Eric Gay/AP Photo
Pump jacks sit idle on a South Texas ranch near Bigfoot, Texas, May 2016.
Tucked into Joe Biden’s American Jobs Plan is a provision for “plugging orphaned oil and gas wells and cleaning up abandoned mines.” The plan’s fact sheet identifies plugging these sites, which tend to exist primarily in rural areas facing various forms of disinvestment, as a high priority, noting that “hundreds of thousands of former orphan oil and gas wells and abandoned mines pose serious safety hazards, while also causing ongoing air, water, and other environmental damage … President Biden’s plan includes an immediate up-front investment of $16 billion that will put hundreds of thousands to work in union jobs plugging oil and gas wells and restoring and reclaiming abandoned coal, hardrock, and uranium mines.”
It marks a surprisingly strong commitment from the Biden administration, and a crucial, unglamorous, and somewhat controversial part of his larger ambitions on climate. If we’re going to make inroads on green energy, we’re also going to have to clean up the mess that fossil fuel production has already left behind. That infrastructure tends to leave a uniquely toxic and pernicious legacy, with huge environmental ramifications that don’t tend to get factored into the discussion about the cost of energy generation from oil, gas, coal, and nuclear power.
It’s oil and gas wells in particular, though, that are of the most immediate concern. (Though tacking on abandoned mines certainly won’t hurt in appealing to a certain senior senator from West Virginia.) To define the term, an orphaned well is an idled oil or gas well whose owner or operator is unknown, out of business, or otherwise unable or unwilling to pay to plug it. This means the responsibility for plugging these wells falls to the states (the particulars of this definition vary from state to state).
An unplugged well can spew everything from crude to methane to brine, which can have huge effects on greenhouse gas pollution and soil and groundwater contamination, among other things. Methane pollution in particular is extremely troubling, given the already sky-high levels of atmospheric carbon. In 2016, University of Cincinnati researcher Amy Townsend-Small tested abandoned wells in Colorado, Wyoming, Ohio, and Utah, and found that 40 percent were emitting methane. The Environmental Protection Agency estimates that the country’s abandoned wells are spewing greenhouse gas emissions equivalent to burning more than 16 million barrels of oil.
Just how many orphaned wells exist in the United States currently is a matter of disagreement. The EPA says there are some two million orphaned wells, with 3.2 million abandoned wells (those for which an owner can be identified) nationwide. Industry groups say it’s much lower. Their states of decline are also contested: An unplugged well can be in disrepair, or with little change in its condition. According to a recent study from the Carbon Tracker Initiative, there are 2.6 million documented onshore wells in the U.S. alone that are currently unplugged, which will cost a staggering $280 billion to plug and remediate. There are, they estimate, another 1.2 million undocumented onshore wells that are unplugged on top of that, which sums to nearly four million. Cleaning and capping all the unplugged abandoned wells across the United States could cost as much as $300 billion.
What’s not up for debate is the fact that the ranks of those wells are swelling all the time, as idled wells become abandoned, often driven by slumps in oil prices. And newly orphaned wells, which are more likely to be fracking wells than their predecessors, represent a particularly complex and expensive challenge. Fracking wells are deeper and more expensive to plug, and run dry faster than their traditional counterparts, which means that in the aftermath of the fracking boom, which turned North Dakota and then West Texas into global hubs of oil production, the bill is only beginning to come due, and is likely to be steep.
Of course, not all of that cost is incumbent upon states, who do have provisions in place to defray cost. States require companies to put up money in surety bonds to ensure that producers will plug their defunct wells, or else risk losing the bond amount. But nationwide, bond amounts have been stunningly low, incentivizing producers to merely walk away from an unplugged well rather than pay the cost of plugging it. According to estimates, states on average have secured just 1 percent of cleanup costs in surety bonds.
An unplugged well can spew everything from crude to methane to brine, which can have huge effects on greenhouse gas pollution and soil and groundwater contamination.
A recent investigation by Grist and The Texas Observer showed just how stark the situation is, and just how bad things could get. “Texas and New Mexico have already identified about 7,000 abandoned wells that were once operated by over 1,000 companies … However, a healthy chunk of roughly 100,000 ‘idled’ wells in those states could also eventually end up abandoned … The uncertain outlook means that independent estimates of the cleanup costs of Texas’ wells alone have ranged from a conservative $168 million to a mind-boggling $117 billion.” Currently, there are over 109,000 unplugged wells in Texas alone that have not produced any oil or gas in more than two years, an ominous sign of just how many more wells may become orphans and how drastic an undercount current figures are.
The financial risk to states and the federal government is much greater in places like Texas and New Mexico, where much of oil and gas drilling, especially fracking, takes place on state or federal land. If producers put up paltry bond amounts and walk away, the financial obligation for cleanup easily becomes the public’s responsibility when operators weigh financially unfavorable market conditions and desert their rigs. The average well costs $30,000 to plug and clean up, according to Rystad, a leading energy research firm, with fracking wells costing even more. According to the Government Accountability Office, plugging wells on federal lands can cost anywhere between $20,000 and $145,000 per well.
None of those cleanup costs should be assumed by the states, given that they were never partners in the profits. If there’s a concern with Biden’s proposal, it’s that throwing $16 billion at the problem, without imposing strict regulations on states for bonding in exchange for taking that money, would create a moral hazard situation not unlike the 2008 financial crisis. Thus, the yet-to-be-articulated stipulations put in place to prevent this program from looking like a blank-check bailout for the oil industry are going to be crucial.
“Oil producers are now in a position where they cannot bail themselves out,” said Robert Schuwerk, executive director of Carbon Tracker North America. “The question now is does the government give them money to bail them out or does it put other restrictions in place to keep it from happening again?”
Indeed, there are multiple proposals under consideration, in both the Senate and the House Natural Resources Committee, that would establish some standards, to ensure that companies are financially responsible for their own cleanup and have the incentive to actually plug their idled operations rather than just walking away. But even those are light: One such proposal would stipulate a $150,000 bond per individual well, or a $500,000 blanket bond for all wells in the state. For large operators, the latter would allow them to put up considerably less than the cost of plugging their entire fleet of wells. It remains to be seen what exact stipulations will be in the final Biden proposal.
Blanket bonds, in fact, are behind much of the current system’s inadequacy. Both Texas and New Mexico have them—a flat rate to cover remediation costs for all of a producer’s wells statewide—but they often fall drastically short of the total bill. In Texas, for example, producers with more than 100 wells must post a bond of $250,000. But the 1,500 oil companies with the highest number of orphaned wells in the state have 63 idled wells on average, which comes out to just a couple thousand dollars per well. That creates a clear financial incentive to orphan them, rather than plug them. That’s part of the reason the U.S. oil industry currently plugs just one of every three wells drilled.
Newly orphaned wells, which are more likely to be fracking wells than their predecessors, represent a particularly complex and expensive challenge.
“Where wells have already been orphaned to the state, it makes sense for the federal government to put local workers back to work plugging orphaned wells,” said Schuwerk. “But it shouldn’t plug wells that are industry’s responsibility today, and it should prioritize funds for states that are helping themselves by requiring full-cost, single-well bonds. Without those conditions, industry may perceive this as a reason to not plug its wells.”
The $16 billion commitment from Joe Biden is both a solid start and an admission of what’s a severe and accelerating problem. It’s an admission, too, of the failures of the energy policy of his Democratic predecessor. Barack Obama championed American oil production, which was expanded overwhelmingly via fracking, and oversaw the repeal of the American oil export ban. American oil production doubled, which he then celebrated after he left office.
Many of the wells currently orphaned in the United States predate that policy, but the Biden administration’s policy is clear-eyed about what decarbonization will entail, far beyond his former boss. Even as oil prices have returned to pre-COVID levels, the overall trend line is clear. Doing nothing is not an option, but merely raining money on a moribund sector that’s actively polluting American land and water while continuing to funnel money to shareholders is also inadequate. Getting off oil is going to be a dirty and pricey business. That $16 billion is likely just the start.
