PA Gas Driller Bonds Will Skyrocket from $2,500 to $150,000 per Marcellus Gas Well Under Proposed Legislation
Pennsylvania lawmakers, both Democrat and Republican, agree that bonds posted by drillers need to increase—dramatically. The bonds are used to cover the costs of plugging or closing natural gas wells. The current bond requirements date back to 1984.
Drillers are required to post a $2,500 bond for a single well and $25,000 blanket bond to cover any number of wells under current law. A measure sponsored by Rep. Camille George, D-74, Houtzdale, would require a $150,000-per-well bond for any well in the Marcellus Shale formation and $12,000 bond on other oil and gas wells. George, chairman of the House Environmental Resources and Energy Committee, also proposes setting a $240,000 blanket bond, while prohibiting blanket bonds for wells in the Marcellus Shale formation. He suggested those amounts would cover the actual costs of decommissioning.
*Hazelton Standard Speaker (May 23) – Marcellus drilling spurs calls for higher bonds
I think we all knew that the $2,500 bond was inadequate. I presume these bonds are not cash, but can be obtained from banks and other sources for a relatively modest fee. The issue is how reliable the driller is. If reliable, then the fees should be small because the bank, etc. knows that it stands as guarantor for a company that will anyway fulfill its legal obligations. I do not purport to know the full costs of decommissioning a frac’ed well, but the bond should be high enough to do that, and then some.
Thanks RSHouck3. I think you’re probably right. The amount needs to be adjusted. I’m not making a judgment about the new proposed amount…just issuing a general alert that it’s going up quite significantly. But I suspect you’re right, that drillers do not have to post the entire amount up front. Thanks for reading and commenting.
Jim