Activists Are Going Back To the Future On Orphan Wells
The global pandemic coupled with a dip in oil prices this year has resulted in challenging times for the U.S. oil and natural gas industry. Despite a history of energy sector resilience and forecasts showing the challenges won’t last forever, opportunistic “Keep It In the Ground” activists have used these events to revive the misleading narrative that hard times will result in widespread orphaned wells across the country.
As national conversation turns towards the future, much of what is being discussed sounds suspiciously like the past, particularly on the topic of orphan wells. Back in early 2015, environmental activists used nearly the same exact frightening narratives when discussing the impact of orphan wells following the 2014 oil price drop. These scare tactics, including predictions of excessive methane emissions and having states bleed money, never became reality as prices steadily recovered in the following years.
In the midst of $100-plus barrels of oil in 2014, several factors came together that resulted in a steep decline in prices. In part, and strikingly similar to what occurred in early 2020, this was caused by a drop in global demand and OPEC-plus increasing output to cause a glut of oil in the market.
This downturn sparked fears that bankrupt companies would be unable to properly plug oil wells, leaving taxpayers “holding the clean-up bag” and sending methane emissions skyrocketing.
Notably, that didn’t happen.
Although activists claimed these unplugged wells would lead to uncontrollable emissions, oil and natural gas methane emissions actually fell during that time.
Nearly all states require operators to post a bond in order to account for clean-up funds. Other states have developed specialized funds aimed specifically for cleanup. In 2017, California developed a centralized Idle Well Program with support from industry and the public, which included well classifications, testing, idle well fees, plugging and restoration funding, and incentives to properly plug and abandon idle wells.
All of the noise surrounding the potential for mass orphan wells back in 2015 turned out to be just that: noise. Despite this, activists are presenting the same arguments about orphan wells (or “ticking time bombs,” as activists call them), with some slightly new variations in 2020.
… Until now
A recent Politico story found that groups like Greenpeace and the Environmental Defense Fund are getting involved in the issue once again, pushing for both state and federal governments to act based on speculation.
And a recent New York Times article claims that across the country, “wells are already being abandoned” due to the economic crisis – and not in the way that the oil and natural gas industry defines abandonment i.e. properly plugging a well. However, they seem to be getting a little ahead of themselves.
According to the Interstate Oil and Gas Compact Commission (IOGCC), many states do not define a well as “idle” unless it has not been productive for more than six months. It is too soon to assume these wells will be idle, as it is still possible for operators to quickly restart operations once a slow-down has passed.
Further, bonding requirements, modern records and the oil and natural gas industry’s commitment to reduce its environmental footprint means that improperly abandoning a well is an uncommon occurrence.
The industry is already showing signs of improvement with oil prices and demand steadily rising. As activists rush to judgment on the future of the industry, it is important to look back at its long history of riding out challenging times to come back stronger than ever. While there is still a long way to go in addressing the challenges of identifying and properly plugging historic orphaned wells, today’s oil and natural gas industry is committed to supplying the world’s energy while reducing its environmental footprint – and that includes keeping orphan wells a problem of the past.