Creating Jobs & Reducing Pollution by Reclaiming Orphaned Wells

The Orphaned Well Cleanup and Jobs Act of 2021 is being heard right now in the New Mexico State Legislature. The Act would plug and reclaim orphaned wells, helping to create jobs and reduce pollution in New Mexico. This blog has been adapted from the testimony given by Don Schreiber, rancher at Devil’s Spring Ranch in the San Juan Basin.

I am a rancher in Northwest New Mexico at Devil’s Spring Ranch in the San Juan Basin. I would like to say that we stand on Navajo land, on Ute land and on Jicarilla land. For the last 20 years, I have been an advocate for those facing daily the impacts of the oil and gas industry. There are 122 gas wells on and immediately adjacent our ranch including our federal grazing permit.

Previously, I was an insurance broker and risk manager specializing in oil and gas insurance, including writing the plugging bonds required by the state and federal government. The San Juan Basin was built with the hard work and ingenuity of local people and I want to assure the Committee that the same creativity, innovation and hard work can be used to revolutionize the plugging, remediation and restoration processes that will be necessary to meet the coming challenge of orphaned wells. I know. I grew up here.

As happened with the EPA Methane Emission Rule and the Bureau of Land Management (BLM) Methane Waste Rule, the Orphaned Well Cleanup and Jobs Act will drive innovation- innovation to invent or improve a plug and abandon process that has remained largely unchanged for decades. Representative Leger Fernández’s bill will give us the $8 billion to jump start this work. We cannot seriously discuss infrastructure in America without addressing the sometimes forty, fifty even sixty-year-old oil and gas wells and equipment that are such a significant part of our aging energy system.

The crisis of orphaned/abandoned wells is overwhelmed by the looming crisis of idle and inactive wells. This Act aims to tighten idle/inactive well rules on federal lands and revise BLM’s definition of idle/inactive wells. Currently BLM does not even consider wells to be idled until after seven years of non-production. This Act requires operators with idle wells to pay annual fees if the wells remain idle. These fees will incentivize timely plugging, remediation and reclamation.

Idle/inactive wells need to be included in the economic and financial reality of what happens as our oil and gas fields age. Consider the San Juan Basin: for a field that has been in decline for decades, isn’t it strange that there would be fewer plugging rigs running now than there were 5 years ago? Or even 15 years ago? The reason is that companies, many of them private equity, are avoiding plugging their wells.

So, no longer can we rely on the goodwill of a company to fulfill its social contract. Those who benefit from the extraction of our non-renewable natural resources cannot be allowed to continue to enrich their stockholders or their private equity partners and leave what amounts to their “mess” behind for all of the rest of us to live with. As Representative Leger Fernández has said, “Weren’t we all raised to clean up after ourselves? Isn’t that the expectation we all have in our own families?”

Another important feature of the Act is that it provides 10% funding for additional staff for state agencies like our New Mexico Oil Conservation Division to assist the BLM in their implementation of the Act.

My father wrote individual federal plugging bonds in the 1950s for $10,000. I wrote them in the 1980s for $10,000, and the limit is still $10,000 today. Current costs for plugging in the state of New Mexico range between $35,000 and $45,000 and go can much higher.To protect taxpayers’ interest in the future, the Act provides a long overdue modernization of the federal bonding limits to bring them current with today’s real costs to plug, remediate and reclaim orphaned wells. Modernizing bonding limits will prevent us from facing the same problems in the future.

Thank You:

• New Mexico Oil Conservation Division Director, Adrienne Sandoval
• New Mexico Oil Conservation Division Bureau Chief Engineer, Brandon Powell
• San Juan College School of Energy, Dean Alicia Corbell
• Sand Juan College School of Energy Acting Coordinator, Tony Gale
• The many San Juan Basin oilfield workers and contractors willing to provide information and insight

References

capitalandmain.com/frackings-fall-in-the-san-juan-basin-0924

Permits are down dramatically https://www.blm.gov/sites/blm.gov/files/docs/2021-03/Table16ApplicationsforPermittoDrillStatus Report_2020.xlsx. San Juan County Manager Mike Stark said he doubted the San Juan Basin would ever relive the booms of its past. https://capitalandmain.com/frackings-fall-in-the-san-juan-basin-0924.

Statistical modeling by Grist and The Texas Observer suggests https://grist.org/abandoned-oil-gas-wells-permian-texas-new-mexico/ utm_id=26884&sfmc_id=3488412&fbclid=IwAR0NQfhVZRzMzSaA6KSMRXu60tsYLoE8REj6qpM15aXBdCcFs7LltQSrXu8

Environmental Science & Technology, Methane Emissions from Abandoned Oil and Gas Wells in Canada and the United States, December 2020, https://pubs.acs.org/doi/10.1021/acs.est.0c04265.

See generally IOGCC, Idle and Orphan Oil and Gas Wells: State and Provincial Regulatory Strategies, March 2020, https://iogcc.ok.gov/sites/g/files/gmc836/f/2020_03_04_updated_idle_and_orphan_oil_and_gas_wells_report_0.pdf; RFF and Columbia/SIPA, Green Stimulus for Oil and Gas Workers: Considering A Major Federal Effort to Plug Orphaned and Abandoned Wells, July 2020, https://www.energypolicy.columbia.edu/sites/default/files/file-uploads/OrphanWells_CGEP-Report_071620.pdf

See WORC, March 2021, Reclaiming Oil and Gas Wells and Addressing Climate Impacts: State Policy Recommendations (publication forthcoming).

IOGCC 2020 has single well and blanket bond amounts for each state and province.

See https://www.blm.gov/programs/energy-and-minerals/oil-and-gas/leasing/bonding.