Two environmental organisations called today for government action to ensure tax payers do not end up paying for pollution from abandoned oil and gas wells.
There are currently more than 2,000 unused wells in the UK. They are not being monitored and for about half of them, the ownership is unknown. As companies are encouraged to explore for shale oil and gas, the number of abandoned wells is likely to rise.
Under current regulations, drillers can be required to agree to a financial guarantee as part of their mining waste permit to cover the costs of problems. But there are concerns that this won’t be enough. And companies cannot be required to monitor old wells once permits and permissions have expired. If a company becomes insolvent or goes out of business there are also questions about who is liable for any damage.
Friends of the Earth and the RSPB, speaking at a shale gas conference in London, said they were concerned that existing rules would mean the state would have to meet the cost of any problems. They called for a scheme that would ensure the industry paid for pollution incidents.
Jake White, an environmental lawyer with Friends of the Earth, said “This is a big issue. Who picks up the tab when there is a problem? We know it will be up to the tax payer. Something needs to be done about it.” He said some kind of insurance scheme, rather than the existing financial guarantee, would be a better protection against insolvency.
Harry Huyton, head of climate change and energy policy at the RSPB, said there was a legacy of inadequate financial bonds in other industries. He pointed to a £200 million shortfall in funding to deal with an open cast coal mine in Scotland. He said he hoped an amendment to the Infrastructure Bill, calling for a mandatory contingency fund, would be included in legislation.
Jake White also called for long-term independent monitoring of wells. He said that at Cuadrilla’s well at Preese Hall, there was a requirement for groundwater monitoring for one year after the well was abandoned. “We are very concerned that this is inadequate”, he said. “I seems unlikely that problems will manifest themselves in that time.”
Current regulations were defended by Mark Ellis-Jones, team leader for the Environment Agency’s onshore oil and gas programme. On monitoring, he said: “We would expect there to be nothing to monitor. We would expect 100 per cent containment.” And he explained: “Once a company surrenders a permit we cannot require them to carry out long-term monitoring.”
Mr Ellis-Jones said companies applying for a mining waste permit were required to demonstrate that any fluid left underground would “remain in the target formation and would not pose a risk to ground water”.
When asked what would happen if there was a pollution incident, he said: “The role of environmental permitting, as with any industrial process, is to set the standards of what you could expect to happen. The controls within the environmental permit give the Environment Agency the powers of enforcement and compliance.
He added: “If there is an environmental pollution incident whilst they [companies] are operating at a site and holding their permit we have enforcement powers to take action as we would for any other installation or operator.”
But Mr Ellis Jones conceded: “There is a bigger question about liability, which is essentially a question of what happens once an operator surrenders their permit.”
The issue was discussed earlier this month in the House of Lords during the committee stage of the Infrastructure Bill.
Lord Whitty, who proposed the contingency fund, said: “If we are now giving licences to drill to a number of different organisations, some of which are relatively small companies, we need to have the reassurance that in the future—and it may be decades in the future—they will have the wherewithal to meet the costs of clearing up that damage.”
Baroness Verma, for the government, said the operator was responsible for decommissioning a well safely and restoring the site. As with other industries, she said, regulations required companies that caused damage to “remediate the effects and prevent further damage”.
But she conceded: “If a shale gas operator becomes insolvent and no rescue mechanism for the company can be found, in limited circumstances the liability could ultimately pass to the landowner.”
Baroness Verma said the Department of Energy and Climate Change was working with the onshore drilling industry body, UKOOG, to develop a scheme that would step in pay for the liabilities if a company went out of business or could not be identified.
Harry Huyton told today’s conference he didn’t think bonds was a good model for the shale gas industry. “It is good that DECC is looking at this issue but I don’t know why it is taking them so long. There is a perfectly good amendment currently proposed by Lord Whitty to the Infrastructure Bill that I think would do the job.”
- Work by Durham University found in the US there were integrity failures in 1.9-75% of wells. In the UK, the report found that only two wells in the UK had recorded well integrity failure (Harfield Blowout and Singleton Oil Field). But it said “this figure is based only on data that were publicly available or access through UK Environment Agency and only out of the minority of UK wells which were active”. It added “The number is therefore likely to be an underestimate of the actual number of wells that have experienced integrity failure”. It calls for long-term monitoring data for active and abandoned well sites to be the public domain. It also says well barrier failure will occur in a small number of wells and this will lead to environmental contamination. Appropriate financial and monitoring should be put in place, particularly after well abandonment.