In 1859, near Titusville, PA, The Drake Well hit Oil. It was the first time in the United States’ history that a commercial oil well had been drilled. Since then, companies have drilled millions of wells into the land in the ever-growing search for oil and gas.
But for most of the 20th century, there were no formal regulations for oil and gas drilling in America.
During this period, companies and people who drilled oil wells were not enforced by the many modern laws protecting the safety or environmental protection of the area around the well and the well itself. If a well ran dry or stopped producing economic amounts of oil, companies would just walk away from the well. Exposing people surrounding the well to potential hazards of unplugged wellheads. These wells are old, forgotten about, and hazardous oil wells that often do not have a registered owner, called orphan wells. There is an estimated number of 120,000 documented orphan wells in the United States.
An orphan well is an out-of-service oil well that has either run dry or isn’t economically productive anymore; these were left behind by the industry and not properly sealed. Due to not being sealed correctly, they leak a lot, but not just oil and gas.
Orphan wells are a significant risk to human and environmental health. They leak toxic chemicals into the air that can contaminate groundwater. They also emit methane, one of the most potent greenhouse gases.
According to the United States Environmental Protection Agency and the Petrochemical, Chemical and Energy Board, estimate that orphan wells emit 7-20 million metric tons of CO2, equivalent to 2 to 5 million cars (or more cars than 47 states worth of vehicles).
While warming the planet is a concern, methane can cause adverse health impacts like premature birth, asthma, and cancer. Hydrogen sulfide, benzene, and arsenic can also leak from these wells for years, destroying the air, water, and people around them.
Orphan wells also dramatically cost property value. One Pennsyvlniva study showed a 50% drop off in areas with a high orphan well concentration. It’s just bad for business.
The problem with orphan wells is there is no one to plug them up. Due to high fluctuations in the oil and gas industry, 100s of companies have gone in and out of business and bankruptcy over time. Before there was regulation, if a company went bankrupt, and there was no money to replug the well, they just wouldn’t. Think about it like this: if the operating cost and the overall cost of plugging a well exceeds the income from the oil or gas produced from the well, companies may try to abandon, sell, or transfer the well to another entity. Usually, it is sold to someone less capable of paying for the well. They do this to avoid the liability of plugging it—another case of this country’s shady oil and gas industry.
Since the oil companies aren’t there to plug the wells, it falls to the state or federal regulators. But if they are not able to obtain funding for this, the taxpayers will pay the price and bear the high cost of plugging orphan wells.
Orphan wells are very expensive to refill; plugging any type of well is just a costly, long, and complicated process. In a 2021 study, the total price for everything involved in plugging a well can be upwards of $96,000 and, in rare cases, closer to $1 million per well. Additionally, the deeper the well, the more expensive it costs; for every 1000 feet, costs increase by about 20%.
Millions of abandoned wells are scattered across the United States, causing significant methane emissions and creating a variety of health and environmental hazards. Governments are increasingly interested in decommissioning such wells via tougher regulations or direct spending, but want to do so efficiently. However, information on the costs of decommissioning wells is very limited. In this analysis, we provide new estimates of the costs of decommissioning oil and gas wells and the key drivers of those costs. We analyze data from up to 19,500 wells and find that median decommissioning costs are roughly $20,000 for plugging only, and $76,000 for plugging and surface reclamation. In rare cases, costs exceed $1 million per well. Each additional 1,000 feet of well depth increases costs by 20 percent, older wells are considerably more costly than newer ones, natural gas wells are nine percent more expensive than wells that produce oil, and costs vary widely by state. Surface characteristics also matter: each additional 10 feet of elevation change in the 5-acre area surrounding the well raises costs by three percent. Finally, we find that contracting in bulk pays off: each additional well per contract reduces decommissioning costs by three percent. These findings suggest that regulators can adjust bonding requirements to better match the characteristics of each well.
Daniel Raimi and others in 2021 study
And to add insult to injury, orphan wells are usually located in low-income swathes of land, where paying close to 100k for a plug is very much out of reach. But what do these landowners do? The cost is too expensive to fill them, but the price the well will do to the land is equally as great.
The process of plugging an orphan well can be long and complex. First, pipe tubing is removed from the well, and sections of the wellbore are filled with different types of concrete. This isolates the flow path between the water table and the gas zone from each other, protecting the freshwater table from natural gas, methane, or a list of other harmful gases. This also helps protect the surface from leakage. At the surface, the wellhead is excavated and cut off around 6 feet from the surface. The casings are topped with a ‘plug’, and a steel cap is welded in place, then buried with at least 6 feet of soil on top.
The question now being asked is, how did this get so big? Well, we need to talk bout federal bond rates.
Federal bond rates are the amount of money oil and gas companies have to pay upfront to fund clean-up costs before the company can lease public lands to drill. They haven’t been updated in over 60 years. Simply put, thier royalties for the state when private companies want to drill for oil. Currently, this is only $10,000, while the cost of plugging a lot of ‘modern’ wells is much more than that.
Soon, in the coming years, the country will see an influx of ‘idle wells’. These are wells that haven’t seen oil and gas production for more than 24 months. This is due to the onset of fracking in the United States. We are now seeing this trend of fewer wells being drilled, and current wells being used more efficiently. Currently, the US is the number one oil producer in the world, producing 13.5 million barrels a day.
But then something happens; it seems oil and gas companies will only pursue these ‘heavy hitter’ wells and forget about other wells in the process. In areas that have seen most of their oil already taken out (Oklahoma), idle wells are starting to rapidly increase in ‘popularity.’ According to research done by CarbonTracker, idle wells that are projected to become orphaned wells are now outnumbering oil-producing wells in most significant oil and gas states.
We all know fossil fuels are not the future (yes, we still need them, but that’s not the point here), but as we transition to renewable energy sources, we need to take care of the oil and gas industry or what still rusts of it.
As wells continue to go offline, in the years to come, we run the monumental risk of our land being overrun by idel and orphan wells leaking horrible things into are ground and air. We need a plan, and we need it fast, but I honestly couldn’t tell you a solution.
It’s just too expensive to make a profit over filling these damn things.
‘The nine most terrifying words in the English language are: I’m from the Government, and I’m here to help.’
But, in this situation, there may only be a few solutions that require that famous phrase.
Solution one will flat-out never happen. But, we create a tax for the oil and gas industry; for every unplugged, inactive well they have, they are taxed an x amount of dollars. If it’s orphaned, the last primary owner of the well is the taxpayer on that well. What I mean by ‘major’ is a vast oil company that ‘should’ have the funds to do the kind of work necessary to plug the wells. But this leads to more questions than it answers.
- Identification of Major Owners:
- How do we define and identify “major” owners? What criteria determine whether a company is financially capable?
- Tax Amount Determination:
- How do we establish the tax amount per unplugged well?
- Fairness and Equitability:
- Is this tax system fair, considering variations in company size, financial capacity, and the number of wells each company operates? These are factors to be considered.
- Enforcement and Monitoring:
- How would we even enforce this? Drive to each orphan well? Keep a log of taxes paid vs. not paid?
- Legal and Regulatory Challenges:
- What legal and regulatory challenges will arise from this? Would this system be defeated in a court of law?
- Use of Tax Revenues:
- How will the tax revenues be utilized?
- Transition and Implementation:
- How long will the transition period be; 10 years? Will we even have these same problems in the next 10 years?
These questions were developed from one system that wasn’t even a full paper long. That’s the problem with this current issue; it is so complex with so many stakeholders in it; how we solve this might just not be able to happen any time soon.
The second solution is an infrastructure bill, which gives a sustainable amount of money to the project. The government would need to provide the states with a serious downpayment of cash to fill these wells. There are multiple things that need money. Not only is the physical cost of filling the wells expensive, but man hours, human training, and other costs will add up over time. Hiring hundreds of people or companies to fill these wells will skyrocket the price even more.
Some states haven’t even begun to measure what is coming out of their orphan wells; Oklahoma is one of them. Oklahoma’s oil and gas drilling is like a fast-food meal – satisfying in the short term, but as time passes, the long-term effects can leave you with a sense of regret.
Oklahoma only performs methane testing on very selective wells, such as ones close to buildings or some construction. The people who do this are the Oklahoma Corporation Commission, which is the governing body of the state’s oil and gas industry. The commission wants to set up a methane testing program, but due to the commission’s funding, they are currently unable to; they are currently waiting on the next round of federal funding for it.
Oklahoma charges fees on active wells. This means the state funds vary insanely on the industry’s health – or the very volatile energy price within the state.
The agency tries to have an emergency fund, but conserving is challenging in this industry, multiple spokespersons for the agency have said.
Between 2017 and 2021, Oklahoma plugged 462 abandoned wells, with recently being rewarded 25 million to plug 523 more. Which is a great step in a long walk forward in the state’s progress.
There is one company making a profit from this. It’s called Diversified Energy. It’s an oil and gas company out of Alabama and is the largest owner of oil and gas wells in the United States. Its stomping ground is Appalachia. The company’s strategy is not to drill new wells but to acquire old wells from other companies; they only really buy wells that are a trickle of their original production level. But how is it possible to maintain a profit over wells that don’t even produce an economical amount of material to keep ownership? Well, on paper, Diversified profit is the result of pushing back the deadlines for well cleanup and capping by using the trick of discounting to avoid costs as income. To keep it going, it must acquire more and more wells, then push those cleanup dates out,
Two reasons for this: brainwashing and regulators. Diversified has a proven track record of using a tremendous amount of leverage on its own regulators to help the company control its capping dates. Diversified uses its strength as the largest owner of oil and gas wells to control the ‘free market’ and convince regulators to enter into special contracts with the company that pushes agreement deals in exchange for Diversified’s promise to cap a certain amount of wells per, in Pennsylvania, one of the worst affected states of orphan wells, its 25 wells per year.
25 wells per year. 25.
Sometimes, the deadlines for capping wells can be as far away as a decade, and this is all because the company has cut a deal with the states. Investors love this approach. Compliance agreement deadlines are seen as an excellent protection against legal action from lawsuits. Investors who have seen the public disdain for the fossil fuel industry see Diversified as a good investment for keeping money in the industry.
Diversified is all propaganda; yes, it’s all propaganda. Since it looks suitable for capping a few wells per year, its all sunshine and rainbows, but behind the Kool-Aid, is just an awful world. The investors must ignore the company’s ongoing production of gas, the delayed closure of oil and gas wells, the delayed capping for decades, and the dangerous amounts of emissions currently being produced, but that’s relatively easy when you can make money?
I mean, I would invest in it. It’s a great option, and that’s the problem.
When investing in Diversified, you list it in your ESG portfolio, which is a type of sustainable investing. Diverifesed largest three banks, KeyBank, CIBC, and DNB, recently announced that they would be turning their credit into a ‘sustainability linked loan’, which in turn removes them from certain taxes and helps with public image.
By providing capital to allow Diversified to acquire more wells, these “sustainable” financers also indirectly benefit the initial well drillers who are all too happy to offload their costly “asset retirement obligations” for those wells.
The sierra club
Diversified wells in Appalachia emit nearly 100 tons of CO2, or 21 million gas-engine cars. But people will still tell you cow farts are the problem in climate change.
There is hope at the end of the tunnel here; one person doing the most is a retired oil executive Curtis Shuck, who founded the Well Dont Foundation. which is 501(c)(3) nonprofit.
The vision for the Well Done Foundation (WDF) came together during the summer of 2019 after Curtis Shuck (founder and Chairman) visited the legacy Kevin-Sunburst Oilfield in northern Montana. He saw firsthand the impacts of orphaned and abandoned oil and gas wells on communities and the environment.
That encounter left such a strong impression that Curtis felt compelled to take immediate action by leaving the oil patch better than the way that he had found it.
the well done foundation
First, they go through a qualification process of a particular orphan well, through a very detailed analysis to determine if it meets the qualifications to be plugged. The orphaned well is then adopted and monitored for a period of time, then a bond is posted, and the orphaned well is adopted from the state. The foundation then sets up an orphaned well campaign to raise funds for it. If certain situations are applicable, the wells go through carbon financing strategies for the plugging of it.
After the funds are received, the foundation plugs the well. It works alongside state bodies to help with this long process. WDF uses local and regional service companies to perform the work, creating jobs, and supporting the local economy, all while eliminating GHG emissions.
Since 2019, WDF has plugged 29 orphan wells, in mtuiple states, and reovming more then 500,000 metric tons of CO2 from the atmosphere
WDF TAKES ACTION to deliver integrated solutions for orphaned well plugging and surface restorations, eliminating harmful methane gas, #onewellatatime
the well done foundation
Orphan wells are a growing problem in the United States, and whether a solution will be reached in the coming year on how to fix this problem is beyond me. It all goes back to the age-old saying, ‘Cash is King.’