May 27, 2021

House Natural Resources Committee passes bill addressing orphaned oil and gas wells

Hannah Grover/NM Political Report

An oil well is pictured, Thursday, March 25, 2021, in Riverside Park in Aztec.

A bill that would help states plug and clean up orphaned oil and gas wells passed the House Natural Resources Committee on Wednesday on a 22 to 17 vote.

The Orphaned Well Clean Up and Jobs Act is sponsored by Rep. Teresa Leger Fernández, a Democrat from New Mexico.

“Orphaned wells pose a serious threat both to our communities and our climate,” she said during her presentation to the committee. “They can leak toxic fluids into our water and pollutants into our atmosphere, including heat trapping gas, methane.”

The freshman Democrat said there are more than 700 orphaned wells in New Mexico as well as “countless more” idle wells that could become orphaned.

Leger Fernández said when visiting those wells she could taste the metal in the air and see stains around the deteriorated well pads.

“Because there is no liable owner, the federal government, through this bill, is stepping up to plug and reclaim the wells to protect our environment,” she said.

Additionally, Leger Fernández said it is important to take steps to prevent wells from becoming abandoned in the future. The bill would increase federal bond requirements and also establish a fee on idle wells.

Related: Analysis finds $8.1 billion gap in New Mexico bonding requirements, clean up costs for oil and gas

The bill would authorize spending $7.25 billion for clean up on state and private lands. Of that money, $5 billion is “with no strings attached,” Leger Fernández said, adding that the remainder is intended to incentivize states to take actions like bonding reform or emission regulations. The bill also includes $700 million for cleanup on public and tribal lands and $50 million for research and development.

She said the bill would create jobs in clean up and remediation that would require similar skills that are currently found in the oil and gas workforce. Those jobs would be created in the rural communities that rely on energy extraction.

Rep. Yvette Herrell, a Republican from New Mexico, argued that the measure would punish companies, especially small producers, for past actions and for bad actors by increasing the bonding requirements on federal lands.

The bill would increase the minimum bonding amounts for federal lands to $150,000 for all an operator’s wells on an individual lease or $500,000 for all the operator’s wells in an entire state. Currently, the minimum bond levels for all the operator’s wells on an individual lease is $10,000 and the minimum bond requirement for all the operator’s wells in an entire state is $25,000.

Herrell said increasing bonding requirements on federal lands will cause small producers to go out of business, thus creating more orphaned wells and resulting in existing wells being plugged.

“This makes this argument for this bill a contradiction, as you cannot claim that this bill creates jobs while also putting companies out of business and eliminating the jobs of the people they employ,” she said. “The facts are the majority of orphaned wells that exist today became orphan decades ago before our modern environmental laws came into existence. Reclamation of extraction sites is now a hallmark of oil and gas development and producers work diligently with states to ensure that the land is restored to its natural state once production is finished.”

Herrell said the majority of oil and gas producers clean up sites that they are no longer using.

“Raising the bonding requirements would simply punish those who adhere to their reclamation responsibilities for the sins of a few modern-day bad apples and producers from over a century ago,” she said while proposing an amendment that would eliminate the increase in bonding for wells on federal lands. This amendment ultimately failed to pass the committee.

She said that Congress should pass bipartisan legislation that will address the legacy of orphaned wells while preventing wells from becoming orphaned in the future.

Leger Fernández said the issue of asking an operator to live up to its duty to reclaim sites should not be partisan.

“Because these bonds are too low, it’s too easy for them to walk away,” she said. “So if we allow a system to continue to go on which creates these orphaned wells, we are going to be in the same position five years from now, another five years from now, another five years from now.”

Rep. Alan Lowenthal, a Democrat from California, pointed out that if an operator cleans up the wells, that operator gets the bond money back. He said the bond is only used when companies walk away from their responsibilities.. 

Leger Fernández said if operators are unable to pay for higher bond requirements, they may not have the resources to clean up the sites.

The bill further requires that materials like steel and iron that are used in reclaiming well sites be made in the United States.