President Joe Biden’s massive green infrastructure plan contains a proposal to address a long-standing environmental hazard while helping fossil fuel workers who lost their jobs during the pandemic or who are threatened by the administration’s push for cleaner energy.
Biden pledges to create a federal program providing $16 billion in government funding to states to help them plug “orphan” oil and gas wells whose owners are either unknown or insolvent.
His program would employ “hundreds of thousands” of oil and gas workers to do the job at the “same exact rate that a union man or woman would get having dug that well in the first place,” Biden said during a speech in Pittsburgh this week.
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There are 56,600 orphan wells across the United States, which can leak methane, a potent greenhouse gas, and potentially contaminate nearby groundwater.
States and the federal government require oil and gas companies to post bonds or other forms of financial assurance as a down payment in case firms go bankrupt before plugging wells.
But the payments are often insufficient to cover the cost.
“Because the bonding amounts are insufficient, this leaves the burden on taxpayers to clean up,” Democratic Rep. Alan Lowenthal of California told the Washington Examiner. Lowenthal recently reintroduced legislation to increase the amount of bond that oil and gas developers must post before obtaining leases to drill on federal land.
“We have been hearing from states across the country, run by Republican and Democratic administrations alike, that they simply have insufficient funds to cover their abandoned well cleanup costs,” Lowenthal added.
In testimony before Congress last year, Lynn Helms, director of the North Dakota Department of Mineral Resources, said, “We have everything we need except the budget.”
“Funding has been a huge problem. It’s a problem many expect will get worse over time,” said Adam Peltz, a senior attorney at the Environmental Defense Fund.
The oil and gas industry has sought to downplay the extent of the problem, noting that of the 56,600 verified orphaned wells in the U.S., the vast majority (more than 50,000) are located on state and private lands. The American Petroleum Institute did not directly comment on Biden’s specific proposal, but the group’s senior vice president of policy, Frank Macchiarola, said generally, “We will continue to support efforts to plug these wells and further reduce methane emissions.”
Researchers, though, say the 56,600 figure undersells the extent of the problem because it only covers wells in which a state has certified there is no solvent owner of record.
There is a larger category of unplugged abandoned wells, likely amounting to millions, that have sat unused for a long period of time, some likely dating back to the late 1800s, for which no permits and records exist because there was no regulatory oversight at the time.
The Environmental Protection Agency estimates that orphan and abandoned wells emit roughly 280,000 metric tons of methane each year, which is about as much pollution created by 2.1 million passenger vehicles annually.
“The documented orphan wells are a concern, but the bigger concern is the hundreds of thousands of undocumented wells,” said Daniel Raimi, a fellow at Resources for the Future who studies oil and gas regulation. “No one was keeping track of these wells, so when the owners walked away, the holes were still in the ground, and nobody knew where they were.”
Most older wells were drilled to relatively shallow depths, often several hundred feet or less, compared to today’s wells, meaning there is less oil and gas (and methane) that could leak, the industry argues.
But Raimi said older wells represent a greater environmental risk than new ones because steel and cement erode over time, allowing for fluids to migrate within the well bore, which can lead to water contamination. Older wells that have deteriorated are also more expensive and time-consuming to plug, he said.
A program to plug wells could address state and private lands, not just federal land.
In previous legislative proposals floated in Congress, backed by members of both parties, the federal government would offer grant funding to states to be spent through their existing orphan well programs, some of which have existed for decades. A federal program could provide funding for states to use helicopters and drones to locate undocumented wells.
But many states, in addition to lacking funding, also have weak policies that don’t provide incentives to ensure companies plug wells when they reach the end of their useful lives, Raimi said.
Some states have low financial assurance, or bonding, requirements for oil and gas operators, meaning that when a company goes bankrupt, there isn’t enough funding for the state to foot the bill.
For example, in Pennsylvania, which is one of the top states in terms of numbers of orphan wells, a company can provide a blanket bond worth $25,000 to cover multiple wells. If that firm goes bankrupt, the money would have to be spread across plugging all of those wells, which is often insufficient to cover the liability.
Raimi suggested Biden could condition some of the federal funding on states reforming their policies.
“You can imagine a federal program where some funds are allocated on a discretionary basis where states can get additional funding if they update their regulations to prevent this problem from getting worse,” he said.
Proponents say the job opportunities for oil and gas workers to be employed plugging orphaned and abandoned wells are significant.
More than 76,000 oil and gas jobs were lost from February to June of 2020, during the heart of the pandemic-fueled oil price crash. Oil and gas companies typically employ field service workers on a contractor basis to do the brunt work of drilling, seismic testing, and plugging, and this segment of the industry suffered the worst during the downturn.
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A program to plug all of the certified 56,600 orphan wells could create up to 11,000 jobs and as many as 120,000 jobs if it were scaled up to identify and plug 500,000 wells, according to a study last year conducted by Resources for the Future and Columbia University’s Center on Global Energy Policy.
“It gives the oil field services workers meaningful work in their area of expertise and something sustainable for decades,” Peltz said.
