House Passes Bill To Plug ‘Orphan’ Wells And Reduce Severance Tax For Low Producers

Feb 5, 2020

The West Virginia House of Delegates has yet again passed a bill seeking to plug some of the thousands of abandoned oil and natural gas wells that go unreclaimed every year, endangering the environment.

House Bill 4090 calls for the creation of an Oil and Gas Abandoned Well Plugging Fund to be administered by the West Virginia Department of Environmental Protection.  

The legislation proposes reducing the severance tax on oil and gas coming from low-producing wells from 5% to 2.5%, in an attempt to keep these wells in service longer and prevent more gas companies from abandoning them.  

Those halved collections would support the DEP’s proposed well-plugging fund. 

 

After Gov. Jim Justice vetoed an earlier version of this bill in 2019, lawmakers heard in July that there were more than 14,000 abandoned wells across the state, more than 4,500 of which were “orphan” wells, or wells without an operator.   

Justice said then that he disagreed with reducing severance taxes for some companies and using those collections to supplement the well-plugging fund.  

“The new version includes some changes to help alleviate the governor’s concerns,” Del. John Kelly, R-Wood, told other lawmakers on Wednesday.  

HB 4090 exempts horizontal wells from the severance tax reduction, it increases the fund’s cap from $4 million to $6 million and it gives the DEP an extra year to spend the fund on plugging wells.  

By “low-producing,” the bill means natural gas wells producing an average level of 60,000 cubic feet of natural gas a day, on average. For oil, any well producing less than 10 barrels of oil a day qualifies for the exemption.  

Plugging an abandoned oil well is expensive work — in July, West Virginia Public Broadcasting reported that plugging one well could cost at least $60,000.  

For the time being, the DEP collects a portion from each $150 well work permit. In addition to the forfeited bonds the DEP is also allowed to utilize, the agency reported in July that probably adds up to $80,000 a year.  

 

An analysis from the Ohio Valley ReSource found more than 8,000 orphan wells exist across the Ohio Valley region.  
One study four years ago estimated leaks from orphan wells in Pennsylvania accounted for at least 5% of the state's annual greenhouse gas emissions.

 

This most recent effort to plug open oil and gas wells passed the House of Delegates unanimously with one member absent, Del. Bill Anderson, R-Wood, absent. Anderson is the bill’s lead sponsor and he chairs the House Energy Committee. 

 

Emily Allen is a Report for America corps member.