Congressional panel splits on regulation of ‘orphaned’ oil and gas wells

Members of a U.S. House Natural Resources panel agreed Thursday on the need to clean up and cap abandoned oil and gas wells, but disagreed along party lines about the extent of the federal government’s role in well regulation.

The Energy and Mineral Resources Subcommittee hearing was held to consider a bill introduced by Rep. Teresa Leger Fernandez, (D-N.M.), that would authorize $8 billion over 10 years to reclaim oil and gas wells that were abandoned by defunct companies and not properly cleaned up. The measure represents a first step in a priority laid out in President Joe Biden’s infrastructure and jobs plan late last month.

Uncapped wells leak methane, pollute groundwater and harm ecosystems, witnesses told the panel.

“Even after society transitions away from fossil fuels, abandoned and orphan wells may be emitting methane and impacting our water, air and ecosystem for many years, decades and possibly centuries,” said Mary Kang, an assistant professor of civil engineering at McGill University who has focused her research on the environmental impacts of energy development. 

Democrats and Republicans on the subcommittee voiced support for the idea of cleaning up and capping orphaned wells. 

But while some congressional Republicans have backed federal spending to help plug orphan wells, GOP committee leaders took issue with provisions in Leger Fernandez’s bill requiring states to strengthen regulations, including raising bond rates, in order to receive federal grant funding.

“I see this attack for what it is: Another attempt at destroying the industry by over regulation and death by a thousand cuts,” said Rep. Pete Stauber of Minnesota, the subcommittee’s ranking Republican.

Stauber said he would support a bipartisan approach to funding cleanup efforts.

A bill in the Senate, authored by New Mexico Democrat Ben Ray Luján and North Dakota Republican Kevin Cramer, would provide about $4.7 billion to plug orphan wells but doesn’t include regulatory changes that are in the House version.

Biden called for Congress to spend $16 billion over 10 years to reclaim orphaned wells and mines. The proposal is attractive to its supporters because it addresses climate change—methane is an especially concentrated greenhouse gas—while also creating jobs for the oil and gas workers who would be displaced by a transition away from fossil fuels.

Subcommittee Chairman Alan Lowenthal, (D-Calif.), said the bill would create “tens of thousands” of new jobs.

“The bill recognizes the need to clean up the orphan wells while at the same time creating jobs in the communities that will be most affected by any transition,” Leger Fernandez said.

The Senate and House bills have overlapping bases of support outside of Congress. The conservation groups Environmental Defense Fund and National Wildlife Federation endorsed both. 

Conservation groups generally favor the House bill because of its proposed changes to bond rates.

Oil and gas companies must pay bonds before drilling to help finance the cleanup in case they go bankrupt and must quickly abandon the wells and cannot complete the proper cleanup. States then generally take responsibility for reclaiming the wells.

Minimum bond rates have not been raised since they were set in the 1950s and 1960s and are much lower than the cost of cleaning up a well that hasn’t been properly capped. Under federal law, energy companies must secure bonds of $10,000 for a single well, $25,000 for unlimited wells in a single state and $125,000 for unlimited nationwide operations. States can set additional minimums.

But the cleanup costs for a single well can range from a few thousand for shallow wells to tens of thousands for others.

Federal funding to clean up and cap wells is important, but changes to the bond rate would help protect active wells from becoming orphaned, said Brett Hartl, the government affairs director for the environmental group Center for Biological Diversity.

“We prefer an approach that combines the two to one that doesn’t,” Hartl said in an interview. 

Tom Kropatsch, the deputy oil and gas supervisor for the Wyoming Oil and Gas Conservation Commission, said at the hearing that increasing costs on companies could actually lead to more orphaned wells. 

Lori Wrotenbery, the executive director of the Interstate Oil and Gas Compact Commission, a collection of state regulators, endorsed the Senate bill. At Thursday’s hearing, she said the group supported the “basic structure” of the state grant programs in Leger Fernandez’s bill.

Counting wells

Because oil and gas exploration began before the government kept close track of them, only a fraction of the wells that have been abandoned are known.

Varying definitions across states also makes finding the exact number of orphaned and abandoned wells difficult. 

In Colorado, for example, the Colorado Oil and Gas Conservation Commission currently manages about 535 orphaned oil and gas sites, with a backlog of 239 orphaned wells remaining to be plugged at those sites, according to data from the agency’s Orphaned Well Program. 

The program spent more than $4.7 million on cleanup projects at 102 different sites in fiscal 2020, with only about 10% of that cost covered by bond claims; the rest was appropriated by the Legislature, which increased the program’s annual budget to $5 million in 2019.

The Interstate Oil and Gas Compact Commission said in a 2019 study there were 56,600 documented orphaned wells spread across 30 states, but up to nearly 750,000 undocumented in those same states. Kang estimated there were about 950,000 undocumented orphan wells, roughly 19 times the number of known orphan wells. 

The IOGCC study made the following estimates:

• Kansas has 5,709 documented orphan wells and no data on undocumented orphan wells.
• Louisiana has 3,966 documented orphan wells and no data on undocumented orphan wells.
• Michigan has 98 documented orphan wells and zero undocumented orphan wells. 
• Montana has 231 documented orphan wells and zero undocumented orphan wells.
• Nevada has six documented orphan wells and zero undocumented orphan wells. 
• Ohio has 910 documented orphan wells and 35,133 undocumented orphan wells.
• Pennsylvania has 8,703 documented orphan wells and 100,000 to 500,000 undocumented orphan wells.
• Virginia has 10 documented orphan wells and fewer than 10 undocumented orphan wells.