Audit: State regulation of wells inadequate

More than half the oil and gas wells in Louisiana were not inspected within a three-year guideline set by the state, and more than 2,800 orphaned wells in the state has not been plugged as of July 2013.

Those are among the findings of an audit that cites the state Department of Natural Resources Office of Conservation for inadequate management of oil and gas well regulation.

The audit, released Monday by the Louisiana Legislative Auditor’s Office, also notes a failure to collect fines and a lack of information from well owners.

The report says the state doesn’t require all operators to put up a financial security on their oil and gas wells, with only about 25 percent of all current wells required to do this. In addition, the financial security required is not enough to cover the cost of plugging a well if it ends up abandoned.

In a response to the audit, Commissioner of Conservation James Welsh wrote that the office agrees with the findings, noting the office has been struggling with how to write rules to require a financial security without leading to a large number of wells just being abandoned.

“The concern was you would create a wave of orphans,” said Patrick Courreges, DNR spokesman.

Wells are considered orphaned when a responsible owner can’t be found or if the owner fails to maintain the structure.

For the most part, the Office of Conservation agrees with the audit findings and said the report highlights challenges the office has been trying to address.

“We see this as a validation and justification for getting into some new rule-making,” Courreges said.

In addition, the report outlines issues such as data management and developing a more formalized approach to inspections, enforcement and information tracking.

The report will add to what the Office of Conservation will find in a study of orphan well regulations and rules called for by House Concurrent Resolution 102, which was passed in the most recent legislative session, he said.

The audit also points to a problem with the timeliness of inspections, finding that 53 percent of oil and gas wells from fiscal years 2008 through 2013 weren’t inspected within the three-year guidelines set by the commissioner.

About a quarter of oil and gas wells weren’t inspected at all during this time.

Courreges said the priority is to look at risk when assessing where inspections should take place, and the boom in drilling in the Haynesville Shale meant more effort was expended there instead of trying to meet the three-year inspection guidelines. Actively drilling wells pose more of a potential problem than wells that already exist, he said.

According to the report, the Office of Conservation says its ability to meet inspection goals has been impacted by budget cuts, loss of staff, hiring freezes, hurricanes, the Haynesville Shale boom and the BP oil spill.

The report outlines another potential reason for the inspection problems: The office hasn’t been effectively managing the inspection process or monitoring districts to make sure the goals of an inspection every three years are met.

There is no formal oversight procedure to make sure these inspections are done consistently, with some wells not getting any inspections while others receive 20 or more inspections in a six-year period. Although it would be natural for more problematic wells to have more inspections, 91 percent of the wells inspected repeatedly were in compliance with regulations, according to the report.

For orphaned wells, the office shifted its focus to dealing with wells with the highest potential for environmental impact or the ones that are near homes, waterways or roads.

“Although focusing on urgent and high priority wells helps ensure that wells that pose a greater risk are addressed first, this focus has reduced the number of wells plugged from 177 in fiscal year 2010 to 42 in fiscal year 2013,” the report says.

The Office of Conservation contends that many of the issues will be addressed in the ongoing conversion of the SONRIS online database. The office is currently working to switch the database from solely as a way to give public access to electronic records into a way to better manage Office of Conservation operations.

Although the office started work to set up electronic reporting of inactive wells in 2009, there was no funding to upgrade the online database. Money is now in place, and the office expects a system to be in place by the end of the year, according to the commissioner’s response to the report.

Follow Amy Wold on Twitter, @awold10.