Bonding

1. Bonding • ACT 223 - Sec. 215 Bonding (a)(1)…upon filing an application for a well permit and before continuing to operate any oil or gas well, the owner or operator thereof shall file with the department a bond… conditioned that the operator shall faithfully perform all of the drilling, water supply replacement, restoration and plugging requirements (4 pages) Chapter 78.301Scope In addition to the requirements of section 215 of the act (58 P. S. §  601.215), this subchapter specifies certain requirements for surety bonds, collateral bonds, replacement of existing bonds, maintaining adequate bond and bond forfeiture.(9 pages)

2. More Bonding • Guidelines for Submitting Oil and Gas Well Bonds- (64 pages) 77 pages of… • single well bond $2,500…multiple bonded…blanket bond $25,000…acceptable bond -- surety or collateral… attorney-in-fact…Collateral…cash…certified check…bank check…treasurer’s check…money order…payable to the Commonwealth…letter of credit…certificate of deposit…negotiable securities…does not pay interest on cash held as collateral...collateral bond requirements…phased deposits of collateral…individuals…not to corporations, companies, or partnerships. • Plan on 2 weeks to 3 months for Bond approvals • A well will be released from bond coverage one year after it has been properly plugged and the site satisfactorily restored.

3. Permit Application For Drilling Or Altering A Well • Act 223 - Sec.201 (a) No person shall drill a well or alter any existing well…without having first obtained a well permit. • § 78.11. Permit requirements. (a)  No person may drill or alter a well unless that person has first obtained a permit from the Department. (b)  No person may operate a well unless one of the following conditions has been met: (1)  The person has obtained a permit under the act. (2)  The person has registered the well under the act (3)  The well was in operation on April 18, 1985, under a permit that was obtained under the Gas Operations Well-Drilling Petroleum and Coal Mining Act

5. Permits • A permit will expire in 1year… …at which time the applicant can submit an affidavit, requesting renewal of the permit, attesting that all applicable parties have been notified and that all aspects of the original application are the same.

6. Lots of Applications Total applications for New, Drill Deeper and Re-drill Permits for 2010. Northwest 2345 East Region 2299 Southwest 1926 Statewide: 6570

7. Staff to handle paperwork- NWRO 7 Clerical for administration -logging, tracking, issuing 7+ Technical staff for technical review -plats, deviation surveys, environmental issues, notifications 1 Program Manager to sign every permit

8. The hardest part is finding it in the office (EFACTS) Technical Review Log/Track Admin review Log/track Program Manager Sign Date Stamp Screen Tech Chief Re-review Screen Permit Issuance Log/Track Copy/ Scan/ Send

9. How do we keep track • By adding Numbers to the application– To each application we add the following numbers: OGO number Bond number API number Authorization number Site number Client number APS number Account number Primary Facility number Sub-facility number Sometimes more numbers

10. Most important part of the application * Show me the money * After the date stamp… …send the money to Harrisburg… …now the review can begin

11. Form 5500-PM-OG0001 • § 78.15. Application requirements (a)  An application for a well permit shall be submitted on forms furnished by the Department and contain the information required by the Department to evaluate the application. (b)  The permit application will not be considered complete until the applicant submits a complete and accurate plat, an approvable bond or other security, the fee, proof of notification, necessary requests for variance or waivers or other documents required to be furnished by law or the Department. The person named in the permit shall be the same person named in the bond or other security.

21. Completing the Drilling Application Form Administration stuff Name Address Phone Fax Well Name & Number County Muni Was location ever permitted before? ###-##### Is this re-working an existing well not registered or permitted? Please provide all known information about the unregistered/ un-permitted well. Pennsylvania Natural Diversity Inventory… any “hits” must be addressed and mitigation standards might be included as a Special Condition on the Permit.

22. Permit Types Drill a new well Deepen a well Re-drill a well Alter a well Other

23. Drill a New Well • A location where a well has never been drilled location may have been permitted before

24. Deepen a Well • To drill an existing well to lengthen the well bore

25. Re-drill a Well • Drill through a well plug to put well in production Plugged Well Drill through

26. Alter a Well • Changes the well bore or drills out well bore Drill out well bore Drilled out larger well bore Original well bore

27. …Alter a well…casing • In coal areas…any work that effects the coal protective casing…requires a permit • Work or replacement of casing that changes casing depth or diameter…requires a permit • Work or replacement of casing of the same diameter to the same depth does not, by itself, require a permit.

28. Other type ? • If not a new, deepen, re-drill or alteration…it is an “other” well…and must be specified Change use from productionto storage Rehabilitate an Orphan well for production DEP is no longer able to register wells Replacement of casing. No re-drill of borehole. No re-drill of borehole.

29. Type of well Gas Oil Comb.(gas & oil) Injection, recovery Injection, disposal Coalbed methane Gas storage Other (specify)

30. Application Fee The fee is an application processing charge for expenses incurred by the Bureau of Oil & Gas… … and a surcharge for Abandoned & Orphan Well Plugging Funds.

31. Surcharges & fees at a glance Permit fee’s can range from None, for rehabbing an Orphan Well… …to $3850 for a 15,000’ Marcellus Well…& more if deeper!

32. Fee calculator website • http://www.dep.state.pa.us/dep/deputate/minres/oilgas/2011Permitcalculator.htm

33. $ Payment $ • Pay to the order of… …”Commonwealth of PA” We accept Money Orders, personal checks & business checks.

34. Coordination with regulations & other permits The Oil & Gas Act Oil & Gas Conservation Law Coal & Gas Resource Coordination Act Waste Management Act Clean Streams Law PACode Chapters 93, 102 & 105 Among others

35. Oil & Gas Conservation Law • If well is 3800’ or deeper & penetrates the Onondaga…then Conservation Well. Depth Depth 3000- 5000 - Onondaga Onondaga 3800- 6000- 4000-

36. What about these? DEP policy: Proposed vertical wells with a non-vertical lateral, where the vertical portion penetrates the Onondaga by 200’ or less, and the intent of that portion is only for logging purposes, can be considered non-conservation wells. For production purposes 6000- Onondaga <200’ 6200 >200’

37. In areas with no spacing application or order, the borehole, at Conservation depth, must be at least 330’ from outside lease boundary. 330’ 330’ 330’ 330’ 6000- Onondaga 6100

38. Coal and Gas Resource Coordination Act • Applies to all proposed locations that penetrate coal seams, deemed workable by underground methods. Except Conservation wells and certain “other wells” as defined in the Act. • Requires coordination of coal mine and gas well operators in areas where applicable proposed well locations are near active or permitted coal mines.

39. Workable Coal Seams by underground methods • Coal 28” thick with sufficient quality • At least 100’ overburden • …………………………….for at least 1 sq mi aerial extent Surface 100’ 28” sufficient quality 100’ overburden Aerial extent at least 1 mile 28”

40. If determined a workable coal seam and well is not exempted from the Act and not a Conservation Well Distance restrictions: At least 1000’ from any other well that -penetrates a workable coal seam -has not been plugged -is non-producing wells abandoned after 11/30/55 1000’ 1000’ workable coal seam Proposed location Plugged well Before 11/30/55 After 11/30/55 Non-Conservation well Conservation well Non producers abandoned

41. House Bill 265 • House Bill 265 looks to amend the Coal and Gas Resource Coordination Act. • Allowing Non-Conservation well clusters, on the same pad, to be located less than 1000’ feet from each other…among other things.

42. Permitted Coal Mines whose boundaries are within 1000’ of proposed location • Required to notify coal owners/operators Permitted coal mine boundary 1000’ Proposed location

43. Notified coal owners/ operators have the right to object • Act 223 if “the well will, in the opinion of the coal owner or operator, unduly interfere with or endanger such mine, then the coal owner or operator affected shall have the right to file objections” DEP will mediate a conference between the 2 parties to work out an agreement

44. Coordination with gas storage operations • Proposing to drill within 2000’ of a gas storage reservoir. Storage operator must be notified with the casing and cementing plan. The storage operator can object DEP will mediate a conference between the 2 parties to work out an agreement

45. Within perimeter of a landfill • Whether a landfill is permitted, active or abandoned… …if the proposed location falls within it’s perimeter… …label the landfill location on plat and identify the owner

46. Distance restrictions • The proposed site must be > 100’ from any stream, spring, body of water, or a wetland > 1 acre, unless approved through a waiver. Well pad/site 100’ 100’ 100’

47. Waiver request – Form 5500-FM-OG0057 • Requesting to waive the 100’ distance restriction from any wetland > 1 acre, spring, stream or body of water Describe the waiver request in detail… …water bodies, classifications, distances, etc.. …addressing all of the following: (1) Fluid containment measures (drilling, stimulation, formation & production) (2) Handling large volume of top-hole water (3) Site chemical storage & handling…spill clean-up (4) Disposal methods for wastes and waste fluids (cuttings & muds) (5) When polluting substances will be removed from site after well completion (6) Waste removal during inclement weather (7) Submittal of an E & S Control Plan per Chapter 102

48. Waiver request – Form 5500-FM-OG0057 • Waiver request form goes out to the field representative for approval or disapproval… …who might meet out in the field with operator… …then make an educated decision Approved waivers can have special conditions that are incorporated into the permit

49. …more distance restrictions • A new well may not be drilled within 200’ of existing buildings (where someone normally works or lives), or a water well… >200’ …without prior written consent from the owner… …or an approved request for variance Form 5500-FM-OG0058

50. Request for Variance From Distance RestrictionFrom Existing Building or Water Supply (5500-FM-OG0058) Explain the variance request: -distances from the proposed well location to buildings and / or water supply; -uses of buildings and water supplies, and frequency of use; -proof of notification -type of insurance coverage for the project -explain how adherance to the 200-ft requirement would deprive the oil and gas owner of the opportunity to produce or share in the production of oil and gas underlying the surface tract -evidence that no location more than 200 feet from all buildings or water supplies is available where the well could be drilled. • Plan Description. Describe measures, facilities, or practices to be employed during well site construction, drilling, and well operation to insure safety and protect persons and property, and to protect waters of the Commonwealth. Use additional blank sheets for narrative or sketches as needed Define: How you’re deprived Safety measures Insurance coverage Project