers put the Oilfield Site Restoration Fund statutorily out of reach from money grabs.
The OSR Fund, also called the “Orphan Wells Fund”, does not come directly from state taxes. It is generated from fees paid quarterly by oil and gas well operators – 1.5 cents for each barrel of oil produced, and three-tenths of a cent for every thousand cubic feet of natural gas produced. All together, the fees have provided about $4 million to use annually, for safely sealing off wells no longer in use.
Yet despite being fee-generated, the OSR Fund was a target of the Jindal-era funds sweeps, which balanced the state budget through “robbing Peter to pay Paul”, i.e., grabbing money from various accounts to fill in the funding gaps and give the illusion there was no imbalance. In FY 2009, $277-thousand was swept from the OSR Fund. In FY 2012, it was $260-thousand. And in FY 2016 – Jindal’s last budget which was revealed to be $2-billion short of what was actually needed to fund state government – $484-thousand had been grabbed from the fund and put to other uses. And note, the moneys were taken out of the fund and put to other uses throughout the recession, when businesses of all types – including oil and gas drillers – were going belly-up.
That certainly contributed to the OSR Fund’s inability to keep pace with the annual influx of new orphaned wells. Another problem was the fee structure itself – in particular, the fact that the fees well operators pay into OSR are linked to each well’s production via severance tax reporting. And in the case of deep horizontal fracked wells, there’s an exemption from paying ANY severance tax for the first two years of production. Fracked well operators, like those in the Haynesville Shale, had not been paying fees into the OSR Fund to help cover the cost of environmental issues they’re creating – like the DeSoto Parish emergency. Legislation passed in 2017 remedied that by unlinking OSR fees from severance taxes collected.
That is now adding another $1.3-million to the OSR Fund annually.
But back to the current deficit in the fund…
Imagine this: Your company has been a target in a year-and-a-half-long FBI investigation. You’ve cooperated with the authorities, so they have let you continue doing business – despite the fact that the source of the continuing criminal activity appears to be within your business. Then you get a letter from the FBI that says, “We’ve spent all our investigation funding for this year, so we have to stop working on your case…unless, of course, you want to put up the money for us to keep investigating you?”
Sounds laughable…ludicrous…absurd, doesn’t it?
Yet that is analogous to the current status with the on-going gas emergency, EMER 18-003, in the Bethany-Longstreet area of DeSoto Parish.
With the Oilfield Site Restoration Fund now overdrawn by $1.2-million, DNR’s Office of Conservation has sent letters to the gas drillers operating in the area, saying,
“Due to the funding constraints, additional work activity in this area may not continue until after the start of the new fiscal year on July 1, 2019 – unless voluntary contributions are received to continue and complete the gas source well/migration pathway investigation. The Office of Conservation is sure that you share our desire to maintain the progress made to date in containing and eventually halting the migration of natural gas into the aquifer, and bringing the threat to public safety to an end.”
This is a “threat to public safety”, so ante up.
Go fund us.
Just guessing here, but Office of Conservation attorney John Adams’ August 2015 words to northwest Louisiana’s drilling operators might be haunting about now: “Because the restoration program already pays for the state’s abandoned wells, there should be no need for financial security requirements to ease the financial burden for Louisiana to do so.”
Since October, the investigation has been concentrated on the Bessie McMichael gas well in section 27 of 13N, 15W — the center of the nine-square-mile “area of concern.” That well, SN 109699, is named in the lawsuit has being problematic. Completed in August 1965, at a depth of 6993 feet, it was plugged with 30 sacks of concrete in December 1968, and declared “abandoned.”
Yet in October, Elm Springs, the contractor DNR hired to handle this emergency, reopened the well and has been conducting tests. The McMichael well proved not to be the source of the migrating gas, and they’ve replugged the well – the last work the state can authorize around this emergency until the start of the next budget year July 1.
And despite every effort by DNR officials to claim the problem is “contained” within the 9 section area of 13N, 15W (remember: they’ve also insisted the situation is all “under control”), they know the manifestations of the gas-charged aquifer extend to the next plat east: 13N, 14W, as there are now reports of problems manifesting around the Ford wells, in that plat’s section 31.