Plugging Abandoned Oil & Gas Wells Might Seem Like A Great Jobs Program, But It's . . . Complicated

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Meanwhile, the Environmental Protection Agency (EPA) estimates there are more than 2 million unplugged abandoned wells, but they’re counting things a little differently. That number includes wells that are dormant and not yet sealed but have a clear owner. Today, oil and gas companies are responsible for plugging wells after they’re done using them under state and federal law. Governments typically collect a fee from the companies up front, a bond, to ensure there will be money on standby to cover the costs if the company goes bust. But states only collect a fraction of the necessary funds and have allowed companies to put off cleanup by “idling” their wells — putting them out of production, but not officially closing them up — indefinitely. In theory, the owner could start pumping them again or sell them off. In practice, they are holes in the ground, serving no purpose, and spewing methane. The drop in oil demand due to the pandemic has exacerbated that pattern, with companies idling tens of thousands of wells in recent months. According to the financial think tank Carbon Tracker, the energy transition “may destroy any chance for the reactivation of these and hundreds of thousands more idle wells.”

While the problem seems to be at risk of spinning further out of control, the authors of the new report focus their proposed jobs program on tackling the known knowns — the 56,600 confirmed orphaned wells. States have reported plugging and remediation costs ranging from $4,000 to over $100,000 per well to the IOGCC. From that data, they estimated a total program cost of $1.4 billion to $2.7 billion — which would represent just a small slice of the several trillion dollar stimulus packages that have been coming out of Congress. They found that a program of that size could support about 13,500 jobs for one year (or fewer over several years). If instead lawmakers wanted to find and plug 500,000 wells, the report extrapolates a cost of $12 to $24 billion and a resulting 119,000 jobs.

If that sounds like a no-brainer, I regret to remind you that these cost estimates are wrought with doubt. The report notes that as demand for labor and equipment increases, costs could go up. Alternatively, they could come down as crews learn to plug wells more efficiently. Depending on which wells the program focuses on, the cost per well could be exponentially greater. Carbon Tracker found that the cost of plugging a newer shale well, which is typically thousands of feet deeper than older wells, could be anywhere from $300,000 to more than $1 million. Aside from costs, there’s concern that state regulatory offices don’t have the capacity to oversee a larger plugging program.

Perhaps worst of all, once taxpayers start spending billions to counteract the industry’s broken promises, why would an oil company expect to have to foot the bill ever again? The authors of the report recommend that any federal effort to plug abandoned wells focus on those older, truly orphaned wells to avoid this moral hazard problem, and potentially come with strings attached requiring states to figure out a way to make sure future plugging costs are fully covered by the industry.

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https://grist.org/energy/a-jobs-program-to-plug-abandoned-oil-wells-sounds-like-a-win-win-is-it/

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1. The Unfunded Liabilities of the fossil fuel industry continue to mount

From coal ash containment ponds to the abandoned wells of the fracking boom, we will be left with a long list of reasons to transition away from fossil fuels.