Plugging Progress: The Big Squeeze

Tags: Orphan Wells

Dec 21, 2022

More Money More Problems

As states set their sights on using $4.7 billion in federal funding to close a record number of orphan wells, the supply of pluggers able to do the work is struggling to keep up. The result, hyperinflation with no end in sight.

From Sea to Shining Sea

  • Pennsylvania
    • Representative Martin Causer announced a new Pennsylvania law: a grant program providing up to $40,000 for plugging wells under 3,000 ft and up to $70,000 for wells over 3,000 ft.
    • Over 8,000 documented orphan wells with some estimates predicting more than 200,000 as the true total.
  • Kentucky
    • Expects to plug and mitigate 1,000 – 1,200 orphan wells of over 13,000 in the state, with 171 plugged so far.
    • Lack of companies bidding is slowing work and increasing costs with KY Energy and Environment Cabinet Division of Oil and Gas director Dennis Hatfield saying it has “probably doubled or tripled the cost of the labor component”.
    • To date over 3,750 orphan wells have been plugged with over 14,000 documented orphan wells remaining.
  • New Mexico
    • Senator Ben Ray Luján, who introduced the REGROW Act which served as the catalyst for funding to plug orphan wells, has introduced a new bill to provide up to $162.5 million over 5 years to fund DOE research to accelerate identification and remediation of orphan wells.
  • Wyoming
    • Created an accelerated plugging program conventional and coal-bed wells, funded by operator bonds and industry contributions.
    • Spent $30 million to locate and plug around 5,000 wells.
    • Plan to plug remaining 1,500 wells using federal funding.
    • Over 1,000 new documented orphan wells identified, bring the total to over 1,700 wells.
  • California
  • Tribal/Federal
    • The Department of the Interior announced funding for 2023 of up to $50 million for well plugging on tribal lands, based on unemployment rates, number of orphaned wells, and health and safety improvements.
    • BLM is soliciting small and tribal-owned company bids for well plugging and site restoration on federal and tribal land.

Pluggers’ Perspective

The total number of documented orphan wells across the U.S. is approximately 120,000, with some estimates placing the true number in excess of 1 million and counting. Initial plans for closure are much more limited, with WV, PA, and NY collectively planning to plug 327 wells in 2023.

However, this already represents a massive increase in plugging activity that the industry is struggling to keep up with. In Appalachia, pluggers are nearing capacity and struggling to keep existing equipment working (average service rig produced between 1960 and 1980). New equipment requires investment in excess of $1 M per rig and with increased demand for new equipment those costs are likely to increase as well.

Not So Routine

Further compounding the problem is the unpredictability of the price and time to plug a well. While many wells are straightforward to plug, others can be extremely difficult.

The cost to plug a well commonly ranges from $20,000 on the low end to over $400,000 for particularly difficult wells, with the average being somewhere around $130,000 and 33 days on site. While some difficult to seal wells can be identified beforehand by records indicating gas migration, poor cement, corrosion, and difficult access, there is little to no information available on most orphan wells making bidding on these projects a nightmare.

A Remedy for Risk

Fortunately, innovative new technologies in the market are helping to control costs. Biomineralization technology provides much needed certainty to plugging operations. Where other technologies often require multiple attempts to eliminate gas flow resulting in increased costs and time on-site, biomineralization seals leaks with just one application over two days at a single flat rate. By reducing uncertainty, non-routine abandonments responsible for inflating the average closure cost of orphan wells can be decommissioned at a much lower and more predictable cost.