A federal solution is needed to address hazardous abandoned wells

On Thursday the Subcommittee on Energy and Mineral Resources in the US House will be holding a hearing on the federal Abandoned Mine Land (AML) Program to discuss reauthorization of the program and how it can help local economies and the environment.

The AML program was created in 1977 under the Surface Mining Control and Reclamation Act (SMCRA) with the explicit goal of addressing the legacy costs associated with thousands of coal mines that were left abandoned across the country prior to 1977. To ensure that coal companies pay for the cost to reclaim these mines, the AML program established a per ton fee on coal production.

Despite some major shortcomings with the AML program, it has reclaimed over $6.5 billion worth of coal legacy problems on over 800,000 acres of damaged land and water since it was created in 1977. According to the Office of Surface Mining Reclamation and Enforcement (OSMRE) that runs the AML program, there remains over $11.4 billion of work needed to reclaim AML sites across the country, although the true figure is more than double this amount.

The accumulation of thousands abandoned coal mines and billions in clean up costs happened over a 200-year period because there wasn’t a federal system in place to reclaim the damage caused by coal mining. Something very similar is happening today with the millions of unreclaimed abandoned oil and gas wells that are spread across the country.

Much like coal mining, most of these abandoned and orphaned oil and gas wells predate modern regulation and they were never properly plugged or reclaimed. The result has been extensive environmental damage, as some unplugged wells are leaching hazardous pollutants into the air and water, including greenhouse gases like methane. Many of these abandoned wells also pose serious public safety concerns, including dangerous explosions from leaking gas.

According to the U.S. Environmental Protection Agency (EPA), there are over 3.2 million abandoned onshore oil and gas wells in the United States– including 2.1 million unplugged abandoned wells. According to peer reviewed studies, there could be over one million unplugged abandoned oil and gas wells in Pennsylvania and West Virginia alone. The EPA estimates that unplugged abandoned wells emitted about seven million metric tons of carbon dioxide in 2018, while a 2021 study estimated it to be 20% higher. To put this in perspective, seven million metric tons of carbon dioxide is the equivalent of about 16.2 million barrels of crude oil consumed.

While states allocate funds to plug and restore abandoned and orphaned wells, the scale and cost of the problem is likely beyond their reach. For example, in 2018, states spent about $53 million to plug just 2,377 orphan wells and restore 1,554 well sites, according to the Interstate Oil and Gas Compact Commission (IOGCC). To put this in perspective, it would take 965 years at this rate to plug and restore the estimated 2.1 million unplugged abandoned oil and gas wells in the nation. At an average plugging and restoration cost of $24,018, it would cost $51 billion to plug the 2.1 million unplugged wells.

If the plugging and restoration cost were $30,000 per well – which is a more plausible and perhaps even a conservative estimate based on several studies – it would cost $64 billion to plug and restore the 2.1 abandoned wells. The think tank Resources for the Future recently found that the median cost to plug and restore oil and gas wells in states is $48,000 based on a data from over 3,300 wells. This would take the cost to $102 billion. The data analytics firm TSG estimates that it will cost $90 billion to plug all outstanding onshore abandoned and orphan wells in the United States. While there have been several bills to provide states with money to plug abandoned wells, the largest proposal contains just $3 billion or less than 5% of what is likely needed to clean up these wells.

Making matters worse, these estimates do not consider the cost to plug and restore the nearly one million producing oil and gas wells in the United States. Many of these wells -especially the low producing wells (often called stripper or marginal wells) are at risk of being orphaned because of the inadequate bonding systems state have in place. For example, a recent report by Carbon Tracker estimates that 2.6 million onshore wells are at risk of being orphaned in the United States with a cost between $78 and $280 billion. Carbon Tracker estimates the total bonding coverage for these wells is just 1% to 6% of the cost to plug and restore these wells.

The AML program, while inadequately funded, serves as a precedent at the federal level to address the long-term legacy costs of mineral extraction. A similar program that addresses the legacy costs associated with abandoned oil and gas wells is also needed. States and tribes are not in a financial position to deal with the scale of the problem and a federal system would provide a level playing field and ensure states don’t engage in a race to the bottom. Many of these unplugged abandoned and orphan wells do not have responsible owners and states would have a difficult time ensuring that oil and gas companies pay for the clean-up costs of these wells. Moreover, the life-span of well plugs is generally assumed to between 50 and 100 years, sometimes just 10 years. So it is not one plug and you’re done.  This means that these wells will have to be monitored forever.  A small fee on oil and gas production similar to the AML fee on coal production could fund a federal abandoned well program and ensure that the industry pays for the costs to plug and restore these well sites.

A federal abandoned well program could also help states create a better inventory of wells, a monitoring and risk assessment system for wells, provide research and development to establish best practices in plugging and restoration, and boost jobs in rural areas that are often economically distressed.

Next month the Ohio River Valley Institute will release a report exploring how a federal program to plug and reclaim well sites could benefit the states in the mid and upper Ohio River Valley region. Stay tuned!