At the end of their useful life, every oil and gas well must be plugged to prevent future contamination as the infrastructure ages and to return the site back to its original state. For the most part, this is done by the operator. However, sometimes bankruptcies lead to wells becoming orphaned, meaning there is no operator to plug them.
Officials say these wells tend to not have had great maintenance and cleaning them up is important to protect both the environment and the health of nearby communities.
Democratic Senator Ben Ray Luján says he plans to introduce legislation to clean up orphaned oil and gas wells. This comes as President Joe Biden’s American Jobs Plan calls for spending $16 billion to plug abandoned wells and mines.
“Plugging orphaned oil and gas wells will help put New Mexicans back to work, clean up our lands and water, and reduce methane pollution that threatens the health and safety of our communities,” Luján, from Nambé, said in an emailed statement to NM Political Report.
He said Biden’s prioritization of plugging these wells will help “New Mexicans recover and rebuild from this public health and economic crisis.”
There are approximately 700 orphaned wells in New Mexico, and the Energy, Minerals and Natural Resource Department’s Oil Conservation Division Director Adrienne Sandoval said, and about 40 to 50 wells are plugged annually. In fiscal year 2020, the state plugged 42 wells at a cost of more than $1.6 million. She said the state anticipates spending between $1.5 million and $2 million on plugging wells this fiscal year.
“Typically a lot of the wells that we deal with are a bit more challenging wells to plug,” Sandoval said.
She said the wells tend to be older and did not have as much maintenance done as other wells.
“Each well is always different, so the costs can vary greatly based on how complicated the well is,” she said. “We’ve done some pretty tricky ones in the past.”
Sandoval said once there was a well that needed to be plugged that had a house built around it and another time the well was located in the middle of a river.
“As of late, the wells have been costing a little bit more on average to plug this year,” she said, explaining that the wells are in a little bit worse shape and because of that they cost more to plug.
The state contracts with local companies to plug these wells only after it has exhausted other methods of trying to get the private industry to do the work. Required bonds that Sandoval described as “a little bit of an insurance policy in case the company goes bankrupt” help pay for some of the costs. However, she said this does not cover the entire cost of plugging a well.
On top of the bonds, Sandoval said there is the oil reservation fund, which is funded through oil and gas.
However, when looking at the 700 orphaned wells, the state prioritizes plugging of wells based on integrity of the infrastructure, especially if it could lead to issues with groundwater or damage the reservoir. Sandoval said the next wells in the priority ranking are ones where there are multiple orphaned wells in one area. This makes it more efficient to go in and plug them all at once.
There are multiple ways the state identifies orphaned wells. Sandoval said the OCD works with the New Mexico Attorney General’s office to watch for bankruptcies for oil and gas companies. Another way the wells are identified is when there are compliance issues and the OCD discovers the site does not have an operator.
The OCD also has an agreement with the U.S. Bureau of Land Management for cleaning up orphaned wells on federal land, according to Allison Sandoval, a public affairs specialist for the New Mexico State Office of the BLM. Allison Sandoval said this is called a joint Well Plugging Assistance Agreement and the BLM finished plugging the six remaining wells on its list in August and September. She said that cost about $258,400.
The BLM has a new Well Plugging Assistance Agreement with the OCD and is working to identify federal wells that need plugging that have recently become orphaned through bankruptcy.
“The BLM currently has no identified orphaned wells in New Mexico from these bankruptcies,” Allison Sandoval said. “The BLM is currently reviewing the Federal wells that were associated with these bankruptcies to identify any previous lessees and working interest owners that may still be liable for the well plugging and surface reclamation costs associated with these bankruptcies. This is the well liability review process the BLM must perform before declaring these abandoned wells as truly orphaned wells and now become the responsibility of the BLM to complete the final well plugging and surface reclamation work necessary to protect the environment and return the Federal land to its previous condition prior to oil and gas development.”
New Mexico U.S. Senator Martin Heinrich, also a Democrat said in an emailed statement that plugging these wells is important to protect the environment and communities.
“There are over 60,000 orphaned oil and gas wells nationwide, including at least 700 in New Mexico alone,” Heinrich said. “They pose serious environmental risks and threaten communities across the country. This is a problem we must solve. President Biden’s American Jobs Plan does exactly that. With strong funding for states and Tribes to address the current backlog of these orphan wells, we can put people to work plugging them, protecting groundwater, and curbing hazardous emissions.”
Susan Torres, a spokesperson for EMNRD, said people who see problems at well sites, including at orphaned wells, can report them by emailing [email protected].
