Bill before Ohio Legislature proposes more funding for plugging abandoned oil and gas wells
Written by: Chris Hogan, Law Fellow, OSU Agricultural & Resource Law Program
The Ohio House of Representatives is considering a bill that would affect farmers and rural landowners by requiring the Ohio Department of Natural Resources Division of Oil and Gas Resources Management (ODNR) to plug abandoned oil and gas wells within 60 days, under certain circumstances. Introduced by Rep. Andy Thompson (R-Marietta), House Bill 225 would permit a landowner to report an idle or abandoned well to ODNR, who then must inspect the well and plug it if it’s deemed “distressed-high priority.”
Inspection of Idle or Abandoned Wells
Under HB 225, ODNR would be required to inspect an idle or abandoned well within 30 days after a landowner reports the existence of such a well on their property. No later than 60 days after the inspection, ODNR would be required to provide the landowner with a report concerning the idle or abandoned well that categorizes the well as one of the following:
- Distressed-high priority;
- Moderate-medium priority; and
- Maintenance-low priority.
HB 225 would require ODNR to adopt rules to define these three categories. In adopting these rules, ODNR must include a description of the criteria for an idle or abandoned well to fit within a particular category.
Plugging an Idle or Abandoned Well
If a well is categorized as distressed-high priority, it must be plugged by ODNR within six months after the report. Perhaps most interesting for Ohio landowners, HB 225 could increase the amount of funding available for landowners who choose to plug a well on their property themselves. Currently, landowners may arrange to have the well plugged by a third party. Under current Ohio Revised Code 1509.071(D), a landowner may be reimbursed for plugging costs; however, wells are plugged on a priority basis until the funds for the program are depleted. ODNR administers this law, otherwise known as the Orphan Well Program. More information on the current program is here.
Under HB 225, landowners would be permitted to take an income tax deduction for compensation paid by ODNR to reimburse landowners’ costs to plug an abandoned or improperly plugged oil or gas well. Current law requires ODNR to approve an application for reimbursement by a landowner. A landowner’s application must comply with oil and gas plugging laws and regulations for safety and environmental reasons.
Proposed Increase in Funding Under the Oil and Gas Well Fund
HB 225 would likely increase the funds available to Ohio landowners for plugging idle or abandoned wells. Ohio law currently requires that 14% of the current Oil and Gas Well Fund be dedicated to plugging idle and abandoned wells. HB 225 would require ODNR to dedicate 45% of the fund to plug idle and abandoned wells. ODNR would also be required to issue quarterly reports regarding expenditures associated with plugging wells. ODNR may therefore offer more funding to landowners to plug wells, because of the increase in funding and the requirement to show expenditures on the plugging of wells.
However, the proposed increase in funding may lead to an increase in ODNR’s expenditures on plugging wells. The proposed increase could also drive the number of wells that the state plugs. Under the strict timeline requirements that HB 225 proposes, ODNR may subsequently plug more wells after a landowner notifies ODNR of abandoned wells on their property.
The Future of HB 225
At a committee hearing earlier this month, witnesses testified that there are likely hundreds of wells that haven’t been discovered because they’ve been farmed over and covered by urban development. According to Rep. Thompson, most of the orphan wells that have been identified emit methane gas in addition to often contributing to the runoff of oil and brine into the soil. Rep. Thompson also noted that it is estimated that the current program for plugging abandoned wells in Ohio would take 20 years or more to plug the more than 600 known orphan wells in the state. Members of the Ohio Oil and Gas Association voiced support for HB 225, noting that the taxes levied on oil and gas production should be used to correct problems that have arisen from the early days of the industry.