Responsibility for plugging wells in Kansas is governed by K.S.A. § 55-179. Since July of 2008, lessees in Kansas have been operating under a fairly clear cut set of guidelines established by the Kansas Corporation Commission (the "Commission") for determining when a lessee is responsible for plugging abandoned unplugged wells that are found on land on which they have taken a new oil and gas lease. Those guidelines were established by the Commission in two orders known as the New Donna Lee Order, KCC Docket No. 04-CONS-074-SCHO (June 4, 2004), and the Quest Cherokee Order, KCC Docket No. 07-CONS-155-CSHO (July 17, 2008). Boiled down to their essence, those guidelines stated that an operator taking a new oil and gas lease would only be responsible for plugging wells that they drilled, that they reworked, or that their operations on the land impacted. The existence of such guidelines has been beneficial to the industry because it has allowed operators to accurately predict their potential well plugging exposure and to avoid the unwelcome surprise of finding several abandoned unplugged wells on land that they leased without knowledge of those wells.
Those established guidelines were called into question by a recent decision by the Shawnee County District Court in an appeal from a Commission order. In that case, the District Court relied upon common law nuisance principles to conclude that the act of taking an oil and gas lease subjected the lessee to liability for plugging all abandoned unplugged wells on that land covered by that lease, regardless of whether or not the lessee drilled or "touched" those wells. That ruling substantially expanded the lessee's plugging liabilities. The decision in that case has been appealed to the Kansas Court of Appeals – John M. Denman Oil Co. v. Gar Bridwell, d/b/a Black Rain Energy, Case No. 110,861 – and is not final. However, the Shawnee County District Court's interpretation of K.S.A. § 55-179 is not consistent with the prior Commission decisions.
In light of that new inconsistent interpretation of K.S.A. § 55-179, the Commission has opened a new docket In the Matter of a General Investigation of Abandoned Wells in Kansas and Responsibility for Plugging Such Wells under K.S.A. 55-179, Docket No. 09-CONS-024-CINV (December 17, 2013). In the order opening that docket, the Commission directed Staff to discuss at the Oil and Gas Advisory Committee whether to pursue any statutory or regulatory changes regarding the various well plugging funds and responsibility for plugging abandoned wells. Further, Staff was directed to present any proposed changes to the Commission at an Open Meeting. Those discussions have not yet commenced. Regardless of what regulations are adopted or statutory amendments passed, more certainty of the rules regarding responsibility for plugging abandoned wells should be a welcome outcome for the industry.