Commission Shift organized a working group with diverse stakeholders to develop recommendations for the Railroad Commission (RRC). These recommendations are intended to guide the RRC as it begins the rulemaking process to update its inactive well rules, a process mandated by Senate Bill (SB) 1150.
The Big Picture: Put Communities and Their Health and Safety First
The working group recommendations emphasize that getting an extension to delay plugging an old well is a privilege, not a right. The RRC must deny well-plugging extensions that put public health, safety, or the environment at risk. The rules should be written to prevent failures, not just react to them. Additionally, holding public hearings in communities affected by oil and gas activity and making the entire rulemaking process easily accessible to everyone will ensure the RRC considers community concerns and the public impacts of leaving wells unplugged.
Limit Extensions and Shut Down Loopholes
- Time Limits: After a well has been inactive for 15 years, operators should be limited to only two extra years of extensions, unless they submit a full, RRC-approved compliance plan. Companies should be limited to a maximum of three financial hardship extensions and demonstrate they can viably meet their asset retirement obligations.
- Define “Hardship”: Companies shouldn’t get extensions just by claiming “financial hardship.” This term needs strict, measurable criteria for what qualifies (like market prices dropping drastically for months). The cost of plugging a well should not be considered a hardship, and companies should demonstrate, through a review of their books, that they are preparing for and contributing towards decommissioning costs for wells.
- Require Viable Plans: Companies must provide clear, viable plans and update them annually for plugging wells, returning wells to operation, exiting financial hardship, and demonstrating that they are preparing for future well-retirement obligations.
- Real Production for “Return to Operation” Wells: If a company gets an extension by promising to bring an old well back online, the well must actually return to operation and produce in paying quantities. Briefly restarting a marginal well should not qualify.
Make Sure Wells Are Safe
- No Extensions in High-Risk Zones: The RRC should identify the most dangerous areas (such as those with corrosive chemicals or high-pressure formations) and consider banning plugging extensions for all vintages of inactive wells in those zones, as the risk of well failure is too high.
- Stronger Testing Requirements: The RRC must modernize how it assesses the physical condition of wells (mechanical integrity testing) by requiring new, high-accuracy equipment; more rigorous hydraulic pressure tests (especially in high-risk zones); increased notification and witnessing requirements; and secure, accurate reporting of results.
- Independent Checks: Require a licensed, certified third-party inspector to perform and verify these crucial well tests to uphold high standards and prevent cheating.
- Risk-Based Prioritization: Apply the RRC’s “orphaned well prioritization system” to an operator’s inactive fleet to address the most hazardous wells first.
- Water Protection: If a well fails an integrity test, additional safeguards should be in place to ensure that nearby water is not contaminated and that any leaks are cleaned up.
Strengthen Rules to Stop Bad Transfers
- Good Faith Deals Only: Require a certified analysis demonstrating that the well still has economic value greater than the estimated cost to plug it, and that the new operator has a track record of compliance and appears financially able to plug their wells.
- Full-Cost Bond: Encourage and require full-cost bonding in certain circumstances to ensure that the full cost of plugging remains with the well, regardless of ownership.
- Notify Landowners: All surface and mineral owners must be notified of who is buying and selling the wells on their property, and given standing in any proceedings regarding transfers or extensions.
Accountability and Transparency
- Tougher Penalties: Set administrative penalties high enough to discourage bad behavior. If an operator is caught submitting fraudulent information, they should face maximum penalties, including for repeat offenses.
- Compliance Scores: Create a compliance history scoring system (like a risk rating) for every operator. A low score and repeated violations should make an operator ineligible for extensions or for receiving transferred wells.
- Public Data: The RRC must make information about well extensions and operator compliance accessible to the public via monthly reports or online data queries.
