Shell/SWEPI Plugging wells

DEP email says Shell/SWEPI is getting permits to plug some of the Halterlein wells.  I am not sure I like the sound of this.

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Permalink Reply by pg guy on December 9, 2013 at 8:14am

Respectfully disagree.  A plugged well holds nothing.  If the well is drilled and plugged within the intitial term, and there is no extension signed, and there has been no production, the lease is no longer valid. If the well has produced, then virtually every valid lease expires one year after cessation of production, unless it is still with the initial term, or within a valid extension of the initial term.  This applies whether the well has been "plugged", or "plugged and abandoned".

BTW - I believe PA regulations require wells to be plugged within a year after cessation of production, as a matter of fact, there has been some enforcement of this regulation recently with producers being cited for failing to plug non-producing wells within a year. 

 

Permalink Reply by Lance Nimmo on December 9, 2013 at 8:36am

You are right, if the leases don't have cute little clauses in them protecting the O&G companies. Guess what, I know ours with Shell has a sweet little clause called, "shut-in royalty clause." It basically is the landowner letting the gas company cap wells for a later date.  I hope you are right though, for what it's worth.

Permalink Reply by pg guy on December 9, 2013 at 9:11am

The silver lining for you may be that gas prices will increase by the time the pipeline is in place and production starts, if the wells are only shut-in, and not permanently plugged.  (Good luck.)

Even shut-in royalty clauses expire eventually, otherwise the lease would violate the common-law rule forbidding perpetuities, and would not stand up in court.

I am curious - perhaps someone with relevant knowledge can answer this:  To meet DEP standards for plugging a horizontal well, does the entire horizontal section have to be cemented, as well as the normal up-hole areas?  If that is the case (and I suspect it is), it would likely be more economic to drill a new well than to attempt to drill out the plug.  Any authoritative information about that topic would be interesting.

 

Permalink Reply by Tyler Durden on December 9, 2013 at 11:15am

I believe that some of those wells only had a conductor dropped in and that was it.  In PA, that is still considered "spudding a well".  If they never go back to complete the wells and the permit expires, they are considered abandoned.  You would have to look at the well record and completion report in the permit file to see if they were ever drilled to total depth before you start sweating it out.

Permalink Reply by Tyler Durden on December 9, 2013 at 11:38am

I feel more confident about my statement after finding this link:

http://www.ahs.dep.pa.gov/eFACTSWeb/criteria_auth.aspx

- Under Authorization Type: Choose "Drill and Operate Well Permit Inactive Status"

- Under County: Choose "Lawrence"

- Under Program: Choose "Oil and Gas"

- Hit Search

If you look at that list populated, those are wells SWEPI has applied for Inactive Status on in Lawrence County.  Some are Pending, and there could be more in the works.   This would allow them to shut the wells in until they have the infrastructure in place to produce them. 

Permalink Reply by Robert Allingham on December 9, 2013 at 11:20am

For what it's worth, my lease w/ SWEPI says "... Lessor agrees to extend the term one year beyond the completion of plugging operations of the last well on leased premises to permit lessee to deepen,rework,or recomplete said well or to commence operations for the drilling of another well.....". IMO this shows that plugging a well doesn't mean it's permanent. Also, re-reading my shut in clause "....premises are shut-in,suspended or otherwise not producing for any reason whatsoever for a period of 12 consecutive months........lessee may maintain this lease in effect by tendering to lessor as a shut in payment...." . This shut in payment is minimal and could keep the lease open forever. Even my addendums give a shut-in period of 5 years after expiration of the primary term. But the way I look at things, I signed a lease to have them drill and that's what I'm waiting for(of course I'd like to still be alive when it happens,lol). Just my two cents for this discussion.

Permalink Reply by Trapper on December 9, 2013 at 12:21pm

Is it required by PA State law to plug a well that is classified as inactive within a certain amount of time?

Can a well be "shut in" by means other than filling with cement to seal off ? Wouldn't a locked and sealed valve suffice?

Permalink Reply by TM on December 9, 2013 at 1:04pm
I would define shut-in as a well that is capable of producing but has not been hooked into a pipeline yet. Shut-in wells would be temporary and put into production when prices rise or when infrastructure is in place. Plugging a well would be permanent using cement plugs to completely seal off all the fluids from the well thus plugged and abandoned status.
Permalink Reply by paleface on December 9, 2013 at 2:18pm
Permalink Reply by mike on December 9, 2013 at 2:30pm

Here is a pic from one of the Kephart wells.

Attachments:
Permalink Reply by Trapper on December 9, 2013 at 4:10pm

Thanks Paleface! Great find.

§ 78.101. General provisions.

 Upon application, the Department will grant inactive status for 5 years for a permitted or registered well if the application meets the requirements of section 204 of the act (58 P. S. §  601.204) and § §  78.102—78.105. The Department may require information to demonstrate that the conditions imposed by §  78.102 (relating to criteria for approval of inactive status) are satisfied.

I can't find section 204 of the act (58 P. S. §  601.204). I wonder if this sets the criteria to allow the shutting in in the first place? (such  as awaiting pipeline ,economics ,etc.)  § §  78.102—78.105 seem to pertain to the physical  condition of the well and criteria related to safely allowing it to go unplugged for 5 years with the possibility of one 1 yr. extension.

Would you know if the operator's reasons for shutting in are a matter of public record? As Mike has illustrated with his flare photos , the Kephart wells were flared11 months ago , showing gas produced. To me this begs the question of why they are being plugged instead of just shut in? Interesting to say the least. Maybe they weren't completed to high enough standards and will be re-drilled at a later date...? IDK.

P.S. Oh yeah......Hey Lance , I ain't exactly starving and I oughta have another 25 or 30 years left if I live as long as my folks , so I think I'll wait it out and keep my current job for a while yet! ;-')

Permalink Reply by paleface on December 10, 2013 at 12:51am

 I would call the DEP. in Meadville they are in charge of permits they really try to answer your questions (  814-332--6860 )

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