Coalbed methane bust leaves thousands of orphaned gas wells in Wyoming

And the state is starting to come to terms with an orphaned gas well problem.

  • An abandoned coalbed methane well site on Wyoming state land near the line between Johnson and Campbell counties. The state is making efforts to clean up 1,200 orphaned wells and may raise conservation taxes and bonds on wells.

    Ted Wood

Marjorie and Bill West's ranch in Campbell County, Wyo., sprawls across 10,000 acres of hills, rocky outcrops and steep valleys. Their family has run cattle and planted wheat, barley and alfalfa here for 80 years. But when natural gas companies tapped underlying coalbeds, mostly leased from other mineral rights holders, in 1999, artesian wells dried up and cottonwoods drowned in produced water. Today, about 100 gas wells sit abandoned on the property, making it difficult to work the fields and damaging farm equipment. And though none have blown out, neighboring wells have; some still have gas pressure.

Marjorie West partly blames the state, which regulates the industry but also relies on it for revenue. "They don't care about the people who have spent generations farming and ranching," West says. Wyoming has about 1,200 abandoned wells, mainly from a coalbed methane boom that peaked in the early to mid 2000s, when 2,500 wells were drilled annually.

Then the economic downturn hit. As the wells dried up and natural gas prices fell, many smaller operations declared bankruptcy, leaving unreclaimed wells and waste pits behind. Companies pay regulators bonds before drilling, to be returned once they plug wells and restore the surface to, ideally, pre-drilling conditions. Most operators follow through. If they bail, the bonds pay for cleanup. Abandoned wells on private and state land become the state's responsibility; federal-land wells fall to the Bureau of Land Management. But because bonding amounts often fall below the costs of reclamation, agencies sometimes scramble for funds.

With its number of abandoned wells expected to double or even triple within a year, Wyoming has the dubious distinction of having the worst problem in the West, according to Oil and Gas Accountability Project Director Bruce Baizel. In response, the Wyoming Legislature and governor are pushing state regulators to expedite cleanup of orphaned wells and consider increasing bonds and taxes. "Quite candidly," Wyoming Oil and Gas Conservation Commission Supervisor Grant Black recently told lawmakers, "I don't believe that the commission has paid as much attention to this as they should have."

Since the '60s, the BLM has charged just a $25,000 bond to cover all of a company's wells in a given state, or, alternatively, just $150,000 to cover all the company's federal-land wells nationwide. Meanwhile, the number of new wells permitted has doubled nationwide in the past decade. On private land, the Wyoming Oil and Gas Conservation Commission requires a $75,000 bond per company; on state lands, the Wyoming Office of State Lands and Investments asks for $100,000. California, Washington and Alaska require higher bonds, while New Mexico, Montana and Nevada ask less. Roger Coupal, head of the University of Wyoming's Agriculture and Applied Economics Department, estimates that it costs about $30,000 to reclaim one well. "If (a bond's) not big enough," he says, "it's not going to give the incentive (to clean up)." Wyoming coal mines for example, must provide detailed reclamation plans and bonds adequate to cover them.

Because the BLM doesn't keep the bonds in interest-accruing accounts, they lose value with inflation. Although Wyoming collects interest on them, it doesn't use it for reclamation. Instead, it imposes a conservation tax on operators, but that's inadequate to cover the difference.

"The state is going to have to pay to plug and reclaim a lot of old wells" at a time when it's already lost a lot of money in unpaid taxes and royalties, says longtime industry critic Jill Morrison, with the Powder River Basin Resource Council. Already, the city of Gillette has paid nearly $50,000 to plug coalbed methane wells on its property, abandoned by High Plains Gas, the same company whose wells pock the Wests' ranch.

Another company, Pure Petroleum, went bankrupt in 2011, after years of unpaid bills and violations for spills and poorly maintained well sites, leaving just a $25,000 BLM bond and a $93,045 state bond to cover 106 wells. In a letter to the state, co-owner Greg Karl wrote, "We have given every single dime Pure has made to our obligations and have lost our homes in doing so." To date, Wyoming has spent $552,698 from its conservation tax fund cleaning up just five of Pure's wells. The company also owes nearly $1 million in state and federal taxes and fines. Meanwhile, Luca Technologies declared bankruptcy this year and is almost $2 million short in bonds for just its 900 state and private wells, leaving the fate of those and its 400 federal wells uncertain.

Frustrated with the agencies' slow response, the governor's office has proposed its own plan. It estimates it will require $4.6 million to $8 million per year to plug all the abandoned wells, depending on how quickly the state tackles the problem. But regardless of the time frame, the effort may have to draw from other sources of funding besides the conservation tax to cover costs.

Marjorie West hopes the wells on her land will be reclaimed soon. But she says she's wary because regulators already told her not to worry when she first expressed concern about development, assuring her that, "All these companies are very well managed. None of them will ever do something like that."

Charles Fox
Charles Fox Subscriber
Dec 27, 2013 09:49 AM
The boom times are so short, the busts are forever. Wyoming has been trashed.
Dennis Willis
Dennis Willis Subscriber
Dec 27, 2013 10:14 AM
The bonding and reclamation program is a scandal. A couple of years ago, GAO found the average federal well was bonded to the tune of $1,800. Not enough to the equipment, much less plug and abandon the hole and reclaim the surface. Oil and gas projects are not designed to be reclaimed. The working assumption by the developer is the reclamation liability will fall to a subsequent owner. Projects should be designed with reclamation in mind. Reclamation plans should be required and fully bonded before any surface disturbance is allowed. Companies that cause the disturbance should retain liability for reclamation and not just pass along the liability when they sell their interest. The destiny of oil and gas drilling operations currently is to be abandoned and become a public liability.
Dale Lockwood
Dale Lockwood Subscriber
Dec 31, 2013 05:25 PM
There is a reason why you have regulations and rules to prevent disasters like this.
Funny the oil industry and many elected officials think regulations are uneccessary(sp}.

Side note:The mess left behind is reason why many out of state tourists quit coming to Wyoming or Montana.
They once came for the clean air and pristine landscape which Wyoming is losing.
Carolyn Poissant
Carolyn Poissant Subscriber
Jan 01, 2014 08:11 AM
The true cost of cheap natural gas - it is literally destroying our planet.
Dean Nyffeler
Dean Nyffeler Subscriber
Jan 04, 2014 10:17 PM
Dennis was a range conservationist in Nevada and Utah. He has worked tirelessly to see that NEPA has been fully complied with on oil and gas operations. Having worked with him on four EISs in the Price Field Office I can say this without reservation. He has also worked to see that reclamation is carried out when drilling is finally allowed to be done after a subsequent site specific environmental assessment. What he says above is the unfortunate past history of oil and gas development. What he does not say is that that no way has be found to do what he proposes. It is impossible to calculate what future reclamation costs without knowing what the reclamation standards will be more than ten years in the future or to predict how much rain will fall on the area to be reclaimed here in the arid west. Three years of good rainfall will cut reclamation costs in half. It also allows the range conservationists to double the number of animal unit months available on the same grazing allotment.
Dennis Willis
Dennis Willis Subscriber
Jan 05, 2014 10:42 AM
Come on Dean, the coal prgram does it. Yeah, we do not know exactly what it will cost to reclaim a drill site 20-50 years from now. I think we can say with certainty, $1,800 won't come close to getting the job done. Precipitation patterns will not affect the cost of plugging and abandoning the hole and surface dirt work. It will only affect the success of re-vegetation. The planting of the site is relatively inexpensive in the scheme of things. With the inter mountain west clearly in a long term drying trend, betting on reclamation success based on the weather lottery is a shakey proposition. We are setting ourselves up for a repeat of the bad old days.
John W Stephens
John W Stephens Subscriber
Jan 15, 2014 11:26 AM
The argument against responsible reclamation requirements is that it will drive development elsewhere. So what? This may be a perishable resource, but only on a geologic scale. Let it set. When the resource "elsewhere" is depleted the value of the undeveloped resource is greater. That greater value helps indemnify more negative externalities, and there will be more of them identified as time passes.
Dean Nyffeler
Dean Nyffeler Subscriber
Jan 17, 2014 06:08 PM
The last well drilled by an independent geologist south of Farnham Dome we held a cash bond for $10,000 after he had properly plugged and abandoned the well. It took three years to establish any vegetation on the site. The land out by Olsen Reservoir is hardly the hardest to reclaim. Also the gypsum mining on more road had the same problem establishing vegetation for the same three years. As an individual he could not understand why we wouldn't let him have his cash so he could go and drill some where else.
This doesn't even began to attack the problem of looking a minimum of ten years out minimum. How often are AUM recomputed over a ten or twenty year period.
Yes, there was a problem with bonding in the past but the new bonding regulations with an independent surety has definetly helped the problem. I didn't say it was solved but the two programs now working are whittling down the back log. I don't think either one of us created orphan wells on our watch but I doubt if I will live long enough to know for sure and I include my NM wells in that.
Julia Anderson
Julia Anderson Subscriber
Apr 23, 2014 11:24 AM
Look what is happening to North Dakota. This beautiful state is being ruined by the oil companies.