The worst oil bust since the 1980s is putting oil producing states on the hook for thousands of newly abandoned drilling sites at a time when they have little money to plug wells and seal off environmental hazards.
The problem is forcing states to get creative, The Associated Press reports.
Louisiana has roughly 3,000 abandoned wells and is riling drillers with steeper fees to cover the price of managing the wells. In Texas alone, the roughly $165 million price tag of plugging nearly 10,000 abandoned wells is double the entire budget of the agency that regulates the industry. Regulators in that state want taxpayers to cover more of the clean-up, supplementing industry payments.
“As downturns go, this one happened faster and accelerated. It moved downward faster than the big downturn we had in the ’80s,” says John Graves, a Houston oil consultant. “For some people in our industry, it has been more intense.” Crude prices that peaked above $100 a barrel in 2014 plunged by 60% in just six months.
But these responses—if they even wind up working—are still years from meeting the growing backlog of untended wells.
Meanwhile, orphaned wells are potential environmental hazards below ground as well as rusted-out eyesores above. The problem is not new. Energy-rich states had thousands of orphaned wells on the books for decades.
“These landowners are chained to a corpse,” says Trey Scott, a managing partner of Trinity Mineral Management, which represents landowners who own thousands of acres in the Texas oil patch.
Last winter, Louisiana started requiring producers to put up a new bond of $7 for every foot drilled in an attempt to deal with the abandoned wells. After drillers revolted, however, Louisiana’s Office of Conservation in April suspended the new bonding until August.
“The state’s broke and they’re trying to raise funds however they can,” says Dempsey Oil Company owner Jimmy Dempsey, an operator in northwest Louisiana. “It doesn’t take a genius to fill a well with concrete.”
