There is always the chance that an oil and gas company can fall into bankruptcy or go out of business without cleaning up old wells. But Wyoming once experienced a massive increase in orphaned wells, and state regulators are still sweeping up the debris. The coal bed methane bust left thousands of wells littered across the landscape on state, private and public land. Here are couple facts to keep in mind when the subject of orphan wells comes up at the water cooler.
Around 2010, a wash of natural gas nationwide drove prices down. A number of larger companies jumped ship, selling their wells in the Powder River Basin to smaller players for pennies on the dollar. Many of those small firms went bankrupt soon after and simply walked away from the infrastructure. In addition to being a rusting eyesore, abandoned wells can be environmental hazard.
The CBM bust instigated some changes in how the state regulates the oil and gas industry. The Wyoming Oil and Gas Conservation Commission created an orphan well program in 2014 to fast track remediation of the orphaned well crisis. The program is paid for by a production tax on operators and forfeited bonds. The Oil and Gas Commission increased bonding requirements for both operating and idle wells. Regulators also tied legacy wells back to earlier owners, meaning a large company is on the hook if its sells assets to a firm that goes bust. The moves help ensure the state doesn’t pay for clean up, while making operators more careful when unloading older or non-producing wells to financially weak companies.
By the numbers
- Since 2014, about 4,600 wells have been abandoned on state and private land
- In the two decades before natural gas prices fell only 500 wells were left orphaned
- Each well costs between $5,000 and $7,000 to plug