SOURCE: DeSmog Blog
DATE: October 4, 2020
SNIP: The American public is facing a potential bill of $280 billion for the cleanup of 2.6 million unplugged oil and gas wells, according to Billion Dollar Orphans, a new report from London-based think tank Carbon Tracker.
While this number is alarming, it does not even include an estimated 1.2 million undocumented orphan oil and gas wells.
‘Orphan well’ is an industry term for non-producing oil and gas wells that “have no financially viable operator capable of plugging them.” With the current state of the oil and gas industry, the number of financially viable operators is rapidly decreasing while bankruptcies rise, which is exacerbating this whole issue.
One troubling aspect of this problem is that it should not exist. Regulators at both the federal and state levels have the tools in place to hold companies accountable for the costs of well plugging and abandonment. Yet those regulators have not used those tools, and now, as the industry is struggling financially, in many cases it simply may be too late.
Ideally when an oil and gas company applies for a permit to drill a new well, it would be required by regulators to purchase a surety bond from a third party that would cover the cost of plugging and abandoning the well when it had finished producing oil or gas. This should even protect against the possibility of the oil and gas operator going bankrupt.
But regulators have set the limits for those surety bonds far below the actual costs to plug and abandon wells. Carbon Tracker estimates that these bonds currently would cover approximately 1 percent of the estimated $280 billion clean up tab — leaving the rest of the bill to be paid by the public.
While the current scale of this problem is overwhelming for states that simply do not have the budget to address it, the business of fracking shale deposits for oil and gas is likely to make the problem much worse in the future.