Orphan Wells: Corporate, State, and Federal Responsibilities

Tags: P&A | Orphan Wells | Pennsylvania

Oct 27, 2021


Orphan oil and gas wells idled by companies that cannot pay to plug them are an issue in many states, thanks to volatile energy prices and bankruptcies caused by recent plummets in demand.

The U.S. Environmental Protection Agency estimates the current number of orphan and abandoned wells at over a million and growing. Unplugged wells leak methane and leach toxins into groundwater. Even after being plugged, wells can allow VOC seepage and groundwater contamination over time if not properly sealed.

The cost of plugging a well is sometimes covered with bonds that companies post before drilling: Costs can range from $5,000 to $50,000 or more. Recently state legislatures and oil and gas regulators have increased funding for well cleanup and raised bonding requirements to discourage companies from leaving unproductive wells unplugged. However, this can create significant hardship for independent operators who may be unable to commit large sums up front to meet bond requirements.

Coal-bed methane wells are relatively shallow and inexpensive to plug, averaging $5,000 to plug with cement. Unfortunately, cement is often ineffective at preventing gas from escaping the well. Innovative biomineralization applications provide a permanent solution to this problem.

Wyoming’s oil and gas commission has plugged around 400 wells per year for the past four years, compared to a dozen or two in previous years. It still has about 3,600 to plug and with over 30,000 active drilling sites, that number will grow. Budgeting $5,000 to plug each orphan well, the state could be facing a bill as high as $18 million.

“If you ask me what keeps me up at night, it’s that all these wells have to get plugged,” said Mark Watson, Wyoming’s oil and gas supervisor.

In other states, orphan well retirement is a slower process. In Pennsylvania, over 8,000 orphan and abandoned wells need to be plugged. But the state could afford to plug just six wells last year, according to the Pennsylvania Department of Environmental Protection. The agency is seeking funding, such as state grants to address this problem.

Some say the solution to the orphan well problem is simple: Companies should pay a bond that covers well retirement. But this could force many smaller oil and gas companies out of business. Balancing sustainability and company performance is critical to ensuring energy reliability.

In Colorado, wells are deeper and more expensive to plug – around $82,500 per well. Government officials hope to address this with increased funding for orphan well cleanup and bonds based on well depth and number of wells operated.

The Bureau of Land Management lacks a system to effectively track federal funds used for orphan well reclamation. On heavily drilled federal land, BLM spends roughly $270,000 for each well-plugging project and counts 219 orphan wells under its jurisdiction. The costs for these complex projects are higher than budgeted and insufficient funds remain to address these wells.

The transition to greener forms of energy will not happen overnight—we still rely on oil and gas to power our world. Reducing our carbon footprint by plugging orphaned and abandoned wells will have an immediate impact on climate change and must be a priority moving forward.