Interior devotes billions to plugging old oil wells. Is it enough?
The agency under-counted abandoned wells by more than half, which means the effort covers only a fraction of the cost.
In January, the Department of the Interior stated what many have suspected: there are far more orphaned oil and gas wells in the U.S. than previously estimated. In a memo, the agency wrote that more than 130,000 documented wells exist across the country that lack a responsible company on the hook to pay for cleanup – the remnant of more than 150 years of extracting oil and natural gas. This figure, based on data provided by the states, is two-and-a-half times the agency’s 2019 estimate, which put the figure at 56,000.
This ballooning estimate comes in response to Infrastructure Investment and Jobs Act that President Biden signed in November, which includes $4.7 billion to plug and reclaim abandoned and orphaned wells. This is a historically large figure, but the injection of cash pales in comparison to the full cleanup cost for the new abandoned well figure. Plugging wells is a time-consuming and expensive process. Using estimates from a 2021 Government Accountability Office report, the cost of plugging all 130,000 abandoned wells could range from $2.6 billion to more nearly $19 billion. According to industry experts and the plugging cost estimates used by oil state regulators, the expected cost is very likely to fall on the upper end of that spectrum. And it’s likely that this larger figure represents only a fraction of the problem: The Environmental Protection Agency stated in an April 2021 report that there could be as many as 3.4 million abandoned wells nationally.
The cost of plugging all 130,000 abandoned wells could range from $2.6 billion to more nearly $19 billion.
The recent infrastructure spending package includes $250 million for wells on public land, which are overwhelmingly concentrated in the West, and an additional $150 million for tribal governments. Colorado, New Mexico and Wyoming alone account for 65% of all public land oil and gas leases, according to Bureau of Land Management data. Compared to many oil states, the BLM has a far less stringent system of required financial assurances from oil and gas companies to ensure cleanup in case the well becomes orphaned.
So far, 26 states have stated that they intend to apply for these grants. On this list are the West’s leading oil and gas states, including: Alaska, Arizona, California, Colorado, Montana, New Mexico, Utah and Wyoming. Of these states, California (5,151), New Mexico (3,375) and Wyoming (1,350) had the highest number of reported orphaned wells, according to the most recent state reports from the Interstate Oil and Gas Compact Commission. Extra grant funding is available to states that “improve their plugging standards” or increase the financial assurances that oil and gas companies put forward to prevent wells from becoming abandoned. On Tuesday, the Interior Department made public a cross-agency agreement that includes the BLM, the Energy and Agriculture departments, the EPA, the IOGCC and tribal governments. The agreement details how funding decisions will be made and states that annual reports on well plugging will be submitted to Congress. The funds will begin to be allocated to states at the end of February, according to the Interior Department.