Proposed federal funds could help clean up New Mexico’s abandoned oil, gas wells | Local News
Wells typically become orphaned when a company goes bankrupt, dissolves and disappears, forcing the state to clean up the sites, which often have oil spills, methane leaks and discarded equipment.
Federal funding has been proposed to plug orphaned wells and remediate the sites. That would include stopping them from further contaminating air, groundwater and soil.
One potential funding source is $16 billion for cleaning up abandoned mines and wells, which is tucked into President Joe Biden’s $2 trillion infrastructure plan. It’s unknown how much money would go to New Mexico, and Biden’s bill has a nettlesome path ahead with an uncertain fate.
At the same time, two New Mexico lawmakers, both Democrats, have introduced separate bills for nationwide cleanup of orphaned wells that would funnel an initial $25 million to the state for that purpose.
U.S. Rep. Teresa Leger Fernández’s House bill would earmark $8 billion in grant money to clean up the wells on federal, state, tribal and private lands across the country. It also would increase the bonding that companies must pay to drill wells and would charge a yearly fee for idled wells on public lands.
U.S. Sen. Ben Ray Luján is co-sponsoring a bill with Republican Sen. Kevin Cramer of North Dakota. It would provide $4.7 billion for well cleanup, most of it for state and private lands. About $400 million would go to remediate sites on public and tribal lands.
This bipartisan bill has no new requirements for operators.
Adrienne Sandoval, state Oil Conservation Division director, said either bill would provide much-needed funding to deal with abandoned wells. The $25 million New Mexico would receive, plus potential grants later, would “make a great dent” in the problem.
“We could plug, I think, the majority of wells that we have orphaned at this point,” Sandoval said. “We could also reclaim quite a few of the sites.”
Reclamation involves cleaning up and restoring deserted sites, she added.
The state now plugs about 50 old wells a year, with an average cost of $42,000 each, Sandoval said.
In contrast, reclamation costs can vary widely depending on the contamination and overall mess an operator leaves behind, she said, adding, “It gets expensive very quickly.”
A site that only requires removing scrapped equipment and a light cleanup might cost $50,000, she said. But if it is deeply contaminated, the costs can be hundreds of thousands of dollars and even millions, she said.
Some of the orphaned wells are decades old and were very low-producing when the operators gave up on them, she said. More wells became orphaned during the 2015 industry slump, she said, adding that none has cropped up yet from the most recent downturn.
Sandoval and others touted the jobs increased well cleanup and plugging would create, offsetting some of the jobs lost in the industry during last year’s bust.
She estimated that “tens to hundreds” of jobs would be generated.
“So it’s not only an environmental benefit; it’s also a great job stimulus,” Sandoval said.
The State Land Office would get a share of the $25 million to clean up orphaned wells on state-owned tracts, but the amount has yet to be determined, agency spokeswoman Angie Poss wrote in an email.
“It’s vital that we clean up these wells, not only for the health of our people and environment, but also for the potential jobs created,” Poss wrote.
The additional money would help fund the agency’s more assertive legal actions, which it began last year against operators who tried to walk away from shutdown wells, Poss wrote.
In the past six months, the agency has filed 16 lawsuits resulting in 17 abandoned wells being plugged and 12 sites fully reclaimed.
Orphaned wells can emit methane and other greenhouse gases into the atmosphere. They also can leak methane, oil and toxic brine into groundwater, especially if the well’s steel casing deteriorates.
“Plugging them ensures that neither one of those things happen,” said Jon Goldstein, director of regulatory affairs for the Environmental Defense Fund. “That will be 700 less potential pollution problems.”
Goldstein said both Luján’s and Leger Fernández’s bills would strongly aid the effort to mitigate these sites. But Leger Fernández also proposes much-needed bonding reform, he said.
Operators pay a bond as a deposit to cover potential costs of cleaning up a site if the operation fails.
Leger Fernández proposes a minimum bond of $150,000 on any oil or gas lease and $500,000 for a “blanket bond” that covers all wells in a lease or within a state — larger companies operate hundreds at a time.
In New Mexico, operators pay $25,000 for one well plus $2 per foot of depth. Blanket bonds vary in cost depending on the number — from $50,000 for 10 or fewer to $250,000 for 100 or more.
The state also has a reclamation fund that oil and gas companies pay into through fees, Sandoval said. That fund is tapped when a company’s bond doesn’t cover cleanup costs at an abandoned site, she said.
That fund’s size ranges from $5 million to $8 million in a given year, depending on the health of the industry, Sandoval said.
The state Legislature recently approved an additional $2 million to plug abandoned wells, she said, which will really help the effort.
One environmental advocate said the current and proposed funding covers a fraction of the real problem.
New Mexico has thousands of idle wells not officially listed as orphaned, and a high number are bound to be abandoned, said Thomas Singer, senior policy adviser at the Western Environmental Law Center.
“They are trouble brewing,” Singer said. “Where do orphan wells come from? They come from idle wells.”
About 8,500 wells haven’t produced anything in at least 15 months, Singer said. About 1,850 wells have yielded nothing in at least two years, and almost 700 wells have been unproductive for more than 10 years, he said.
Current state regulations let companies that are still operating hold on to inactive wells to avoid cleaning them up, Singer said.
Singer said he was glad to see Leger Fernández pursue bonding reforms because the current amounts, especially for blanket bonds, are “utterly inadequate.”
But it’s important to make companies deal with the idled wells while they are still in business and can pay, instead of waiting for them to fold and push the problem onto taxpayers, Singer said.
Plugging wells and remediating sites offer no profits for companies, he said.
“They’re never going to choose to do that unless they are forced to by a regulator,” Singer said.
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