Private Gas Well Insurance PA.

Long Time Viewer. I want to thank everyone for contributions to this forum as It has helped me.

I may have an opportunity to acquire my shallow well. I received 2 insurance quotes in the amounts of 3,500 and 5,000 a year for this well which is connected to my cabin only. At those prices I do not think It's feasible.

I  understand the DEPs bonding requirements , well inspection and mandatory production reports for Home Wells.

Do these prices seem correct? How are others protecting themselves against the liability from owning a gas well?

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Permalink Reply by KAR on October 8, 2015 at 7:01pm

What year was the well drilled, do you have an API #? If it was drilled before 1985 then you do not have to have a bond to take over operation of the well... Is the seller willing to hand over all the paperwork they have on the well: completion reports, logs, invoices, drilling reports, etc?

Are you positive that you understand all the MIA and production reports that you will be required to submit? You will need to submit an MIA inspection once every 4 months to the DEP. If you are only using the well for house gas you should not be required to submit production, but will need to submit waste production once a year. 

Lastly, you need to think about what happens after the well has stopped producing or if it develops integrity issues. You will either need to repair the well or plug and abandon. This is not cheap. A typical no problems P&A can cost $20K-$30K for a conventional well. 

Honestly, I don't think it's in the best interest for a landowner to take over a well unless they know exactly how to operate it and understand the financial liability. 

Permalink Reply by Jonathan H on October 9, 2015 at 9:06am

I live in Ohio; since you mention DEP, I assume you are in PA, so there are differences in the rules.

Having said that, there are also similarities. I was offered the opportunity to take over the 2 shallow wells on my property, which would have required a well operator bond ($5,000) and a per well bond (2x$5,000) - substantial, but worth considering.

However, the kicker is that I would be taking responsibility to operate or plug the wells in the future; according to the local Ohio DNR Oil & Gas Inspector, who has to be involved in any plugging, a cheap easy well plugging is $20,000 and depending on what problems are encountered, it can run over $200,000 per well.

I HIGHLY suggest that you look into ALL costs before taking over a well. In my case, the wells are non-producing, but the operator doesn't want to admit it since it means they would have to pay those plugging costs, so they would love to get me to take them over and obligate myself to the costs.

Permalink Reply by KAR on October 9, 2015 at 8:19pm
Incorrect, production and waste are required to be submitted to the DEP. Conventional wells production is submitted on a yearly basis and unconventional wells are submitted monthly. If the operator hasn't reported anything then it must only produce gas that is used by a homeowner and no waste is produced. What is the api number for the well not reported?
Permalink Reply by Hopeful on October 9, 2015 at 9:44pm

I think you need legal advice from an oil/gas attorney. If you take ownership of an oil/gas well, you are in the oil business. And it's a risky business with huge risks.

Permalink Reply by Jonathan H on October 9, 2015 at 9:53pm

I fully agree - the costs and liabilities are likely to add up very quick and as I mentioned above could easily cost more than your property is worth. Make sure that the lawyer you talk to is conversant with these issues.

Permalink Reply by KAR on October 9, 2015 at 11:18pm
Thirded.

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