Louisiana enacts orphan oil well law to get $200M in federal money

Wednesday, May 18, 2022  By Louisiana Illuminator

Legislation that positions Louisiana to receive an estimated $200 million in federal grants to fix orphan oil wells became law Tuesday as one of the first bills enacted from the 2022 regular session.

Senate Bill 245, sponsored by Sen. Bret Allain, R-Franklin, was among an initial batch of 17 bills Gov. John Bel Edwards signed. The newly passed law makes changes to certain statutes concerning oil field site restoration, giving the state Department of Natural Resources more flexibility on how much it can spend to plug and restore abandoned wells in a given fiscal year. 

There are roughly 4,600 abandoned oil and natural gas wells across Louisiana, many of which are leaking and polluting the environment. The total price tag to fix all of them has been estimated to be around $650 million. 

When he first proposed the legislation in March, Allain said it would allow the DNR to maximize the amount of money the state can receive from the Infrastructure Investment and Jobs Act that President Joe Biden signed into law in November. 

Louisiana is slated to receive an initial $25 million grant and can compete with 25 other states for a share of $2 billion that will be allocated based on performance. States that are more economically efficient at fixing orphan wells can receive larger shares, Allain says.

Prior to the new changes, the state could fix non-priority wells only if doing so did not limit the number of priority sites that could have been restored in a given fiscal year. Thanks to the new law, the DNR secretary now has the authority to package together more non-priority wells into attractive bid packages if doing so will decrease “in a cost-effective manner” the total number of orphaned wells, the bill states.

The state will receive an estimated $150 million on the low end, which Allain calls a “modest” estimate and says it could be closer to $200 million. 

Orphan well restoration work is performed by industrial contractors the state pays out of a fund that relies on fees collected on the production of oil and gas.