‘Orphaned’ oil and gas wells are on the rise

Wells left behind by industry threaten to overwhelm Western states.

 

In March 2015, Joe MacLaren, a state oil and gas inspector in Colorado, drove out to the Taylor 3 oil well near the tiny town of Hesperus, in the southwestern corner of the state. He found an entire checklist of violations. Atom Petroleum, a Texas-based company, had bought out more than 50 oil and gas wells after the company that drilled them went bankrupt. Now, Atom was pumping oil from those wells, but Taylor 3 was leaking crude, and it was missing required signage as well as screens on infrastructure to keep birds away from toxic gunk. Worse, the company had not performed safety tests to ensure the well wasn’t leaking fluids underground.

Over the following months, the state slapped Atom with fines, performed follow-up inspections, and demanded a $360,000 bond to cover the cost of shutting down the wells, just in case Atom — hardly proving itself to operate in a trustworthy manner — didn’t clean up its act.

Indeed, the list of violations MacLaren and others discovered kept growing, yet Atom kept on pumping oil and gas, and did not pay fines or put up the $360,000 bond. So in 2016, the state took a rare step: It revoked the company’s drilling permit. Atom’s business, it said, was no longer welcome in Colorado. 

Atom didn’t bother to follow through on one last important obligation either. When companies cease production, they are supposed to plug wells with cement to reduce the risk of leaks, and to restore vegetation and wildlife habitat aboveground. They recoup their bonds if they do so, whereas if they don’t, the state cashes them. In this case, Atom flouted its responsibility to plug and reclaim its wells, leaving the state to clean up its mess. Colorado did claim a $60,000 bond Atom posted when it first started operating, but the cleanup could cost taxpayers 10 times that.

The 50 or so wells Atom left behind comprise Colorado’s largest-ever “orphaned well” case, according to the Colorado Oil and Gas Conservation Commission. But it’s not an isolated problem. Companies that go out of business, become bankrupt, or, like Atom, simply ignore the rules, tend to skip out on cleanup and land restoration. And since bond amounts set by states and the federal government rarely if ever cover real-world cleanup costs, it can be cheaper for a company to forfeit a bond than to follow reclamation rules.

Orphaned wells are more likely than properly plugged “abandoned” wells to leak pollutants, including methane gas, which can contaminate groundwater and even trigger explosions. So it’s troubling that the number of such wells in the West has soared. A downturn in energy prices starting back in 2008 has led energy companies to orphan thousands of wells across Colorado, New Mexico and Wyoming. States are struggling even to tally them, let alone remediate them. Officially, Colorado has 244 orphaned wells on its books, but state officials estimate another 400 have yet to be located. And with a new drilling boom tapping deep shale formations along Colorado’s urban Front Range, some worry that the next bust will saddle the public with thousands more.

Steve Labowskie, the southwest field inspector and project manager for orphan wells with the Colorado Oil and Gas Conservation Commission, walks around an abandoned oil well in Redmesa, Colorado. There are 244 known orphan wells in the state.
Jerry McBride/Durango Herald

On state and private land, major energy corporations typically explore and drill for oil and gas across large fields and then sell parcels to smaller operators when production dips. The little guys can still turn profits, just not at the margins big corporations need to satisfy shareholders.

But small companies tend to have shakier financing and are therefore more vulnerable to market swings. When gas prices plunged starting in 2008, it bankrupted many small companies producing marginal amounts of methane from coal seams, and thousands of coalbed methane wells were orphaned.

In Wyoming, the problem reached epidemic proportions. In 2014, under Republican Gov. Matt Mead, the state implemented an aggressive strategy to identify and plug orphan wells. To hedge against future busts, the state also significantly hiked the bonds companies must put up before drilling. It based those increases partly on well depth, since the deeper shale oil and gas wells now being targeted are much more expensive to reclaim than conventional shallow wells. Wyoming has since reclaimed 1,700 sites on state and private lands, using taxes and royalties paid by industry to chip away at the backlog caused by the spike in orphaned wells and insufficient bond funds. But it has also identified nearly 4,600 more orphaned wells — and that’s just on state and private lands.

Wyoming is more ahead of the game than other states,” says Jill Morrison, director of the Sheridan-based Powder River Basin Resource Council. Even so, the state can’t keep up,” she says, and the higher bond rates still don't fully cover reclamation costs when a company orphans its wells. Reclamation on federal lands in Wyoming, where there are thousands of additional orphaned wells, has been even slower.

In Colorado, the state currently uses bonds and revenue from fines to cover cleanup costs for orphans. But that generates less than $850,000 a year, so the state has only plugged and reclaimed 52 orphaned wells since 2013, at an average cost of $82,500 each. According to a recent state analysis, dealing with all 244 of its known orphans will cost an estimated $5.3 million annually over the next five years.

This August, Colorado Gov. John Hickenlooper proposed several tougher rules for monitoring and reclaiming both orphaned and properly plugged wells. The announcement followed a deadly house explosion in a north Denver suburb last April, which elevated concern about all kinds of oil and gas infrastructure since it was caused by a severed methane gas flow line mistakenly attached to a previously idled well that had been made active again. Hickenlooper’s reforms included creating a fund that would be used to eliminate the state’s orphaned-well backlog within a decade. It would be bankrolled by energy companies, possibly through a property-tax increase, and could also pay for services like in-home methane monitors for neighborhoods that are next to or even on top of old wells.

Tracee Bentley, executive director of the Colorado Petroleum Council, acknowledges the need to “get ahead of a potential problem,” but questions whether new taxes are the solution. Instead, she says, the state could direct existing tax revenues to the issue, or create a voluntary program for companies to help plug and reclaim wells. In Oklahoma, for instance, companies can choose to divert 1 cent for every $100 of oil and gas they produce to a program that restores orphaned wells. The state claims that 95 percent of operators participate and the program has restored 16,000 well sites since 1994.

State Rep. Mike Foote, a Boulder County Democrat, says he would like to see higher bond rates in Colorado, but he doesn’t expect much cooperation from state Republicans. In a letter to the Colorado Oil and Gas Conservation Commission, two state GOP leaders expressed concern over Hickenlooper’s proposal for an orphan-well fund and disagreed with his portrayal of the issue as a “vast” problem. But without more money and regulatory muscle, Foote says, the state is not just ducking the current problem; it’s inviting future calamity.

Since the deadly Denver house explosion last spring, watchdogs have documented an alarming number of poorly monitored abandoned wells and flow lines beneath Front Range communities. Some of this potentially perilous infrastructure lies directly beneath neighborhoods. With several small companies, some already cited for violations, currently drilling and applying to drill for oil and gas in Boulder and neighboring counties, Foote and others fear the next price crash could create a hazardous landscape rife with orphaned wells. And dealing with those wells could be even more complicated than before, because industry is now tapping deep shale formations, where wells are much more difficult and expensive to plug, reclaim, and inspect.

According to the Colorado Oil and Gas Conservation Commission, there are currently 63 financially distressed" operators in the state, who collectively own almost 4,000 wells. These companies have either missed required safety tests or aren’t producing much, signs that they may be running out of money and therefore more likely to abandon their sites. If even a fraction of those companies become deadbeats, the state’s problems will quickly multiply. Without broad action, says Foote, “It’s a disaster waiting to happen.”

Note: This article has been updated to correct a statement that inaccurately attributed last April’s deadly explosion to a flow line connected to a plugged – not a temporarily idled – well.

Joshua Zaffos is a Fort Collins, Colorado-based correspondent for HCN.

High Country News Classifieds
  • CONSERVATION PROGRAM MANAGER
    Central Colorado Conservancy, located in Salida, Colorado, is seeking a Conservation Program Manager dedicated to managing the Conservancy's land protection program which includes developing and...
  • PUBLIC LANDS PROGRAM MANAGER
    Conserve Southwest Utah is seeking a candidate with excellent communication skills and a commitment to environmental conservation for the position of Public Lands Program Manager....
  • EXECUTIVE DIRECTOR
    The Western Slope Conservation Center in Paonia, CO, seeks a dynamic leader who is mission-driven, hardworking, and a creative problem-solver. WSCC is committed to creating...
  • PLANNED GIVING OFFICER
    National Parks Conservation Association (NPCA), the nation's oldest and largest national parks nonprofit advocacy organization seeks a Planned Giving Officer. Do you find energy in...
  • NORTHERN NEW MEXICO PROJECT MANAGER
    Seeking qualified Northern New Mexico Project Manager to provide expertise, leadership and support to the organization by planning, cultivating, implementing and managing land conservation activities,...
  • REGIONAL TRAIL STEWARDSHIP COORDINATOR
    Are you passionate about connecting people to the outdoors? The Pacific Crest Trail Association (PCTA) is looking for someone with trail maintenance and volunteer engagement...
  • TRAIL CREW MEMBER
    Position Title: Trail Crew Member Position Type: 6 month seasonal position, April 17-October 15, 2023 Location: Field-based; The RFOV office is in Carbondale, CO, and...
  • CEO BUFFALO NATIONS GRASSLANDS ALLIANCE
    Chief Executive Officer, Remote Exempt position for Buffalo Nations Grasslands Alliance is responsible for the planning and organization of BNGA's day-to-day operations
  • IDAHO DIRECTOR - WESTERN WATERSHEDS PROJECT
    Western Watersheds Project seeks an Idaho Director to continue and expand upon WWP's campaign to protect and restore public lands and wildlife in Idaho, with...
  • DIRECTOR OF DEVELOPMENT, NA'AH ILLAHEE FUND
    Na'ah Illahee Fund (NIF) is seeking a highly qualified Development Director to join our team in supporting and furthering our mission. This position will create...
  • DIRECTOR OF OPERATIONS, NA'AH ILLAHEE FUND
    Na'ah Illahee Fund (NIF) is seeking a highly qualified Operations Director to join our team. This position will provide critical organizational and systems support to...
  • DEVELOPMENT DIRECTOR
    Grand Staircase Escalante Partners (GSEP) is seeking a leader to join our dynamic team in the long-term protection of Grand Staircase-Escalante National Monument (GSENM). We...
  • GRASSLAND RESEARCH COORDINATOR
    The Grassland Research Coordinator is a cooperative position with the U.S. Fish and Wildlife Service that performs and participates in and coordinates data collection for...
  • "PROFILES IN COURAGE: STANDING AGAINST THE WYOMING WIND"
    13 stories of extraordinary courage including HCN founder Tom Bell, PRBRC director Lynn Dickey, Liz Cheney, People of Heart Mountain, the Wind River Indian Reservation...
  • GRANT WRITER
    JOB DESCRIPTION: This Work involves the responsibility of conducting research in the procurement of Federal, State, County, and private grant funding. Additional responsibilities include identifying...
  • ASPIRE COLORADO SUSTAINABLE BODY AND HOME CARE PRODUCTS
    Go Bulk! Go Natural! Our products are better for you and better for the environment. Say no to single-use plastic. Made in U.S.A., by a...
  • CANYONLANDS FIELD INSTITUTE
    Field seminars for adults in the natural and human history of the Colorado Plateau, with lodge and base camp options. Small groups, guest experts.
  • ATTORNEY AD
    Criminal Defense, Code Enforcement, Water Rights, Mental Health Defense, Resentencing.
  • LUNATEC HYDRATION SPRAY BOTTLE
    A must for campers and outdoor enthusiasts. Cools, cleans and hydrates with mist, stream and shower patterns. Hundreds of uses.
  • LUNATEC ODOR-FREE DISHCLOTHS
    are a must try. They stay odor-free, dry fast, are durable and don't require machine washing. Try today.