Federal funds will be distributed to 26 states to plug orphaned wells in their jurisdictions.
States Tackle Orphaned Oil and Gas Wells
By Austin Igleheart | Feb. 25, 2022 | State Legislatures News | Print
States saddled with thousands of potentially leaky orphaned oil and gas wells can launch programs to address the problem with the help of $1.15 billion from the Infrastructure Investment and Jobs Act of 2021 and additional federal support.
The number of orphaned wells across the nation includes 100,000 documented as well as many more unidentified or uncounted wells. The unplugged wells can continue to leak methane and other pollutants into the atmosphere, creating local environmental concerns and broader climate impacts. Methane is a far more potent greenhouse gas than carbon dioxide, and its relatively short lifespan in the atmosphere—decades as opposed to centuries—makes it a popular target for efforts to quickly reduce greenhouse gas emissions and atmospheric concentrations.
An interagency group led by the Department of the Interior will implement the oil and gas reclamation program and distribute money for states and tribes to establish and manage their own orphaned well plugging and remediation programs. The partnership includes the Agriculture Department, the Energy Department, the Environmental Protection Agency and the Interstate Oil and Gas Compact Commission.
The Interior Department’s Office of Environmental Policy and Compliance will lead the rollout of the well reclamation program on state and tribal lands. Funds will be distributed to the 26 states that submitted a notice of intent to apply for money to plug orphaned wells in their jurisdictions. The full amounts available for each state will be published in coming weeks, along with guidance on how to apply.
Bonds Don’t Always Cover Costs
Nearly every state that contains oil and gas wells also requires some form of bond—a financial assurance that well owners must pay prior to receiving a drilling permit, which is meant to cover the costs of future well plugging and site reclamation. (NCSL’s Energy Program is tracking the bonding requirements for every state and U.S. territory.)
These amounts are often insufficient, however, particularly as wells are being drilled deeper, plugging costs have increased and inflation continues to erode the purchasing power of the required bonds. The federal government, for instance, has not updated its bonding requirements since they were first issued over half a century ago. While states have generally been more active in updating their bonding requirements, these often fall short of the full reclamation costs. Unfortunately, this usually leaves state taxpayers footing the rest of the bill, which can be several times higher than the initial bond.
The federal infrastructure bill included $4.7 billion to address the issue, including the $1.15 billion for states.
NCSL will continue to monitor these developments. To stay plugged in to the latest state energy news from across the country, subscribe to NCSL’s monthly Plugged In newsletter.
Austin Igleheart is a policy associate in NCSL’s Energy, Environment and Transportation Program.