Wednesday, September 14, 2011
Abandoned Oil & Gas Wells in Kansas
To do all this, the legislature created two funds: The Abandoned Well / Site Remediation Fund that is to cover the costs of the pre-1996 wells (state responsibility); and a Well Plugging Assurance Fund which the industry would use for post-1996 wells. The state's fund is pre-set to sunset on June 30, 2016. The industry fund is supposed to be permanent. Both funds are administered by KCC.
The state's fund consists of 4 sources and receives about $1.6 million annually, although the actual funding has been somewhat erratic of late, with the state general fund and state water plan fund having contributed zero dollars of late due to the state's economic conditions. The industry fund is from 4 industry sources and currently has a cash balance of $3.966 million and a non-cash balance of $3.296 million.
The KCC reported on September 9, 2011 the following total program gains from the state funded program (July 1, 1996 - June 30, 2010): 8,200 wells have been plugged (pre-1996 wells) and 5,475 remain on the inventory list to do. Moreover, 209 additional wells were added to this list during FY 2011. All the available state funds have been spent each year. The KCC asked that the state general fund and state water plan funding be reinstated. They also noted that the average plugging cost per well has been increasing over time, so with the same funds, fewer wells will get plugged as this cost rises. They said this was due primarily to the contractor costs increasing - as they contract with industry personnel and equipment to do this work. WOW, Sweet deal - the industry gets out of their responsibility for these wells and then cuts a deal to get paid to do the very same work with the taxpayers footing the bill. Gotta shake your head, sometimes.
The KCC also reported that no funds have yet been spent from the industry fund (post-1996 wells). Yikes, does this raise any red flags? And when this was noted, no committee member asked "Why?"
While it is comforting to know that abandoned oil and gas wells with PRPs are taken care of by the responsible parties, and that such wells without PRPs can also get taken care of, it is not so comforting to know that it's going to take an estimated 40 years to address the currently known list, and that the fund created to do this is slated for sunset in 2016. Of course, it's already been extended once - so maybe a couple more times won't be asking for too much. I gotta tell, you, it sure appears to me that the industry has been coddled in Kansas. I hope I'm wrong. But I guess, when you carry a purse as big as theirs, you have to be careful how you deal with 'em.