A recently released analysis, “An Analysis of Unconventional Gas Well Reporting under Pennsylvania’s Act 13 of 2012” states the Pennsylvania Department of Environmental Protection did not report all of the state’s natural gas wells and this could result in the loss of hundreds of millions of dollars.
Report: DEP didn’t count all wells under Act 13 | By Rachel Morgan Calkins Media | Wed, Jan 9, 2013:
Excerpt (emphasis added) : It was written by Joel Gehman, a professor at the Alberta School of Business at the University of Alberta in Edmonton, Canada; Diego Mastroianni, a doctoral student at Desautels Faculty of Management at McGill University in Montreal, Canada; Angela Grant, a graduate student of Bioresource Engineering in Agricultural and Environmental Sciences at McGill University; and Dror Etzion, a professor in the Desautels Faculty of Management at McGill.
But DEP spokesman John Poister said Wednesday that those wells not reported did not meet the criteria of Act 13.
“We are confident that all wells eligible for the fee have been included in the list of data provided to PUC for their response,” Poister said. “The wells he believes should be included do not meet the requirements of the legislation to be considered for the impact fee — they do not come from unconventional formations, were not produced using high-volume hydraulic fracturing, and or do not produce more than 90 mcf/day (thousands of cubic feet per day).”
Exactly how confident is DEP regarding the accuracy? So confident that PA DEP has a DISCLAIMER SPLASH screen on their website which requires the user to click on an AGREE button before proceeding further into the site? Disclaimers of this nature do not support Poister’s attempt to pooh-pooh the report.
Click to download “An Analysis of Unconventional Gas Well Reporting under Pennsylvania’s Act 13 of 2012” report.
Excerpts (emphasis added)
– In response to growing concerns about the impact of shale gas development, Pennsylvania’s Act 13 of 2012 established an unconventional gas well fee and required the state’s Department of Environmental Protection (DEP) to report on the number of such wells. In this article, we analyze the extent to which the DEP complied with its reporting requirements under Act 13. Using publicly available data, we find that the DEP likely omitted between 15,300 and 25,100 unconventional gas wells from its Act 13 report. Left uncorrected, we estimate that Pennsylvania’s state, county, and municipal governments could forfeit fees of $205–$303 million in 2012 and up to $0.75–$1.85 billion cumulatively over the expected life of these wells. Rather than an isolated incident, evidence suggests that information management is a systemic and recurring problem within the DEP and its predecessor agencies. We propose the implementation of a relational database and geographic information system as a way for the DEP to fulfill its Act 13 obligations. ~ Environmental Practice 14:262–277 (2012)
– Finally, fees depend on spudding, or “the actual start of drilling of an unconventional gas well” (58 Pa.C.S. §2301). In the oil and gas industry, spudding is distinct from activities such as completion and production, which can occur only after spudding, if at all. By anchoring the assessment of fees on spudding, Act 13 requires the identification of unconventional gas wells without reference to completion or production. But, in that case, how does one differentiate unconventional and conventional wells, as both are essentially identical at the start of drilling? And how can the DEP retroactively determine whether an unconventional well has been spud if the necessary records were not kept?
– Phase 1: The DEP Omitted 1,500 “Recent” Unconventional Spuds: The first phase of our analysis started with the DEP’s Act 13 report and focused on determining the extent to which the DEP accurately reported on recent unconventional well spuds—those between 2002 and 2011, as this was the time period explicitly covered by its report. In particular, we compared the DEP’s Act 13 report with its previously published reports covering the same period. Essentially, we used the DEP’s existing reports to assess the accuracy and completeness of its Act 13 report. This entailed downloading five additional DEP reports—permits, spuds, production, wastes, and compliance—all of which were publicly available on the DEP’s Office of Oil and Gas Management website.
– Summary of Findings: Taken together, our analyses suggest that the DEP’s Act 13 report minimally omitted some 15,300 unconventional gas well spuds. This total includes over 1,500 recently spud Marcellus wells, nearly 9,800 deep wells spud through 1991 (including Medina wells spud during this period), and over 4,000 Medina wells spud from 1992 through early 2007. As shown in Table 4, these wells have been drilled throughout Pennsylvania. Of note, we were able to identify each of these wells by name, number, and location.
– Additionally, our analysis suggests that the actual number of spud wells probably includes as many as 25,100 unconventional gas wells—all the above wells, plus an additional 9,800 deep wells considered “missing” from the Bureau’s records. Moreover, as described in the “Limitations” section below, our analysis covers only 962 (52%) of the 1,848 formation-years during which unconventional wells were potentially spud in Pennsylvania, suggesting that the number of unconventional wells omitted from the DEP’s Act 13 report could be significantly higher. Although we recognize that significant efforts may be required to identify the names, numbers, and locations of these latter wells, at no point do these circumstances relieve the DEP of its reporting requirements under Act 13.
– Conclusion: Unconventional shale gas development has become widespread, bringing with it a growing number of concerns. Critical to untangling these many controversies is better information. Twenty years ago, the Bureau wrote, “For 125 years oil and gas well drillers and producers have had a veritable free hand in Pennsylvania” (Harper and Cozart, 1992,p. 38). Act 13 of 2012 is simply Pennsylvania’s latest effort to close this gap. Our analysis of the DEP’s Act 13 reporting suggests that,unfortunately, this “veritable free hand” persists.
– Our intention in this article has not been to determine the exact number of unconventional gas well spuds in Pennsylvania, but to assess the extent to which the DEP has fulfilled its Act 13 reporting requirements. Though clearly more than 4,906 unconventional gas wells were spud by the end of 2011, determining the true number of such wells remains the DEP’s responsibility. In this regard, we hope that our analysis may prompt the DEP to reconsider its statutory requirements more carefully. Until these omissions are corrected, the many state, county, and municipal stakeholders impacted by unconventional gas well drilling will not be compensated for the impacts of unconventional gas wells as required by Act 13.
Between the DEP Disclaimer Splash Screen and Poister’s attempt to pooh-pooh the report – does anyone really think the DEP will “reconsider its statutory requirements more carefully”?
Sadly, the only thing that will be considered is how fast can EID/IPAA pump out a hit piece on the report.
©2013 by Dory Hippauf