Oil & Gas Companies and Their Gaping Holes
According to E&E News, the government is releasing $560 million of a total of $4.7 billion to fund the cleanup of orphan oil and gas wells in 24 states. It is part of the Infrastructure, Investment and Jobs Act.
From the E&E article-
“Historic oil and gas activity in regions like Appalachia and the West goes back more than a century, with many old wells lost. Additionally, oil and gas price busts have left more wells abandoned, their original drillers out of business or difficult to trace. When left unchecked, those wells can release greenhouse gases like methane and pose combustion risks.
All told, states have flagged more than 10,000 high priority wells for cleanup, the first in line of a nearly 130,000 backlog of unreclaimed known well sites, Interior reported today. That number is expected to rise as federal funds bolster state efforts to identify hidden or lost orphans.”
According to a June 16, 2020, article in Reuters, drillers are required to pay a bond up-front to pay for remediation in case they go bankrupt. In reality, the system is a patchwork of state and federal regulations that are underfunded. The article goes on to say-
“The U.S. figures are sobering: More than 3.2 million abandoned oil and gas wells together emitted 281 kilotons of methane in 2018, according to the data, which was included in the U.S. Environmental Protection Agency’s most recent report on April 14 to the United Nations Framework Convention on Climate Change. That’s the climate-damage equivalent of consuming about 16 million barrels of crude oil, according to an EPA calculation, or about as much as the United States, the world’s biggest oil consumer, uses in a typical day. (For a graphic on the rise in abandoned oil wells, click tmsnrt.rs/2MsWInw )“
The whole thing is a century-long train wreck- we could have easily followed along as it happened. The extractive industries have a long history of leaving a hazardous and unsightly mess in their wake so there is nothing new here. Industry has socialized the cleanup cost and kept the profits.
It is pathetic that someone would even have to remind them to at least seal the damned well when they were done with it. Walking away from a well that is or could be venting natural gas and hydrogen sulfide is obviously unethical. Transfer of ownership or bankruptcy should be no excuse by statute.
States like North Dakota, for example, have statutes relating to wells having “abandoned well” status.
“For various reasons, wells stop producing. State law requires that the site be reclaimed and directs the Industrial Commission to oversee that process.“
The upstream exploration and production (E&P) side of the oil & gas industry should collectively pay for this. However, like most businesses, they will only respond to the threat of added costs. But, we’re not asking them to split the atom. This issue could be solved at a single board of directors meeting at any E&P company.
Naturally, the oil & gas lobby will howl like banshees at the very notion of holding the industry responsible. Refiners and distributors of distillates, I think rightfully, will say that they are not at fault. So it has to be upstream.
But what about the owner of the mineral rights? Should they be free from liability? Not being a legal scholar, I can only surmise that this is old turf.
A modest excise tax on every barrel of oil or every million cubic feet of gas would accumulate into a sizeable fund over time. But would E&P companies just leave every abandoned well uncapped thinking that they have already paid for it? Hard to say. There would be legions of corporate cost accountants and executives working on it though.
American voters have yet to elect a congress or legislature that will write law to hold E&P oil & gas or somebody responsible for the blight that oil & gas brings. The industry lobby knows that all they have to do is float out the twin dementors of lost jobs and economic despair to frighten the public into submission. Works every time.
When Colorado tried to pass a ballot initiative recently to ban oil & gas well operations within some expanded distance from residential neighborhoods, the industry had employees on the streets protesting even in my own small bedroom community. They seemed convinced that their livelihoods were in imminent danger. The initiative was voted down. Basically, it would have barred most drilling within cities. Would this have cost jobs? Well, I think that the frosting on the cake would have been ever so slightly thinner.