We Need to Talk About Methane: Part Two
The abandoned and orphaned well crisis
This is the second post in our We Need to Talk About Methane series. See Part 1 for more information about methane emissions data and Part 3 for the history and current state of U.S. methane regulation.
What happens when an oil or gas well reaches the end of its useful life? Ideally, the well is properly plugged at the source and the surface area is thoroughly remediated. Unfortunately, as a result of companies and regulators shirking their responsibilities, oil and gas wells are often left abandoned to wreak havoc on nearby communities and ecosystems. And because so many of those communities are Latinx and Indigenous, this is another example of environmental racism.
While it may be hard to believe that there’s so little accountability when it comes to cleaning up these profoundly hazardous polluters, it is estimated that there are millions of abandoned and orphaned wells throughout the United States, including tens of thousands in Colorado. An abandoned well is a well that’s no longer producing oil and gas but has yet to be appropriately plugged and remediated. The term “orphaned” refers to any abandoned well in which the operator is unwilling or unable to plug it, thus leaving the clean-up responsibilities to governments and taxpayers. Wells can become orphaned when operation rights are lost through an enforcement action, when the operator is facing financial distress, or, for very old wells, when the operator cannot be identified.
Not only do orphaned and abandoned wells carry a high risk of groundwater contamination, they can also emit dangerous levels of noxious gases, including methane. As we discussed in the first installation of this two-part series, methane has a global warming potential that is over 80 times greater than carbon dioxide in the initial twenty years after it is released into the atmosphere. Significant amounts of methane are released through the production and transmission of oil and gas, although inaccurate metrics and loose reporting requirements make it nearly impossible to find an honest representation of its full impacts. When taken together, the potent levels of methane emitted from oil and gas operations, plus the emissions released from millions of abandoned and orphaned wells around the country, make for a very real climate threat.
In fact, a 2020 EPA report found that upwards of 3.2 million abandoned oil and gas wells together emitted 281 kilotons of methane in 2018, which is roughly equal to the consumption of 16 million barrels of crude oil (about as much as the United States uses in a typical day) in terms of its climate-damaging impacts. And keeping with the ambiguous reporting trend, the EPA estimates that the true amount of emissions could be three times higher due to the incomplete nature of the data. It’s important to keep in mind that this frightening report only discusses the methane emitted by abandoned wells; there are millions more operational wells that continue to emit at alarmingly high rates.
Source: Reuters
Here in Colorado, the situation is extremely concerning. There are thousands of abandoned wells currently polluting in our state, and yet the cleanup process has been slow and underfunded. Currently, there are over 20,000 wells in Colorado that are classified as Dry and Abandoned (they never produced, but can still pose environmental threats) and another 2,750 classified as Temporarily Abandoned. Many Temporarily Abandoned wells are at risk of becoming orphaned, due to their operators’ precarious financial situations. Furthermore, according to the COGCC Orphaned Well Program website, there are over 500 orphaned sites in the backlog, indicating that critical plugging and/or remediation has not yet been completed. While the COGCC estimates the average cost for plugging a well in Colorado to be around $93,000, actual expenses can far exceed that number and continue to increase over time. Despite this, Colorado’s current system of levying bonds on the oil and gas industry collects only as much as $20,000 down to as little as a few hundred dollars per well depending on the depth and number of wells a company owns.
According to the COGCC Orphan Well Program 2020 Annual Report, the program spent $4,740,440 on well clean up projects that year. While this was an all-time high expenditure that resulted in more wells being plugged than in any previous year, there are still some major concerns regarding the funding of these projects. Of the nearly $5 million dollar budget, only $458,549 came from bonds levied from the oil and gas operators. The remaining $4,281,891 was provided to the COGCC through General Assembly appropriation. That’s a significant amount of taxpayer money devoted to this issue, especially given the fact that oil and gas operators could be taking on more financial responsibility for orphan well clean up. The Oil and Gas Act allows the bond levy to be set as high as 1.7 mills, but it’s currently set at 1.5 mills. Considering the growing problem of orphaned wells, the health and environmental threats they pose, and the historically slow place at which these wells have been plugged, it’s critical that oil and gas companies are held fully accountable for their role in this issue.
The map below shows the vast scope of orphaned oil and gas wells in Colorado. There are numerous additional abandoned wells that are still under company ownership but have yet to be reclaimed as well as many thousands of wells currently in operation. The map reveals Colorado’s legacy of environmental injustices, as there are high numbers of orphaned wells that have yet to be plugged near historically disenfranchised communities.
Source: COGCC
Perhaps the most grim aspect of this issue is that it is projected to worsen in the coming years. Despite the fact that its creation is at odds with future clean energy targets, there continues to be a huge drive in investment in natural gas infrastructure. At the same time, eight oil and gas companies announced that they were filing for bankruptcy in the first quarter of 2021 alone (the highest number in five years), and debt from North American oil and gas bankruptcies is likely to top $100 billion dollars this year. With bankruptcies often comes orphaned and poorly remediated sites, leaving behind a mess for the taxpayers and communities to grapple with. More wells are being drilled each year (there are over 5,000 newly permitted wells soon to be drilled in Colorado alone), even as oil and gas companies are losing money. Plugging and remediating abandoned wells is going to look like a losing game of whack-a-mole if current trends continue.
The time for decisive and comprehensive action is now. One of the most important solutions is quite obvious: to stop (or at least significantly slow) the rate at which new wells are being drilled. The COGCC has never denied an oil and gas permit. It’s time for our regulators to become more discerning about the risks that are inherent in each new permit application. Additionally, significantly greater funds should be allocated towards remediation and clean up, particularly those paid by the oil and gas companies. President Biden’s original infrastructure plan, which currently stands on shaky ground, would have devoted $16 billion towards plugging abandoned wells and cleaning up mines. As the plan evolves, citizens and environmental groups must keep pressuring legislators to protect this funding.
At the state level, Colorado needs to revamp its bond structure to adequately meet our extensive clean up needs. To uphold the new provisions included in SB19-181, the COGCC recently drafted regulations that would require operators to pay up to $78,000 per well as a way to financially guarantee future plugging. The regulations would specifically target temporarily abandoned and low-producing wells (those producing less than 5 barrels per day), as these wells carry a high risk of becoming orphaned in the near future. While many operators with a high number of active wells would still be able to get blanket bonds that allow them to evade paying the newly increased amount per well, those that have greater than 60% low-producing wells will need to pay the full $78,000 per well over the next ten years. While a positive step in the right direction, the proposed regulations, set to begin hearings in late September 2021, don’t do enough to hold oil and gas producers accountable. They still do not require that companies pay upfront in full for bonds, the $78,000 per well falls short of the $82,000 or more that it actually takes to properly plug a well in Colorado, and the complicated structure allows for too many operators to pay less than their accountable share.
In addition to levying bonds, there’s another major income source that is currently untapped. The COGCC has not been consistently imposing penalties on operators that fail to meet their monthly reporting requirements. One analysis of the 2020 Severance Tax Audit shows that if these penalties were collected between 2016 and 2018, they could have totaled as much as $308 million. This money could be spent on promising new technologies to rapidly increase the rate at which wells are located and remediated. Not only that, plugging and cleaning more sites would create good jobs, an important part of a just transition from fossil fuel energies.
It’s time to start holding oil and gas companies fully accountable for their actions in Colorado and it’s time to start talking about methane. It won’t be possible to reach our emissions goals and escape the worst of the climate catastrophe unless we do.