Orphan Well Stimulus Would Employ Displaced Workers

As Congress eyes additional measures to stimulate the U.S. economy, three members of New Mexico’s congressional delegation this week called for a new fund to clean up orphan oil and gas wells that they contend would employ thousands of laid-off oil and gas workers.

U.S. Sen. Martin Heinrich and U.S. Reps. Ben Ray Lujan and Xochitl Torres Small – all Democrats – in a written statement noted that a new fund would enable states, tribes and federal land management agencies to plug orphan wells and restore affected lands and waters while creating jobs.

“Orphan wells are idle wells for which the operator is unknown or insolvent,” Heinrich stated. “In New Mexico alone, there are over 700 documented orphan oil and gas wells, and as many as 60,000 nationwide. Congress should respond to this challenge with strong funding for states and tribes to address the current backlog of these orphan wells, put thousands back to work plugging them and restoring the land, and protect groundwater and curb hazardous emissions and greenhouse gases.”

Heinrich, Lujan and Small on Monday participated in a House Natural Resources Committee virtual forum on the topic that included state officials from New Mexico and North Dakota as well as representatives of Resources for the Future and the Western Organization of Resource Councils.

According to a recent Interstate Oil and Gas Compact Commission (IOGCC) report, there were nearly 57,000 documented orphan wells in 25 states in 2018. The study also found that states spent slightly more than $45 million plugging 2,372 orphan wells that year. IOGCC Projects Manager Amy M. Childers told Rigzone that state and federal officials are considering various ways to keep oil and gas crews working during the current crisis and the ensuing recovery.

“Providing funds to states for plugging orphan wells would support this effort while also serving to protect the environment,” Childers said. “IOGCC has offered its recent report on idle and orphan wells and other information on state orphan well plugging programs to support the analysis of stimulus options.”

State-by-State Focus

Oversight of orphan well programs is state-specific and depends on local regulatory programs, American Petroleum Institute (API) Vice President for Upstream Policy and Industry Operations Lem Smith told Rigzone. He said that local regulations include requirements for wells to remain idle and prioritizations for plugging known orphaned wells.

“Most states have established funding mechanisms that are dedicated to plugging orphan wells, mostly supported by the natural gas and oil industry taxes and fees,” Smith said.

Smith added that the U.S. Bureau of Land Management (BLM) can claw back to previous operators to plug and abandon wells on federal lands – even if those wells were sold to other parties years ago.

“Existing federal regulations require that companies are under obligation for the full cost of plugging and abandoning wells and reclaiming well sites and are not released from liability until BLM has determined they have properly done so,” he continued. “These actions are also subject to regulation by the jurisdiction in which the wells are located and numerous related topics such as safe conduct of drilling operations, standards for equipment and materials used during drilling and completion are addressed by industry standards and recommended practices.”

Smith pointed out the following API standards documents address the practice of abandoning wells:

• API 51R, Environmental Protection for Onshore Oil and Gas Production Operations and Leases (first edition, July 2009; reaffirmed Dec. 2015)
• API Bulletin E3, Wellbore Plugging and Abandonment Practices (second edition, April 2018)
• API Standard 65-2, Isolating Potential Flow Zones During Well Construction (second edition, Dec. 2010).

The above list is not exhaustive. Industry players also work with the Groundwater Protection Council (GWPC) and state regulators on various environmental protection measures. This 2017 GWPC document is a case in point.

An executive with the Independent Petroleum Association of America (IPAA), an upstream trade association, told Rigzone the issue of orphan wells has been a longstanding concern of the organization and its member companies.

“IPAA believes that it would be useful to have a sound orphan well program to help the drilling industry maintain employment through these tough times,” said IPAA Executive Vice President Lee Fuller. “It should be a program operated by the states because they have the skills to be able to run it. And, it should be endorsed by the IOGCC which is comprised of the oil-producing states.”

Fuller added that IPAA encourages congressional leaders to continue exploring the idea of a federally funded orphan well program and a workable solution to address the matter.

To contact the author, email mveazey@rigzone.com