The potential for repurposing old oil and gas wells for renewable energy raises a number of complex legal issues in Pennsylvania. In recent years, the federal government has been exploring renewable energy generation by using existing infrastructure. That includes repurposing oil and gas wells for geothermal energy.
Exploiting the earth’s temperature to generate or save energy comes in a variety of forms. Some homes and businesses in Pennsylvania already use shallow wells like heat pumps, pumping water to regulate indoor temperature. Generally, as wells penetrate deeper into the earth, the temperature increases, allowing for water injected into deep wells to heat up and return to the surface with greater potential use for energy and heat transfer. For instance, temperatures in the Marcellus shale can be 120-150 degrees Fahrenheit.
The University of Oklahoma is conducting research on repurposing oil and gas wells to potentially generate heat for schools. Researchers have identified the potential for repurposing oil and gas wells in Pennsylvania. Repurposing oil and gas wells for renewable geothermal energy avoids the large up-front costs in many geothermal energy systems: drilling the wells. On that front, there is no shortage of non-producing wells in Pennsylvania. With over 150 years of oil and gas development, there are thousands of orphaned oil and gas wells that no longer produce and are on the state’s plugging roster. It is very likely that there are hundreds of thousands of wells that the state is unaware of, in addition to abandoned wells that are still on operators’ books.
Repurposing oil and gas wells for renewable energy potentially creates a new industry that delivers economic benefit and simultaneously saves the Commonwealth untold amounts of money that would have to be spent plugging wells. But, assuming the geology is conducive for repurposing oil and gas wells for renewable energy, the process is not as easy as refurbishing an old oil or gas well and then using it for geothermal energy. Putting aside the complex regulations involved, competing ownership interests are at-play.
It is highly likely that repurposing oil and gas wells for renewable energy involves orphaned and abandoned wells that have not produced for years and were drilled pursuant to rights granted in oil and gas leases. Many oil and gas leases state that they remain operative as long as oil and gas is produced. An oil and gas lease in Pennsylvania is understood as a conveyance of a fee simple determinable in the oil and gas. T.W. Phillips Gas & Oil Co. v. Jedlicka, 42 A.3d 261, 267 (Pa. 2012). As a fee simple determinable, an oil and gas lease automatically terminates and reverts to the grantor upon the occurrence of a specific event, such as the cessation of oil and gas production. Id. Therefore, if a well is identified as a candidate for repurposing because it no longer produces oil or gas, it is possible that the oil and gas lease on the property may have terminated, eliminating the lessee' rights to use the well for any purpose.
Even though repurposing oil and gas wells for renewable energy obviously implicates oil and gas wells, it does not necessarily involve the owners of the oil and gas. Like the potential underground storage of carbon dioxide, repurposing oil and gas wells for renewable energy in Pennsylvania implicates ownership of pore space. While the oil and gas owners who leased those rights for development granted a fee simple determinable in the oil and gas, the lease is “. . . sale of an estate in fee simple until all the available minerals are removed.” Snyder Brothers, Inc.. v. Peoples Natural Gas Company, 676 A.2d 1226, 1230 (Pa. Super. Ct. 1996). In Pennsylvania, ownership of subsurface rights does not involve perpetual ownership of the geologic strata where the subsurface minerals were found and removed from.
Over a century ago, the Pennsylvania Supreme Court implicitly addressed the question of pore space ownership in Chartiers Block Coal Co. v. Mellon, 25 A. 597, 598–99 (Pa. 1893), focusing on coal ownership and writing that:
While the owner of the coal may have an estate in fee therein, it is at the same time an estate that is peculiar in its nature. Much of the confusion of thought upon this subject arises from a misapprehension of the character of this estate. We must regard it from a business, as well as a legal, standpoint. The grantee of the coal owns the coal, but nothing else, save the right of access to it, and the right to take it away. Practically considered, the grant of the coal is the grant of a right to remove it. This right is sometimes limited in point of time; in others it is without limit. In either event, it is the grant of an estate determinable upon the removal of the coal. [. . .] When the coal is all removed, the estate ends, for the plain reason that the subject of it has been carried away. The space it occupied reverts to the grantor by operation of law. It needs no reservation in the deed, because it was never granted. The grantee has the right to use and occupy it while engaged in the removal of the coal, for the reason that such use is essential to the enjoyment of the grant. It cannot be seriously contended that, after the coal is removed, the owner of the surface may not utilize the space it had occupied for his own purposes, either for shafts or wells, to reach the underlying strata.
Therefore, under Chartiers Block Coal Co., the physical space where subsurface minerals used to be present is owned by the owner of the surface of the property. Id. Therefore, in order to inject water into repurposed oil and gas wells for renewable energy in Pennsylvania, rights would likely need to be secured from the surface owners to use their pore space.
Another complicating factor is that the production of hot water can be a “co-product” of ongoing oil and gas development. Even though oil and gas wells would be producing hydrocarbons, a lease may not authorize the simultaneous use of the well or subsurface formations for geothermal purposes.
Like many emerging technologies, the state of the law and its interplay with potential economic development is being developed. Repurposing oil and gas wells in Pennsylvania for renewable energy development has the potential to breathe new life into what are often seen as present-day liabilities in orphaned and abandoned wells. But, there are a variety of issues and competing interests that must be resolved. Houston Harbaugh’s oil & gas and renewable energy attorneys are at the forefront of these issues. If you have questions about converting oil and gas wells for renewable energy or the use of existing oil and gas wells for those purposes, please contact Brendan A. O’Donnell at 412-288-2226.
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