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Environment & Energy Report

States, Democrats Want Federal Help to Clean Up Old Oil Wells

June 1, 2020, 7:28 PM

Fossil fuel companies going bankrupt in the wake of the Covid-19 pandemic are expected to leave behind thousands of abandoned oil and gas wells, and some congressional Democrats are calling for a federal program to ensure they’re cleaned up.

There are 56,000 known abandoned oil and gas wells in the U.S., leaking methane and other air and water pollutants, said Rep. Alan Lowenthal (D-Calif.) during a Monday House Natural Resources subcommittee Democrats’ forum.

“Huge numbers” of oil and gas companies are poised to go bankrupt, and Congress can create a program to pay the cost of remediation, he said.

Lowenthal in 2019 introduced the the Bonding Reform and Taxpayer Protection Act (H.R. 4346), which would boost the minimum bond a company must pay per federal oil and gas lease to ensure wells can be cleaned up if the company abandons them.

The bill, which hasn’t advanced beyond committee, would increase the minimum bond a company must pay per lease from $10,000 to $50,000, or from $150,000 to $1 million for all of an energy company’s wells nationwide.

‘Keep It in the Ground’ Playbook

Republicans, who weren’t represented during Monday’s forum, have railed against efforts to increase bonds for oil and gas leases.

Rep. Paul Gosar (R-Ariz.) said at a September House hearing that Lowenthal’s bill, and others that would cut methane leaks from oil wells, are “right out of the ‘keep it in the ground’ playbook,” and will drive away investment and energy production on federal lands.

Last year, the Government Accountability Office reported that 84% of bonds linked to oil and gas wells overseen by the Bureau of Land Management are too low to reclaim wells left derelict by the companies that own them.

Varied Cleanup Costs

Costs to plug and remediate abandoned wells average $18,940 per well nationally. But they range dramatically, depending on the state and the depth of the well, said Lynn Helms, director of the North Dakota Department of Mineral Resources. Helms spoke at the forum Monday as a member of the Interstate Oil and Gas Compact Commission.

In North Dakota, which has 366 known orphaned wells, it costs $150,000 to plug and reclaim the well, Helms said.

In New Mexico, those costs run about $35,000 per well, which will ring up to about $24 million for the state to shut and reclaim its 708 orphaned wells, said Adrienne Sandoval, director of the New Mexico Oil Conservation Division, speaking at the forum.

With limited capital and the possibility of bankruptcy amid the pandemic, oil and gas companies may not be able to plug their wells properly, she said.

“When operators go bankrupt, the states step in,” Sandoval said, adding that more federal support is essential for proper cleanup.

To contact the reporter on this story: Bobby Magill at bmagill@bloombergindustry.com

To contact the editors responsible for this story: Gregory Henderson at ghenderson@bloombergindustry.com; Anna Yukhananov at ayukhananov@bloombergindustry.com

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