A win-win': Plugging Louisiana's 4,300 'orphaned' wells could boost industry, cut emissions
A federally funded stimulus program aimed at plugging the growing number of “orphan” oil and gas wells could greatly reduce pollution while giving a much-needed boost to the state’s ailing oil industry, a new report says.
As Congress considers a new stimulus package of several trillion dollars to assist with the economic impacts from the coronavirus pandemic, a group of energy policy experts has published a report making the case that a fraction of the money should go toward plugging the millions of wells that have been abandoned by their owners and are now the responsibility of state governments. Louisiana has documented nearly 4,300 such wells, and the number is expected to rise as more companies shut down wells due to low oil prices and a faltering economy.
“Plugging wells is a win-win opportunity that would provide good work for people negatively affected by the downturn in the economy and provide environmental benefits,” said Daniel Raimi, a public policy researcher and co-author of a report by Columbia University and Resources for the Future, a Washington D.C. environmental policy think tank.
Orphan wells often leak oil and brine and emit methane, an air pollutant that harms air quality and contributes to climate change.
Plugging all of Louisiana’s orphan wells could employ just over 1,000 oil workers full-time for one year. It would also cut methane emissions by 558 metric tons per year, according to the report’s metrics. That’s the equivalent of the annual greenhouse gas emissions from more than 3,000 cars.
Gifford Briggs, president of the Louisiana Oil and Gas Association, supports a federal stimulus for well plugging. He said many unemployed oil workers and struggling companies in Louisiana have the skills and equipment to begin doing such work today.
“There are multiple layers of benefits,” he said. “It gives the opportunity to put people back to work and money back in our communities … and it continues to improve our environment.”
Oil prices went negative for a short time after the coronavirus' first flare-up in the U.S. They’ve since rebounded to $40 per barrel, low compared to historical levels.
The industry’s workforce has shrunk by about 7% percent since the pandemic struck the state, Briggs said.
Several companies have filed for bankruptcy protection, and about half of LOGA’s 460 members have indicated they may be forced to do the same.
Briggs said some members of Louisiana's congressional delegation have expressed support for steering stimulus money toward plugging wells.
Bipartisan support is growing for a congressional infrastructure-oriented stimulus package, known as the Moving Forward Act, that would pour $2 billion into well plugging over five years.
The report estimates it would cost between $1.4 billion and $2.7 billion to plug the nation’s documented inventory of nearly 60,000 orphaned wells. But the actual number of orphaned wells is potentially as high as 3 million.
“The U.S. has been drilling for oil since the 1850s, and we haven’t been keeping track of (the wells) until modern times,” Raimi said. “We simply don’t know where a lot of them are.”
In Pennsylvania, where commercial oil drilling began in 1859, there are nearly 10,000 documented orphaned wells, but the state estimates there may be another 290,000, according to a report by the Interstate Oil and Gas Compact Commission. Other states, including Oklahoma, Ohio and West Virginia, also reported high estimates for undocumented wells to the IOGCC, but Louisiana wasn’t among them.
“Louisiana didn’t provide an estimate,” Raimi said. “But it’s safe to say there is a large number of undocumented wells in Louisiana.”
The state has struggled to keep up with the rapid rise of orphan wells. According to a 2014 audit by the Louisiana Legislative Auditor, the state Department of Natural Resources wasn’t properly regulating and inspecting wells or charging fees that could cover the plugging and cleanup of orphaned wells.
A follow up audit in April indicated that the DNR has made progress, but estimated the number of orphaned wells had increased by 50%. The new audit also noted that the DNR is behind in forcing operators to plug disused wells that are yet to be abandoned, and has failed to conduct required re-inspections of dozens of out-of-compliance wells.
The DNR has said its regulatory challenges are due in part to the large number of inactive or low-production wells, many of which are owned by small, cash-strapped companies.
Patrick Courreges, a DNR spokesman, said in April that the state must strike a balance between pressing companies to plug wells and pushing them out of business, thereby adding to the inventory of orphan wells.
Editor's note: This story was updated July 23 to correct a figure. The state Department of Natural Resources failed to reinspect nearly half of 163 out-of-compliance wells, not hundreds of out-of-compliance wells.
The more I consider the possibility of Louisiana following ND's example, the more I think it may be a reasonable option. Before being fully in support, I think we would all have to see where the state's needs lie in regard to mitigating the virus impacts and how far the CARES FUNDS would go. For those who find it offensive that oil companies would pass the bill for proper plugging and abandoning old wells to the public (a natural reaction, it's our tax dollars), I would put the following questions: Is it better to pay now and solve a problem that is growing beyond the state's ability to keep the annual orphan well count from increasing? For those who are supportive of the state operators (not necessarily the majors or super-major oil companies who work offshore federal waters but the average private LA oil operator) wouldn't this be more equitable and less damaging to state revenue than a lowering of or a moratorium on the severance tax or reducing the existing fee structure? Wouldn't the jobs created by such a program be a tangible benefit at a time when so many skilled oil field workers are being laid off? Wouldn't there be environmental benefits and a means to avoid considerable future costs when orphan wells caused serious pollution problems?
North Dakota to spend $66 million to plug abandoned wells
July 29, 2020
(Reuters) - North Dakota plans to spend $66 million to plug wells abandoned by oil and gas companies in the U.S. state after the pandemic crushed demand for crude, causing a plunge in prices.
The $66 million has come from the Federal Coronavirus Aid, Relief, and Economic Security (CARES) Act, said Katie Haarsager, a spokeswoman for the North Dakota Oil and Gas Division, which is undertaking the project.
The move is expected to create jobs and keep some of the oilfield services companies at work in the second-largest oil producing state, as energy-related revenues plummet.
Well plugging is expected to sustain more than 600 oil and gas service sector jobs with 300 to 500 additional jobs managing reclamation of the sites, a statement here from North Dakota's Department of Mineral Resources said.
The impact of the virus and trade war on the state’s key industries of energy and agriculture could ripple through its budget for years through cuts to education, government and highway services.
Reporting by Shradha Singh in Bengaluru; Editing by Shinjini Ganguli