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Growing problems with orphaned, abandoned wells challenges oil industry


Thousands of oil wells can become orphaned as bankruptcies occur

State and federal funding are limited for cleanup, plugging efforts

White House, lobbying groups propose cash injections, reforms

  • Author
  • Jordan Blum
  • Editor
  • Jeff Mower
  • Commodity
  • Natural Gas Oil Petrochemicals

A growing number of orphaned and abandoned wells in the US is growing costlier by the day, challenging an oil and gas industry that is already negotiating the energy transition away from fossil fuels, according to critics, who are calling for reforms and new funding to clean up long-dormant, corroding sites.

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The White House is aiming to inject major cash into well-plugging activities, and new groups in Texas, such as Commission Shift, have sprung up this year to help lobby and draw attention to the potential ticking time bombs of orphaned or undocumented wells. The Permian Basin has become dotted with more unnaturally-occurring phenomena, including the Wink Sinks sinkholes and the so-called Boehmer Lake from failed wells drilled decades ago.

There is also the fear that new drilling and hydraulic fracturing activity -- as well as the associated saltwater disposal wells -- increasingly will interfere with and rupture older well sites, threatening air quality and water supplies often without any visible problems above the surface, said Virginia Palacios, executive director of the new Commission Shift group focused on reforming and better funding the Texas Railroad Commission that oversees state oil and gas regulations.

Spurred by the shale revolution and led by Texas, US oil production boomed from 5.5 million b/d in 2010 to a record high of nearly 13 million b/d at the beginning of 2020, although output has since slipped to about 11.3 million b/d. But that surge in growth has not come without cyclical stops and starts, including busts in 2014 and 2020 and the ongoing coronavirus pandemic, and with each downturn came a wave of bankruptcies and consolidation.

"When these companies go bankrupt, we see more orphan wells going to the state to plug and clean up," Palacios said. "There's just ben a lot of activity out there in the Permian, and with that there's an issue brewing in our state with waste management."

Orphaned wells are those abandoned by companies that are no longer solvent. Texas currently counts about 6,200 orphaned, unplugged wells, while the Interstate Oil & Gas Compact Commission adds up about 57,000 documented orphan wells nationwide.

The Commission Shift also is focused on the estimated 37,000 wells in Texas that have been inactive and unplugged for a decade or more, threatening to soon join the "orphan" list. The state counts almost 150,000 inactive wells overall.

During the pandemic last year, about 10,000 conventionally drilled wells in the Permian were shut-in and never returned, according to S&P Global Platts Analytics, which accounted for about 80,000 b/d of crude that was lost forever. Permian oil wells that are at least 50 years old still produce well more than 35,000 b/d.

Because so many wells are undocumented, including ones that are more than 100 years old, the US Environmental Protection Agency has estimated there may be more than 3 million abandoned wells nationwide, most of which are unplugged.

In Texas, the Railroad Commission is charged with plugging orphaned wells, which in part entails shutting them down and filling the wellbores with cement. Even then, some plugged wells can spring leaks without oversight, because the plugging rules were much more lax decades ago. Texas' well-plugging rules first went into effect in 1976 and have been amended more than 20 times since, ranging from plugging techniques to the types of cement, according to the Environmental Defense Fund.

The Railroad Commission is averaging plugging about 1,800 wells per year, and spokesman Andrew Keese noted that 83% of wells are plugged by their operators, even though the commission waived plugging requirements and fees last year amid the oil price crash and a slew of bankruptcies.

The American Petroleum Institute released updated well-plugging standards in June, and the industry-led Environmental Partnership has taken more steps to help detect and repair leaks on active operations.

Washington attention

President Joe Biden has proposed spending as much as $16 billion for "capping hundreds of thousands of orphan oil and gas wells and abandoned mines," although that much money is unlikely to be included in any bipartisan compromise. A bipartisan Senate bill provides $4.7 billion for such efforts, while a pending US House bill would set aside $8 billion for old wells and mines over 10 years. And, apart from the infrastructure and jobs plan, the president's overall fiscal year budget bill proposes almost $500 million total for the cleanup of wells, mines and decommissioned offshore oil and gas facilities.

In court, a recent federal ruling in the bankruptcy case of Fieldwood Energy said the Houston offshore producer could pass hundreds of millions of well cleanup costs in the US Gulf of Mexico to previous field owners and insurers, including BP and Shell. That ruling is pending on appeals, but could have implications for onshore producers.

Since 2015, more than 250 North American producers have filed for bankruptcy with half of them coming from Texas, including 45 upstream bankruptcies in 2020, according to the Haynes & Boone energy bankruptcy tracker. For instance, Fort Worth-based Weatherly Oil & Gas left 163 wells orphaned after it filed for bankruptcy in 2019, according to Commission Shift.

And now, bigger energy companies, such as Chevron, are attempting to sell more of their mature, conventional Permian assets, which critics fear could be sold to smaller producers more likely to go bankrupt and leave behind lots of orphan wells.

At a West Texas ranch

At the 22,000-acre Antina Cattle Company Ranch near Monahans, Texas, two Chevron sites sprung leaks in June from wells that were previously plugged in 1995 or prior.

Ranch owner Ashley Watt said she fears leaks from old plugged wells on her family's property have occurred for more than a decade, contaminating the water and, years ago, even bubbling up crude oil in a toilet.

Watt took to social media on Twitter to raise attention to her plight, even mocking a red plastic bucket that Chevron contractors initially utilized to unsuccessfully cover the leaking well that was spraying brackish water with high benzene concentrations, according to water samples she had taken.

"I'm scared," Watt said. "This problem is finally just bubbling to the surface. The water table is very, very shallow here."

Some of Watt's cattle have died recently, which she believes is from the well pollution. And, even though Chevron re-plugged the primary leak after 11 days, Watt said she still believes pressure levels indicate it is continuing to spew hydrocarbons into the water wells underground.

However, Chevron said in a statement that its tests showed the leaking water met applicable drinking water standards, including for benzene.

"While we cannot speak for the whole of industry, we believe the state's requirements, coupled with Chevron's practices, contributed to a prompt response to this incident," said Chevron spokeswoman Deena McMullen in a statement. "Chevron strives to protect people and the environment wherever we operate. Since arriving onsite on June 12, Ms. Watt has expressed several concerns, which we have addressed. We will continue to review thoroughly any concerns brought to our attention."

A recent Southern Methodist University earth sciences study published in December used satellite imaging to detect subtle surface changes over time, identifying thousands of unplugged and abandoned wells in the Permian, as well as many more emerging sinkholes near well sites. More active satellite imaging from regulators could help mitigate future damages and pollution, the researchers concluded.

Watt said she wonders if it is just a matter of when -- and not if -- leaks eventually occur from most of the other plugged wells on her property, and throughout the larger region.

"The state of Texas is failing the landowners," Watt said. "We're the ones who have to deal with the consequences -- the health and business consequences."

"If this is a preview of what every old oil well looks like, the Permian Basin will be absolutely uninhabitable in the next few decades. Terrifying," she later added.