Morning Must Reads: Big Gas Gets the Goldmine and Taxpayers Get the Shaft

Natural resource extraction produces wealth, but it also imposes large costs on third parties. For instance, when a Marcellus Shale gas well stops producing, the well must be plugged. But as the many abandoned mines in Pennsylvania illustrate, gas well owners, in the absence of requirements to fully fund the decommission of a mine, often prefer to take their money and run.

Governor Corbett's Marcellus Shale Advisory Commission, composed largely of industry representatives, agrees that somebody should pay to decommission Marcellus gas wells, but much like their Robber Baron forbearers, they would prefer that somebody not include them.  

Plugging an abandoned Marcellus Shale gas well in Pennsylvania could cost $100,000 or more, and well bonding changes proposed by the Corbett administration could stick taxpayers with almost all of that bill, according to a study from Carnegie Mellon University...

The proposed new bonding requirements, while higher than those now in place, would eventually have dire economic and environmental consequences for the state, similar to those caused by the inadequate bonds required of the early coal, oil and shallow gas industries, the study said. It will appear in the journal Environmental Science & Technology and has been published online.

Neither the existing $2,500 per well bonding requirement nor the proposed increase to $10,000 per well are high enough to make gas drilling companies clean up after themselves or cover the costs of plugging and decommissioning a well, said Austin Mitchell, a doctoral student in the Department of Engineering and Public Policy at Carnegie Mellon University, who co-authored the study with Elizabeth Casman, an associate research professor in that department...

Mr. Mitchell said Cabot Oil & Gas paid $2.2 million [$73,000 per well] to plug three vertical Marcellus wells that had caused problems with groundwater supplies in Dimock, Susquehanna County.


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