How oil & gas states did (and did not) protect land and water in 2019

By Adam Peltz and Nichole Saunders

Regulating the day-to-day details of an oil and gas operation can be a complex task, with both regulators and operators working hard to prevent leaks, explosions and other threats to worker safety, community health and the environment. As we learn more about technical advancements in the oilfield as well as risks from various aspects of production, it is vital that the regulations requiring best practices are kept up to date.

EDF believes this process of continuous improvement is foundational for protecting land, water and communities from development-related impacts. That’s why we track what states are up to on a consistent basis. Building on our review of state progress toward this goal in 2018, we’ve gathered up the big changes states made this past year and assessed the trends.

Here are the big things we saw in 2019.

Dealing with the legacy well and financial assurance shortfall

The United States has around a million oil and gas wells, but about 75% of these wells are marginal producers nearing the end of their economic life. These wells will ultimately need to be properly plugged to prevent environmental harm and economic waste, at a cost in the tens of billions of dollars (an individual well can cost $25,000 or more to plug). Oil and gas agencies require operators to post bonds or other forms of financial assurance to cover plugging costs, but these bonds have in many cases proven to be inadequate to current cost structures, especially when operators use blanket bonding to put up only a tiny fraction of the future cost of plugging each well. When these operators go bankrupt, taxpayers are often left with significant plugging liabilities. Some states are still responsible for wells that last produced in the 19th century!

In order to reduce current and future burdens on taxpayers, some states worked to improve their financial assurance and idle well management programs.

• North Dakota raised individual bonds for commercial injection wells from $50,000 to $100,000, and perhaps more importantly, limited the number of long-term temporarily abandoned wells that can be covered under a blanket bond.
• Alaska significantly adjusted bonding amounts for single wells and for multiple wells in order to reflect true plugging costs.
• California adopted a program to reduce the state’s large idle well backlog, instituting new fees, idle well testing requirements and idle well management plan requirements including plugging schedules.
• Mississippi added an annual fee for idle wells.

Reducing the likelihood of wellbore communication, or “frac hits”

When a well is hydraulically fractured, fluid or pressure from that operation can impact nearby wells. In the worst cases, unintentional frac hits can contaminate land and drinking water. Frac hits can also cause economic problems by damaging the oil and gas reservoir, reducing total productivity.

As the traffic cops of their respective geologies, many states now require operators to analyze the geology surrounding proposed wellbores to ensure a proposed hydraulic fracturing operation will not impact nearby wells or the environment. While many mitigation pathways are possible, including redesigning fracs so they will not cause interference, even the basic step of requiring notification to nearby operators prior to hydraulic fracturing allows those operators to take steps to reduce the risk of damage and contamination.

• North Dakota doubled the pre-frac notification radius from a quarter mile to a half mile and provided additional requirements around the contents of the notifications.
• Oklahoma also doubled its pre-frac notification radius from a half mile to one mile and expanded notification beyond wells completed in the same common source of supply. The rulemaking also addressed interactions between production and gas storage wells, a major safety concern.

Improving and modernizing Underground Injection Control programs

The vast majority of oil and gas companies employ injection wells (also called Class II wells) to dispose the salty, radioactive wastewater that comes out of a drilled well, or use it to enhance oil recovery. These wells — especially disposal wells (if not properly regulated) — can cause earthquakes and significant damage to aquifers. Mitigating these threats is a top priority for state and federal regulators, as there are about 180,000 of these wells across the country and they are considered higher risk than production wells.

Fortunately, several states updated the rules for injection wells in 2019:

• California significantly updated its Class II rules, implementing major changes to its permitting, fluid containment review, mechanical integrity testing, annular pressure monitoring, well architecture, allowable injection pressures, surface expression of fluids and incident response requirements.
• Kansas and New Mexico both undertook Ground Water Protection Council UIC peer reviews (the Kansas review remains under development).
• Michigan, heading into the final stretch of its Class II primacy application, tweaked its injection well rules.
• Oklahoma added requirements around confining strata for high-rate wells, enhanced cement heights above the injection zone and put timelines on repair of mechanical integrity problems.
• North Dakota added requirements related to casing and cementing, surface water resources and water well review, enhanced fluid containment review along with corrective action for problematic offset wells, transportation plans, wellbore schematics, mechanical integrity assessment, reporting requirements, surface facilities and more.
• Arkansas clarified Class II categories for commercial disposal and enhanced oil recovery, and added permitting requirements related to UIC surface facilities.

What to watch in 2020

Reusing industry’s wastewater

Some states in drier parts of the U.S. have expressed a growing interest in recycling the huge volume of wastewater generated through oil and gas development. Doing this safely is a challenge because there’s so much we don’t know about what’s in the water and how it could impact the environment. In 2019 the GWPC published a first-of-its-kind comprehensive report that lays out the research we still need to do before moving forward with repurposing this waste.

Some states are looking specifically at the option to treat and discharge wastewater to rivers and streams. Expanding the discharge of oil and gas wastewater to these waterways comes with many questions, potential risks and regulatory challenges. States should be researching these questions and, for example, updating water quality standards in order to protect our existing water from concerning pollutants that could be present in industry’s waste stream.

Additionally, New Mexico is investigating options to reuse oil and gas wastewater outside of the oilfield, including for purposes like irrigation, agriculture and aquifer recharge. Allowing these practices could be extremely risky if states and companies don’t first do their homework to better understand what’s in the water, if certain chemicals can be removed and how to set the right limits to ensure our environment and health won’t be impacted. We’ll be keeping an eye on the state next year, along with its newly established research consortium to see what progress they make on these challenging issues.

Carbon capture and sequestration

Regulators are looking at ways to enhance regulation of wells dedicated to storing carbon dioxide (Class VI wells). Class VI is a relatively new Environmental Protection Agency program but it is poised to grow tremendously over the next few years and decades as companies look to carbon capture and sequestration as a solution to climate change. North Dakota has primacy of the Class VI program and other states with sequestration potential — like Wyoming and Louisiana — are moving to take primacy as well. The GWPC is working to help states in this process while developing ideas for enhancing the Class VI program and ensuring that regulators are sufficiently trained and resourced to implement it.

Year of the drone

As drone technology becomes ever more sophisticated and affordable, state oil and gas regulators are beginning to incorporate drones into their regulatory programs in a variety of ways. In North Dakota, the state has partnered with industry in the iPIPE initiative to develop drone and related sensor technology to inspect pipelines and rapidly find leaks of produced water that could damage lands, groundwater and surface water resources.

In Ohio, regulators are using drones armed with magnetometers and LIDAR technology to find orphan wells and abandoned pits, and to better plan site remediation projects located close to schools and houses.

Other states are investigating similar uses — drones can enable regulators to cover more ground at higher levels of detail than ever before, and coupled with advances in artificial intelligence and machine learning, the sky is truly the limit. To this end, the GWPC and the Interstate Oil and Gas Compact Commission held a drone workshop to discuss innovative uses, legal considerations, data management implications and other topics that will help states implement this rapidly evolving technology.

Major overhauls in key producing states:

While some states conduct comprehensive rulemakings on an annual basis (Oklahoma is a prime example) major overhauls of programs are less common. However, there are some significant changes on the horizon for a few key oil and gas producing states:

• Ohio has a series of rules proposed around well spacing, brine fees, severability, setbacks and safety, plugging, well construction, waste facilities and Class III solution mining.
• Colorado proposed a major well integrity rule update that includes significant innovations around annular pressure monitoring, cement quality, integrity testing and emergency response.
• We also expect to see new rules out of California, Oklahoma, Pennsylvania, West Virginia and many other states. Texas is overdue for regulatory updates on a number of fronts, and we hope to see the Railroad Commission of Texas taking action in 2020.

Overall, states continue to create innovative rules and regulatory programs to minimize the impact of oil and gas development on people and the environment. Continuously improving these rules helps to better protect our resources and maintain public trust. Much progress was made in 2019, and EDF expects to see even more in 2020.