US Orphan Oil & Gas Wells Nationwide Elimination Program – Government Funding and Individual State Details: Part 1

Posted: February 8, 2022

On January 31^st, 2022, The US Biden administration bill allocating $4.7 billion for federal orphan-well plugging nationwide was created, an effort to address the lingering problem of wells left unmaintained by their owners and for someone else to plug and clean up, typically state governments. Of the overall funding, $1.15 billion is being offered in grants to state orphan well programs. It was part of the Bipartisan Infrastructure Bill to address legacy pollution and spur economic growth.

To learn more about orphan wells, we point you to a previous article “Orphan Wells and the Plan to Abandon” from RARE PETRO from early January of 2022.

The motivation behind this initiative was due to a public outcry that:

“Orphaned wells are polluting backyards, recreation areas, and public spaces across the country. The historic investments to clean up these hazardous sites will create good-paying, union jobs, catalyze economic growth and revitalization, and reduce dangerous methane leaks.”

There has not been guidance released yet from the US Department of Interior but there is an expectation that guidance will be released of how each state can apply for the Initial Grants in the form of Formula Grant funding and in-state Performance Grants.

Below is a data capture image shows that of the 50 US states, 26 of them have been included in the evaluation for initial grant eligibility.

The green states will be further explored in this article

Over the next few months, we’re planning on digging deeper into each state and provide more details about their plans to access the funding available in series of articles. To begin, we’ll focus on California, Colorado, Texas, and Wyoming and present a high-level view of what we know thus far:

California:

Governing regulatory body: California Department of Conservation, Geologic Energy Management Division

Number of wells currently on the list: Estimated 1500+ unplugged wells.

FAQs:

Inactive and deserted oil and gas wells that are not maintained can pose threats to groundwater and public safety. CalGEM has taken multiple steps to mitigate such potential hazards with ground-breaking legislation (Assembly Bill 2729, Williams, 2016) and development of rigorous regulations. There are incentives for operators to file Idle Well Management Plans for either plugging and abandoning long-term idle wells or returning them to production. Also, idle well fees have been increased to help encourage operators to address such wells in their inventories.

The 2018 report details that:

Wells are now being plugged before they become a problem. 1,234 idle wells, of which 968 were long-term idle wells, were plugged and abandoned (permanently sealed and closed).
CalGEM collected $4.3 million in idle well fees, funds that are available to remediate hazardous well conditions to protect public health and the environment.
Operators are complying. They filed 76 Idle Well Management Plans, leading to the elimination of 988 long-term idle wells.

Colorado:

Governing regulatory body: the Colorado Oil & Gas Conservation Commission

Number of wells currently on the list: Estimated 625 unplugged wells.

FAQs:

Changes to state law in 2019, legislation known as Senate Bill 181, overhauled oil and gas well regulation and made it a higher priority to address orphan wells.

“Receiving federal funding will further help Colorado in its implementation of SB 19-181 and is excellent timing as the commission is revamping the orphan well fund through the financial assurances rulemaking,” said Jeff Robbins, COGCC chairman, in a statement.

In addition to carrying bonding to pay for well plugging, oil and gas companies operating in Colorado pay into a state orphan fund for plugging wells abandoned, typically by companies that have gone out of business.

Texas:

Governing regulatory body: Texas Railroad Commission

Number of wells currently on the list: Estimate 6,500+ have been identified thus far.

FAQs:

Texas also has a REGROW act and an OGRC fund to help cover plugging costs.

The Revive Economic Growth and Reclaim Orphaned Wells (REGROW) Act was included in the infrastructure bill that was signed into law in November. Sponsored by Rep. Lizzie Fletcher, who has been an outspoken advocate on the issue, the REGROW Act allocates $1.15 billion in the first round. This funding will eventually reach a total of $4.6 billion over the life of the program. Texas is set to receive $107 million in the first round and a total of more than $343 million overall, more than any other state.

Oil & Gas Regulation and Cleanup Fund (OGRC) allows the Railroad Commission to plug abandoned oil and gas wells and clean up abandoned oilfield sites.

The Oil and Gas Regulation and Cleanup Fund is a fund that was created by the 82nd Texas Legislature in 2011. This fund replaced the previous Oil Field Cleanup Fund. This fund allows the Railroad Commission to plug abandoned oil and gas wells and clean up abandoned oilfield sites.

Wyoming:

Governing regulatory body: Wyoming Oil and Gas Conservation Commission

Number of wells currently on the list as of January 2022: Estimated 1400+ unplugged wells.

FAQs:

When an oil and gas well on state or fee land is no longer economically productive, the owner of that well is required by state regulations to plug and abandon the well. Over the years there have been times when wells were orphaned by their owners mostly through bankruptcy and the responsibility to safely plug and reclaim them becomes the responsibility of the Wyoming Oil and Gas Conservation Commission (WOGCC) as outlined in the agency’s Rules and Regulations, Chapter 3, Section 16.

Since 2014, Wyoming has had several thousand coal bed methane (CBM) wells on state and private leases orphaned by their owners due to declining gas prices. To address the issue, the WOGCC initiated an aggressive plan to plug and abandon the orphaned wells.

Tim Rathmann – Riviera Unconventionals, LLC

Brandy Butler – Windy Mountain Energy

Daphne Sullivan – Endeavor Energy Resources, LP