Monday, March 27, 2023

Orphaned O&G Well Count Climbing

$25M Federal Cash to Plug State’s Problem Falls Short of What’s Needed


There were 741 orphaned wells in the Land of Enchantment prior to the Infrastructure Investment and Jobs Act that Congress passed last year. Once the law was enacted, New Mexico checked our abandoned and orphaned wells list twice like Santa Claus. The state suddenly found 1,000 more orphaned wells in need of plugging.

After this new count, the Department of Interior announced that New Mexico would receive $43.7 million to clean up its orphaned wells. Initially New Mexico had identified 741 wells in the Permian Basin and the San Juan Basin in need of plugging. When the New Mexico Oil Conservation Division (OCD) applied for a grant from the Infrastructure funding the state claimed “1,741 known orphaned sites” and that cleanup and plugging would cost more than $290 million.

The state just got its first down payment on ramping up the cleanup. The money was included in the amendment sponsored by U.S. Sen. Ben Ray Lujan (D-NM) and attached to the infrastructure bill.

Orphan wells are a huge source of methane, the greenhouse gas that is 86 times more potent than CO2. These emissions can have devastating impacts on climate and the health of communities. Statewide, New Mexico has 57,401 active oil and gas wells and 64,858 inactive wells. Of those inactive wells, 1,700 are orphaned. If they are not monitored, orphaned or abandoned wells that are not plugged are continually releasing air pollutants like methane.

Closing off a disused well is hazardous, highly specialized work that can take a lot of time. The idea sounds simple enough; inject concrete into all the nooks and crannies below, ultimately capping off the top of the well; however, not every job is the same. Old boards that have crumbled or collapsed can take months to excavate and pluck out.

Estimates put the average cost of plugging and cleaning an open well at $76,000, but the contractors say that figure can vary from $10,000 to $1.5 million, depending on the well.

Gov. Michelle Lujan Grisham said the DOI’s program would help New Mexico continue to clean up abandoned wells in the coming years through additional federal funds yet to be allocated.

Last year, Grist and the Texas Observer modeled the phenomenon of well abandonment in the Permian Basin that spans Texas and New Mexico and estimated that the two states are undercounting orphan wells to the extent that the number found is set to triple in the coming years.

The New Mexico Oil Conservation Division (NMOCD) has reported it was able to remediate about 50 per year at its current funding levels. The NMOCD plans to use drones and other technology to locate more orphaned-well sites in the future. 

“This funding will allow the state to clean up dozens of additional abandoned oil and gas wells every year, protecting our environment and providing local jobs and economic benefits,” Governor Grisham said. “I appreciate New Mexico’s congressional delegation and the U.S. Department of the Interior for bringing these vital funds to our state." 

The $25 million New Mexico just received makes a small dent in the estimated $290 million needed for the 1,700 orphan well sites currently earmarked for cleanup across the state. As we move away from oil and gas dependency in the next 20-30 years it falls short of the potential dollars needed to clean up abandoned wells across the state.

Each state has a different meaning of when they consider that a well is to be officially considered abandoned or orphaned. Texas considers a well orphaned if it has not been producing oil and gas for at least 12 months and the responsible company has been delinquent in renewing its license for a year or longer. North Dakota regulators list a well as orphaned if its operator cannot be found, cannot be legally required to plug a well, or doesn’t have the funds to do so. 

In New Mexico, if a well hasn’t been producing for 15 months, the OCD puts it on an inactive well list. More than 5,200 wells in the state fall into this category. Operators typically finance cleanup of their wells, should they be abandoned, via bonds to help pay for remediation; however, that funding is usually inadequate. If the OCD serves the operator with an enforcement order and they fail to plug a well, the state takes it in as its ward and will have to plug the well.

The number of orphaned wells on federal lands is unknown in New Mexico. According to the OCD, 6,000 wells in New Mexico have not produced in more than a year, and 2,600 of those are on federal lands. There are about 40,000 wells located primarily on federal and tribal lands in the San Juan Basin.

The average lifespan of an oil or natural gas well is 20 to 30 years based on the active years the well is in production. Upon abandonment, the owners are responsible for the proper plugging and abandonment of the well. Plugging a single well takes anywhere from two weeks to six months, depending on its complexity, and the number of plugs to be set in the well.

U.S. Interior Secretary Deb Haaland said orphaned wells create dangerous pollution in some of the nation’s most disadvantaged communities in rural areas where oil and gas activities occur.

Twenty-four states received the initial round of funding from the infrastructure bill totaling $1.15 billion, earmarked for 129,000 abandoned wells throughout the nation as of 2021. Federal lands received another $33 million to plug wells, with more money expected for similar work on Indigenous lands. New Mexico has plans to prioritize wells in disadvantaged communities.

“President Biden’s Bipartisan Infrastructure Law is enabling us to confront long-standing environmental injustices by making a historic investment to plug orphaned wells throughout the country,” Haaland said. “At the Department of the Interior, we are working on multiple fronts to clean up these sites as quickly as we can by investing in efforts on federal lands and partnering with states and Tribes to leave no community behind.”


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